Gradual resumption in demand for wood
2024 was marked by a weak global demand for wood and wood articles despite a recovery in merchandise trade, which increased by 2.9% after a 1% contraction in the preceding year. Poor construction activity amid persistently high interest rates in Europe and the US continued to weigh on the wood industry. Consequently, the wood industry’s players reduced their prices. In the EU, producer prices for the manufacture of wood, as well as articles of wood, cork, straw and plaiting materials reduced by 2.2% in 2024. Similarly, the US producer price index for wood and wood products eased by 1.4%.
Although still fragile, the sector began to recover in the first half of 2025, driven primarily by construction activity. This momentum is expected to continue into 2026, benefiting roundwood producers which are mainly located in the European Union (12% of global roundwood production in volume), led by Germany, Sweden, Finland and France. The US (11%), India (9%), China (8%), and Brazil (8%) round out the top five, collectively responsible for over 50% of global roundwood production. Roundwood is typically categorized into three types, which are determined according to the quality, part of the tree and species. Each of the categories leads to three major distinct usages, the main being wood energy, which is mainly used to produce heat and accounts for around half of the world’s roundwood production. Due to its renewable nature and carbon-neutral quality when harvested sustainably, wood is becoming increasingly valuable amid green energy transition. The expansion of wood pellet output made from wood residues reflects this trend. Between 2019 and 2023, global output grew by an average of 2.9% per year. Nevertheless, and despite the importance of this segment, global wood markets remain largely unaffected by developments in the wood energy sector. This is notably because of its quasi-exclusively domestic use – global exports represent around only 0.3% of production – and the fact that this category does not directly compete with other types of roundwood intended for industrial applications.
The second category of wood is timber (known as lumber in the US and Canada), which accounts for 28% of roundwood production. It is classified into softwood, such as pine, fir, and spruce, which is widely used in construction framing, and hardwood, such as oak, maple, and walnut, which is favoured for applications such as flooring and furniture. In the European Union, early signs of a construction sector rebound, signalled by recovering residential building permit numbers during the first half of 2025, are expected to result in higher demand for timber. In addition, the uptrend in building permits is expected to continue, supported by further monetary easing anticipated in the second half of 2025. Meanwhile, in the US, despite the struggling sector, a slow but sustained easing of monetary policy projected throughout 2026, as well as a housing shortage, may bolster building activity. This could support the activity of US sawmills, which has been stagnant or even slightly declining over the past four years. Conversely, the Chinese construction sector is likely to remain sluggish.
Beyond any cyclical recovery, timber demand is increasingly reinforced by its positioning as a material aligned with sustainable development goals. Wood gains traction as an alternative to steel in roof structures and other building components. These developments would particularly favour softwood timber exporting countries, as the product accounts for two-thirds of overall timber production. According to ReportLinker, the EU ranks first, accounting for almost half of global softwood timber exports, followed by Canada (22%) and Russia (16%).
Demand for pulpwood (18% of roundwood production) may slacken. This category is mainly used for making wood pulp as well as paper and paper products. Consumption growth of such products, in particular paper-based packaging (70% of paper product volumes) may suffer from the slowdown in global economic and trade growth in 2025 and 2026.
Heightened risk of wood price volatility
Improving demand fundamentals are expected to drive an upward albeit minor trend in wood and wood product prices. After two years of declines, global wood prices have started to recover. After falling by 14.5% over 2022-2024, the IMF primary commodity price index for timber, which encompasses hard and soft sawn wood, increased by 1.5% in the first semester of 2025 compared to the same period of the preceding year. These fundamentals remain generally weak, limiting the potential for any significant price increase on a global scale.
However, US trade measures targeting wood and wood-based products could exert upward pressure on domestic prices. In March 2025, the US administration launched an investigation under section 232 of the Trade Expansion Act into imports of wood and wood products (furniture included). Following this, tariffs were introduced on softwood lumber and certain wooden furniture imports. These duties took effect on 14 October 2025, with additional increases scheduled for 1 January 2026 on those relating to furniture. The tariffs on softwood lumber primarily affect Canada, which accounts for approximately 80% of US softwood imports. Although these imports are expected to be exempt from the new tariffs due to a trade agreement (USMCA), the US government raised countervailing and anti-dumping duties on Canadian softwood lumber during the summer of 2025. This led to an increase in the combined rate from 14.34% to 25.19% for most Canadian companies. As for wooden furniture, the most impacted economies are Vietnam, China and Mexico. New tariff announcements could lead to increased price volatility. For example, the election of President Donald Trump, who had threatened to impose a 25% tariff on all Canadian goods contributed to upward price pressure on lumber in the US. September 2025 futures spiked by nearly 25% on the Chicago Mercantile Exchange in the first quarter of 2025.
Meanwhile, on the other side of the globe, the European Regulation on Deforestation-free Regulation (EUDR), which governs the region’s trade notably in wood and wood products, will enter into force on 30 December 2025. The regulation aims to ensure that products consumed in and exported by the EU do not contribute to global deforestation or forest degradation. Also covering commodities such as coffee or palm oil, the UE’s trade of wood and its derivatives will be affected. Compliance will likely result in higher costs for wood companies both inside and outside the EU due to the required investments, notably in traceability technologies. Within the EU, the EUDR will make imports more complex, possibly resulting in supply-chain disruptions.
In another vein, global warming also contributes to wood price volatility. Higher temperatures increase the frequency and intensity of wildfires, significantly impacting raw wood supply. According to the World Resources Institute, fire activity has surged in recent years, with 2024 marking the most extreme year for forest fires and surpassing the previous high in 2023. Global warming also affects wood supply by fostering the emergence and survival of invasive species and forest diseases.
Different exposures to wood price fluctuations
A rise in raw wood and sawn wood prices could pose a risk to downstream businesses in the wood supply chain. In the context of recovering albeit fragile demand, companies may struggle to fully pass on higher input costs to customers, leading to margin compression. The risk is particularly acute in countries that heavily rely on imports of raw or slightly processed wood. Although several Asian nations possess domestic forest resources, they import lightly processed wood and then export wood articles such as plywood or tableware and kitchenware made of wood. This import dependency has limited the extent to which Asian companies benefited from the global wood price surge in 2021 and 2022. Based on a panel of listed companies involved in the wood industry, we observe that the region’s median EBITDA margin increased by less than two points during the period compared to the pre-Covid average, rising from 9.4% between 2015 and 2019 to 11.3% in 2021.
European companies in the sector benefited more from this price spike. Several countries of the region, including Sweden, Finland and Germany, export minimally processed wood. As a result, the region’s median EBITDA margin rose from an average of 12.2% over the 2015–2019 period to 15.5% in 2021.
However, it was North American companies that most benefited from the trend. They also rely heavily on the export of minimally processed wood, particularly in Canada, with the country being a net exporter of sawn wood. In 2021, the median EBITDA margin for the region’s wood sector jumped to 20%, up from 10.4% over the 2015-2019 period. However, some segments remain vulnerable to input cost inflation. For example, in the US, while producer prices for lumber (called timber everywhere else in the world other than in the US and Canada) rebounded by nearly 7% year-on-year in the first semester of 2025, millwork prices remained stable and plywood prices even receded (-2%).
Last updated: October 2025
Wood
