Uncertainty in construction masks supply shortage

Then there is the dynamism and optimism of this industry, despite the challenges we currently face. It has been a great pleasure to meet customers this summer, and I look forward to getting to know more of you and gaining a closer understanding your businesses.

Trade dynamics

There is no denying that we face a market which is balanced mainly by soft demand: the building industry has continued to operate below normal levels in all markets in which we are active.

This demand situation can primarily be attributed to market uncertainty, particularly in the US, driven by global trade dynamics. But despite these challenges, Södra remains well-positioned in the market, thanks to strategic investments and a strong market presence.

On top of high raw material prices and weak demand, the strengthening of the Swedish Krona has put even more pressure on profitability.

We have not been able to adjust prices to compensate, because prices in local currencies have been more or less unchanged since the spring.

Currency and tariffs aside, the need for stability in interest rates is crucial for confidence, and this is reflected in subdued building activity.

In virtually all of our markets, we are seeing levels of construction starts that are significantly lower than what we have seen in recent years following the pandemic.

To cite a few examples, Germany, a key driver of the European economy, is facing a downturn, while Poland is faring slightly better but still experiencing challenges. In the UK, there are some positive signs of recovering demand. In many markets, timber frame is gaining traction, as the industry shifts towards more sustainable building solutions. This trend is expected to put additional pressure on the demand-supply balance as construction activity recovers.

Pressure on supply

Various factors created a shortage of sawlogs at the beginning of the year, the relative scarcity of sawlogs, especially spruce, means that a return to anything like normal demand levels will put additional pressure on supply. While Swedish sawmills maintain a relatively good balance, central Europe, notably Germany, Austria and the Czech Republic, is experiencing a significant shortage, which is a major drag on wider supply.

In this situation, Södra’s membership structure plays a pivotal role in maintaining close relationships with forest owners, which fosters a deeper understanding of their needs and encourages cooperation in keeping our mills supplied with raw material from the forest.

The log supply situation will eventually stabilize, and part of this will be down to an increased acceptance of pine as a suitable substitute for spruce in most applications. The UK market, for example, is showing a growing acceptance of pine, and at the same time some Swedish merchants have introduced parallel assortments of pine alongside spruce.

The timber industry is navigating a complex landscape, influenced by supply shortages, market uncertainties, and currency impacts. Sodra's proactive approach and strategic investments are key to its resilience and long-term position as a supplier of choice.