Challenging Situation for the Swedish Forest Industry

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Swedish forestry companies have had a tougher start to 2025 than expected, according to a report from the Swedish Forest Industries Federation, which represents companies in the wood processing, paper, and wood mechanical industries.

The report points to a combination of higher costs and lower demand, which has taken a toll on Swedish sawmills and pulp and paper producers. In addition, increased tariffs create uncertainty, as well as the strong Swedish krone.

Sweden is one of the world's largest exporters of pulp, paper, and sawn wood products. According to the Swedish Forest Industries Federation, more than 80 percent of the products are exported and the largest market is Europe.

Several of the major forestry companies have production sites in Northern Sweden. Holmen's two sawmills are outside of Skellefteå and Umeå, while SCA is located in Piteå municipality. The Swedish-Finnish company Stora Enso has two facilities in Northern Finland.

Not increased as expected

The report states that the Swedish wood products sector is under pressure, and demand for wood products in the country last year was the worst since the 1990s.

The construction industry in Sweden did not increase as expected, and consumption that drives pulp and paper production has declined. An increasingly pressured profitability situation is starting to have consequences, which is particularly noticeable at sawmills, writes the Swedish Forest Industries Federation.

"Deliveries of wood products to the Swedish construction industry are comparable with the crisis in the 1990s. It is clear that this is having a hard time on the wood industry, not least in combination with the high costs and competition for raw materials," says market analyst for wood products Christian Nielsen at the Swedish Forest Industries Federation in a press release.

However, Nielsen points out that the interest rate cuts may be the beginning of the Swedish market's recovery.

A vulnerable export industry

Swedish exports within the forest industry remain strong despite a declining economy in 2024.

However, the recent development of increased tariffs creates significant uncertainty.

"As one of the world's largest exporters of pulp, paper, and wood products, the Swedish forest industry is also particularly vulnerable in the trade war, even though the US itself is not the primary concern," emphasizes the federation.

Figures from the federation show that between 5 and 10 percent of the annual Swedish forest industry exports go to the US. Furthermore, Sweden represents approximately 20 percent of the values ​​of the EU's forest industry exports to the US.

The industry is concerned about the consequences for global trade and the global flow of goods.

"The recent abrupt changes in trade policy mean that unpredictability is falling like a wet blanket over Swedish pulp and paper producers, who export 90 percent of their production. If the trade war escalates, it could, among other things, lead to major disruptions in the global flow of goods. It is difficult to predict the full extent of the consequences other than that they are substantial potential movements," says Charlotte Dickens, market analyst for pulp and paper at the federation.

Finally, the federation writes that a stronger Swedish krone could also impact the industry and change the competitive situation vis-à-vis other European producers in an already sensitive situation.