European Wood Products Industry Faces Prolonged Headwinds Amid Weak Construction Demand

Europe’s timber industry faces a prolonged period of weak construction demand, industrial recession, and regulatory pressure, according to a macroeconomic assessment presented at International Wood Day on September 4, the Chamber of Agriculture Carinthia reported (9-22-26).

The assessment offered little indication of a near-term recovery, emphasizing instead the need for strategic perseverance as companies contend with sluggish construction activity and regulatory requirements including the EU Deforestation Regulation (EUDR).

The Central European forestry, sawmilling, and wood processing industries have experienced several years of significant economic volatility. Following strong global construction demand and supply-chain disruptions that contributed to record profits in 2021 and 2022, monetary tightening by central banks has weighed heavily on European construction.

Gunter Deuber, chief economist at Raiffeisenbank International AG, said economic conditions remain divided across Europe. While parts of Southern and Southeastern Europe are seeing moderate growth, supported by service industries and EU reconstruction funding, Europe’s industrial core remains in recession. Germany’s continued weakness is particularly important for Austria’s wood industry because of the country’s role as a major trading partner.

Private and commercial construction activity in Germany and Austria appears to have bottomed out mathematically, but there are few indications of a meaningful recovery. Building permits remain near historic lows, while residential construction cancellations continue.

The industry is therefore preparing for an extended period of consolidation in which operational efficiency, deeper value creation, and expansion into export markets outside Europe are expected to become increasingly important. Longer-term trends including climate protection, construction-sector decarbonization, and the circular economy continue to support wood demand, but companies face continued pressure to maintain strict cost and capacity discipline.