The log price, recovery and the margin squeeze

Because logs are the largest cost, the relation between log price, recovery and sawn timber price decides most years' result. This lesson shows the arithmetic and then the real European squeeze described in the portal's sources.

The core formula

To a first approximation, gross margin per cubic metre of sawn output is:

margin = sawn price + residue revenue - log price / recovery - other variable costs

The key term is log price / recovery: the log cost per m³ of sawn output. A log price rise is multiplied by the inverse of recovery. At 50% recovery, one euro more on the log is two euro more per m³ sawn. At 48% recovery it is 1 / 0.48 = 2.08 euro.

Illustrative mill (illustrative numbers, not market data)

All figures below are invented round numbers to show how the levers interact. They are not from any real mill, country or year.

Assume logs delivered at 100 euro/m³, recovery 50%, sawn price 260 euro/m³, residue revenue 24 euro per m³ of sawn output.

Sensitivity 1: log price. Logs rise by 5 euro/m³ (5%). Cost per m³ sawn rises by 5 / 0.50 = 10. Contribution falls from 55 to 45.

Sensitivity 2: sawn price. A fall of 10 euro/m³ in the sawn price has exactly the same effect on contribution. A 3.8% price fall and a 5% log rise are equally damaging.

Sensitivity 3: both together. Contribution 55 - 10 - 10 = 35, a fall of more than a third.

Notice that a 5% change in one input removed almost a fifth of contribution. That is why a small log price rise can turn a thin margin into a loss.

The real squeeze in Europe (trade commentary, not audited data)

A squeeze happens when logs get dearer faster than sawn timber, typically when sawlog supply is tight and construction demand weak. Fastmarkets (November 2025) reported:

• Southern Swedish spruce sawlogs above 1,400 SEK/m³ by the second quarter of 2025, more than double 2019.
• Finnish stumpage about 76 euro/m³ (pine) and 79 euro/m³ (spruce) in October 2025, 14 to 16% above five-year averages.
• German spruce sawn timber (44 to 50 × 150 mm) at 310 to 325 euro/m³ in autumn 2025; Nordic timber in Germany 50 to 60 euro/m³ cheaper.
• A 115,000 m³/year mill in central Sweden to close in March 2026, citing wood costs.

These are market reports; they match, but do not prove, the thin margins in the academic data of lesson 1.

Poland: price volatility in numbers

A 2024 Polish paper (Folia Forestalia Polonica) gives annual average prices of pine pallet lumber: 442.5 PLN/m³ (2019), 757.5 (2021), 1,225.0 (2022) and 775.0 (2023). Own calculation: 1,225 / 442.5 = 2.77, so the 2022 price was about 2.8 times the 2019 price, and 775 / 1,225 - 1 = -36.7%, so 2023 was about 37% below the 2022 peak. A contribution margin must survive swings like this.

A Polish industry-chamber statement in 2024 that sawmill costs exceeded product revenue is an unquantified trade claim, not verified data; treat it as a caveat only.

Options in a squeeze

• Raise recovery.
• Shift the product mix to higher-value sizes and grades.
• Grow residue revenue.
• Cut conversion cost.
• Curtail volume, which is rational only when the marginal cubic metre has a negative contribution, and which costs fixed-cost absorption, skilled staff and customers.

Key points

• Log cost per m³ sawn = log price / recovery; at 50% recovery every euro on the log costs two euro per m³ sawn.
• In the illustrative mill, +5 euro on logs and -10 euro on sawn price each cut contribution from 55 to 45.
• The recent European squeeze combined high log costs (Swedish sawlogs more than double 2019) with weak lumber prices; the sources are trade commentary.
• Polish pine pallet lumber prices moved 2.8 times up and 37% down within four years.
• Recovery is the first lever to look at, but not the only one.