Poland’s timber industry at a crossroads: Crisis, reform, and the struggle for survival

Once a powerhouse of European wood processing and a key contributor to Poland’s exports, the domestic timber industry now finds itself in one of its most severe downturns in decades. The sector—which includes sawmills, wood panel producers, packaging firms, furniture manufacturers, and paper mills—is grappling with falling production, shrinking exports, tight margins, rising debt, and a wave of bankruptcies.

The government’s “Wood Industry Package,” announced in 2024 as a response to growing distress in the sector, is only beginning to show limited effects. Meanwhile, industry players continue to face mounting pressure from rising operating costs, restricted access to domestic raw materials, and an influx of low-cost imports, particularly from Ukraine. Financial institutions have become increasingly cautious, compounding liquidity issues across the sector.

From Export Leader to Industry in Crisis

The downturn is rooted in a sharp imbalance between rising costs and waning demand. Following a brief pandemic-era boom, the wood sector was hit hard by a slowdown in international markets, especially Germany and Western Europe. Export orders dropped across the board—from furniture and wooden packaging to pulp and sawn timber—while domestic costs surged for energy, labour, materials, and logistics. Exporters are also struggling with the effects of a strong Polish zloty, which has made local products less competitive abroad.

The crisis is widespread. Trade bodies warn that if the current trend continues, up to 50,000 jobs could be lost and financial losses could top PLN 12 billion.

Imports and Raw Material Shortages Deepen the Blow

Adding to the challenge is a flood of low-cost wood and wood-based components from Ukraine, made possible by the EU’s removal of trade barriers in response to the war. Polish producers—particularly in the pallet and wooden packaging sectors—are finding it increasingly difficult to compete with these cheaper imports.

At the same time, domestic timber supplies have tightened significantly. A 2024 moratorium restricted logging on approximately 20% of Poland’s forested area, particularly in environmentally sensitive zones like the Białowieża Forest and the Carpathians. In 2025, timber supply from State Forests is estimated to be down by 2 million cubic meters compared to the previous year.

Government Measures: Slow Impact, Mixed Results

Under growing pressure, the government introduced a nine-point “Wood Industry Package” in 2024 aimed at supporting local processors and limiting unprocessed wood exports. Key actions included prioritising domestic customers, incentivising companies that conduct deeper processing, and curbing timber exports to non-EU destinations.

While officials reported a 39% drop in timber exports to China, overall exports actually rose 26% in 2024, calling into question the package’s real impact. Industry leaders also welcomed a 2025 regulation that removed certain wood assortments from biomass classification, a long-demanded step to prevent valuable raw material from being burned for energy.

Efforts to limit Ukrainian imports began in March 2025 when customs authorities started blocking wood shipments at the border. The sector is now calling on Brussels to introduce anti-dumping duties, similar to recent sanctions against Chinese plywood. However, political sensitivities regarding Ukraine have delayed any EU-wide consensus.

Signs of Stabilisation—But Only in Some Segments

Since the beginning of 2025, a revised wood sales framework favouring local processing has helped lift parts of the sector. The Central Statistical Office reported a 13.3% year-on-year increase in sales of wood and wood-based products in March, with cumulative growth of 6.9% in Q1. May data showed continued momentum, with sales rising 7.6%.

Some medium-sized sawmills and component manufacturers are seeing modest improvements. However, the furniture segment—once a flagship of Polish manufacturing—remains under pressure. Furniture exports fell 6% in 2024 while imports rose 10%. Although there was a small production boost of 8.7% in May 2025, weak demand from key markets like Germany continues to drag on the sector.

There is some optimism in the domestic market. Retail sales in the “furniture, electronics, and household appliances” category rose 13.2% year-on-year in April, with cumulative growth of 12.5% in the first four months. Analysts suggest that improving consumer sentiment and lower inflation may support recovery, but a full rebound is still distant.

Financial Fragility and Rising Insolvency

Despite modest production gains, the financial health of timber companies remains fragile. Debt levels have surged: wood processing firms now owe over PLN 100 million—up PLN 30 million in less than three years. Furniture manufacturers are in even worse shape, with total debt reaching PLN 130 million, a 20% increase year-on-year.

According to Coface, 1,969 companies declared insolvency in Q1 2025, a 20% rise compared to the same period last year. The timber industry has been among the hardest hit, with insolvencies in the sector rising by 167% year-on-year. In Poland’s eastern regions—where raw material restrictions are most severe—up to 22% of companies have shut down.

Limited Credit Access and the Turn to Alternative Financing

As banks tighten lending criteria, many companies face a credit crunch. Financial institutions are treating timber companies as high-risk, drawing parallels with the troubled construction sector of previous years. Entrepreneurs report increasing difficulty accessing loans, with banks demanding additional collateral, shortening repayment terms, or declining applications altogether. Even though interest rates were cut in May, debt servicing costs remain burdensome.

In response, many companies are turning to factoring as a lifeline. This alternative financing method allows firms to access cash tied up in unpaid invoices, helping them manage liquidity and safeguard against delayed payments. Factoring is particularly popular among smaller sawmills and furniture producers, where even minor delays can pose major operational risks.

Outlook: A Sector on Edge, Searching for Stability

As mid-2025 approaches, Poland’s timber industry is caught between cautious hope and continued uncertainty. While government reforms and market adjustments may offer the first steps toward recovery, many companies are still battling serious financial and operational headwinds. Without stronger systemic support—such as stabilisation funds, credit guarantees, or targeted subsidies—the industry risks permanent decline.

If the second half of the year brings improved access to raw materials, financial relief, and a rebound in demand, the sector could begin a slow path to recovery. If not, thousands of firms may fail, and Poland could lose a critical pillar of its industrial economy.

Author: Dominik Łada, Business Finance Manager at Bibby Financial Services