Industry Disappointed by the Price Increase of Wood Products

Timber prices are increasing by a minimum of four percent to a maximum of twelve percent for individual products. The announcement made yesterday by Hrvatske šume (Croatian Forests) was not well received by industry representatives, as indicated by our interlocutors.

Ivić Pašalić, president of the HUP Association of the Wood and Paper Industry, states that with this decision, the overall increase in timber prices this year has reached about 20 percent, which is clearly significantly above the inflationary trends in Croatia. Pašalić, who is also the president of the Supervisory Board of Mundus Viridis (a company owned by Ksenija Pašalić), believes that this will further pressure the overall results of the wood processing industry, which has already been recording a negative trend since 2022.

– This is a decline in total revenue and the physical volume of production. The decline in export value after 2022 amounts to about 22 percent. This will further pressure the already lagging wages of our workers, as despite all negative trends, wages will continue to lag behind the average wages in the manufacturing sector. When you add to this the extremely low labor productivity, it is evident that it is necessary to devise and implement strategic measures aimed at increasing the competitiveness of this crucial industrial sector. This, in terms of reach and seriousness, goes beyond merely raising or not raising the prices of raw timber. It seems to me that the time has come for serious strategic discussions and decisions to significantly improve the position of the wood processing sector in Croatia. I hope that the relevant minister will reset the management crisis in Hrvatske šume and be ready to undertake strategic measures, says Pašalić.

Inappropriate Price Increase

Regardless of the consequences, we asked him whether the price increase is justified considering the rising costs. Pašalić refers us to publicly available data that show the negative trend in the operations of Hrvatske šume, lower profits, shaken liquidity, and a significant increase in loans for regular operations….

– In addition, there is a need for a realistic valuation of unsold stocks that remained from the time of the catastrophic windfall, so it is entirely possible that the financial situation is even more questionable than reported. Furthermore, nothing has been done regarding the urgently needed restructuring of the company’s operations, so it seems to me that this price increase aims only to patch current holes and significant shortcomings of the Management in the past period, says Pašalić.

However, he particularly emphasizes the inappropriateness of the way prices are raised, as it is extremely unprofessional to raise them on October 20, 2025, with application from tomorrow.

– Furthermore, the methodology of raising prices is incredible, where all assortments are raised by the same or similar percentage, regardless of the well-known fact about which assortments are the most profitable. If nothing else, they could have seen the price ratios in recent arrests, Pašalić remarks somewhat sarcastically.

The price increase of timber does not please Damir Kelava, CEO of Finvest Corp. He states that the announced increase in raw material prices will certainly have a significant impact on the entire sector. The wood processing industry is already facing rising costs of energy, labor, and transportation, and the increase in the price of basic raw materials, says Kelava, will further reduce the competitiveness of domestic producers, especially in export markets. Many companies will be forced to adjust their selling prices, which could lead to a loss of market share and a reduction in investments.

– For our company, this price increase means an increase in input production costs, which will inevitably reflect on business results. We will try to mitigate part of the cost through internal savings and more efficient processes, but larger increases in output prices are not possible as they are determined by demand in foreign markets, which is already weakened due to economic trends and reduced consumption in the countries where we operate. This further complicates the preservation of profitability and investment in further business development, says Kelava.

The same is said by the Bauwerk group. Although they consider the price increase justified from the perspective of forest management, which cites rising labor costs, energy, and forest sustainability, it is not well-timed. They emphasize that the parquet market has recorded a consumption decline of nearly 30 percent globally over the past two years, which has forced producers to lower the prices of final products to maintain competitiveness. In such circumstances, any increase in raw material costs, especially before the logging season, further complicates the position of Croatian producers and reduces their ability to compete in the European market.

– In other words, while we understand the need for Hrvatske šume to adjust prices, we believe that such decisions should be planned gradually and in cooperation with the industry, as the competitiveness of Croatian wood processing production depends precisely on stable and predictable procurement conditions. At a time when the Croatian wood processing industry is already under pressure from high labor costs – among the highest in Europe – further increases in raw material costs could jeopardize the operations of several producers and have negative repercussions on the entire wood-based value chain, say the Bauwerk group.

This company uses raw materials from Hrvatske šume in a relatively small share, only about 15 percent of total needs, so they state that the direct financial impact of this price increase on their operations is not decisive.

– However, the increase in raw materials from Hrvatske šume has a strong domino effect as it also affects the rise in prices in the free market, where we procure most of our materials. This further complicates an already challenging situation in the sector, they state.

Kelava also believes that the announced price increase is not justified as its cause is not market-driven, but primarily a consequence of inefficient operations within the company Hrvatske šume.

– This company has suffered for years from sluggish decision-making, a lack of accountability for implementing necessary reforms, and an excessive administrative apparatus that does not contribute to real improvements in business results. Instead of passing on the costs of its own inefficiency to the wood processing industry, it would be more beneficial to enable and mandate restructuring of Hrvatske šume aimed at greater operational efficiency, transparency, and creating added value in the wood processing chain, says Kelava.

The Wood Industry Will Bear the Consequences of Poor Operations of Hrvatske Šume

In the same tone and content speaks Robert Žulj, CEO of Bjelina, a company owned by Darko Pervan, a Croatian entrepreneur and innovator based in Sweden. He states that the announced price increase is merely an attempt to pull Hrvatske šume out of the poor situation it has fallen into due to incompetent management at a rather challenging time caused by the Vinkovci windfall. Moreover, the price increase is unjustified due to the poor quality of logs, which is far from declared, further increasing production costs and leading the industry towards losses in business.

– Thus, the wood industry will actually bear all the consequences of the poor and disorganized operations of Hrvatske šume in the form of a reduction in the number of employees, which is already happening in some companies in the wood industry, and likely also the closure of operations. I expect a decline in Bjelina’s revenue, a lack of competitiveness in the market, and consequently, we must reduce the number of employees.

Let us recall that Hrvatske šume announced yesterday an increase in timber prices from a minimum of four percent to a maximum of twelve percent for individual products, noting that a 20 percent discount will still be granted for firewood for citizens.

This state company states that it continuously monitors the situation in the domestic and regional market of wood products and, in accordance with price analyses in neighboring countries and the current market situation, has approached a minimal correction of timber prices.

– This decision was made with the aim of maintaining business stability, preserving forests, and ensuring the long-term sustainability of the forest economy of the Republic of Croatia, it was emphasized in the statement from Hrvatske šume.

They note that analyses have shown that timber prices in Croatia are among the lowest in the region, which, in the current economic circumstances marked by rising labor costs, inflation, and rising prices of energy and materials, is no longer sustainable without minor adjustments.

Hrvatske šume, as they stated, will continue to conduct a responsible pricing policy that respects the needs of the wood processing industry and citizens, while also ensuring sustainable management of national forest resources. The goal of this measure is not to create additional pressure on the wood industry, but to establish real market relations that will enable continued investment in forest renewal, security of supply, and the development of the domestic wood industry.

– This correction is not a decision made overnight, but rather the result of detailed analyses and the need to ensure the long-term sustainability of our forests and the security of wood supply for the domestic market. The price for citizens is minimally adjusted as we are aware of the importance of firewood as a basic life necessity, especially in the upcoming period, emphasized the CEO of Hrvatske šume Nediljko Dujić.