Long-Term Demand for Wood Products
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"Forest-product demand carries a genuinely structural growth story to 2050, but near-term returns remain tied to housing cycles, interest rates and construction activity. Distinguishing long-term fundamentals from short-term volatility remains essential before sizing any exposure."
Forests provide a renewable source of construction materials, packaging, pulp, energy and a growing range of bio-based products. The FAO expects demand for forest products to rise sharply by 2050 as global material consumption increases, noting that global material use has nearly doubled over the past 50 years and may rise a further 60% by 2060. This creates a structural backdrop of rising demand set against a finite and, in some regions, shrinking resource base, with roughly 100 million hectares of forest lost globally over the past two decades. For clients assessing long-duration exposure to forest products, this combination of rising consumption and constrained supply is the central structural theme.
The scale of the underlying opportunity extends beyond simple material substitution. FAO analysis estimates that wood products, when sourced sustainably, could store 1 billion tonnes of carbon dioxide annually by 2050, equivalent to removing around 200 million cars from the road, while the global forest sector already contributes an estimated USD 1.52 trillion annually and employs at least 33 million people. This scale illustrates why forest products are increasingly discussed not as a niche sustainable alternative but as a mainstream industrial sector with genuine capacity to influence decarbonisation pathways across construction, packaging and textiles simultaneously.
Mass timber and engineered wood are part of this long-term theme, particularly where developers and policymakers seek lower-carbon material choices. Industry forecasts suggest annual mass timber building construction in the United States could rise from approximately 750 projects in 2025 to around 5,000 per year by 2035, while separate market analysis projects the broader engineered wood sector growing from roughly USD 308 billion in 2025 to over USD 520 billion by 2035. This reflects growing specification of engineered wood products, including cross-laminated timber and glulam, in commercial and institutional construction, a segment increasingly viewed as a genuine new demand source distinct from traditional residential lumber consumption.
Demand will remain cyclical, however, as it is shaped by construction activity, housing markets, interest rates and regional manufacturing capacity. Current market conditions illustrate this cyclicality clearly. US single-family housing starts were running at approximately 980,000 units annualised in early 2026, down from around 1.03 million a year earlier, with mortgage rates averaging 7.1% to 7.4% continuing to constrain new home sales. Total North American wood products consumption fell 0.7% amid global energy shocks, an AI-driven investment boom competing for capital, and ongoing tariff uncertainty, all factors with limited connection to forestry fundamentals yet material influence on near-term demand.
Two features of the current cycle are worth noting for long-term positioning. First, repair and remodelling activity, estimated at USD 420 billion in the US for 2026, is providing a resilient demand floor even as new construction slows, partly reflecting a "lock-in effect" where homeowners with low-rate mortgages renovate rather than relocate. Second, forecasters remain divided on the pace of recovery: some project US housing starts climbing toward 1.5 million units in 2026 on the back of lower interest rates, while others, including Forisk's Q1 2026 analysis, forecast a further 1% decline to 1.34 million units before a modest recovery in 2027. This forecasting divergence is itself informative, underscoring genuine near-term uncertainty even where the multi-decade demand trajectory is well supported.
For clients considering forest-products exposure, the practical implication is to separate the FAO's structural, multi-decade demand growth from the shorter housing and interest-rate cycles that will continue to produce meaningful volatility along the way. A position built solely on optimistic near-term housing forecasts carries different risk from one grounded in the sector's broader bioeconomy role across packaging, textiles and industrial decarbonisation. Defoes helps clients hold both timeframes in view, evaluating structural demand signals from bodies such as the FAO alongside the cyclical housing and manufacturing data that will shape returns over any individual investment horizon.
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