Mercer International reported sharply widened losses in Q2 2026 as elevated German fibre costs and weak pulp pricing pushed both its pulp and solid wood segments into negative EBITDA, highlighting mounting competition between traditional pulp producers and biomass energy sector for limited feedstock supplies.
The company posted a net loss of $76 million, or $1.13 per share, compared to a $52 million loss in Q1. Revenue of $460.3 million fell below analyst expectations of $498 million. Operating EBITDA swung to negative $21 million from positive $8 million in the prior quarter, driven primarily by fibre cost inflation in Germany of approximately 7% versus Q1.
Chief executive Juan Carlos Bueno attributed the deterioration directly to geopolitical disruption. 'Extremely high German fibre costs and delayed recovery in pulp prices' drove the results, he told analysts. The war in Ukraine has halted Russian wood supplies into Europe and driven energy costs to record levels. This creates a direct feedstock squeeze: high energy prices, coupled with German government subsidies for wood-burning home heating, have increased demand for wood pellets, placing biomass producers in direct competition with Mercer's pulp mills for limited fibre supplies.
The company's German mills now operate at reduced rates. Mercer strategically reduced production at its German pulp mills by approximately 26,000 tonnes in Q2 and plans to continue operating at reduced capacity in Q3. The company expects German fibre costs to remain elevated in the near term, though sawmill costs may ease as saw log availability improves.
Softer market conditions are expected to persist through 2026. Mercer took a $29 million non-cash inventory impairment charge in Q2 related to high fibre costs and weak pulp realizations. The company's mass timber operations remain a bright spot, with revenues up more than 25% from Q1 and an order book of $151 million.
Mercer is evaluating capital structure alternatives and working with advisors on refinancing options as it faces debt maturities in 2027 and 2028.
Biomass demand intensifies German fibre squeeze for pulp producer
