It is needed in all levels especially in lower and higher ones. In lower levels, it is needed because it serves as second resource with the first is food. In higher ones, it is used for lots of resources like sun tile and lumber (which is for coal, polunarium and moon graphite).
It is recommended to build at least more than 6 in each island that this building is available for allowing to sustain wood needs. You can also build at least 10 if you want to expand your wood production.