the visible hand

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Sawmill profitability benchmarking: 2004 and 2006

Posted by ecoshift on September 14, 2007

What difference a year or two makes…

Global lumber/sawnwood cost benchmarking report—2004

Sawmills on the West Coast of the United States are the most profitable in the world, with 2004 earnings at average mills more than twice the overall global average earnings of USD 24/m3. Mills in Australia held the number two spot with earnings of USD 58/m3, followed by British Columbia’s Interior region sawmills at USD 55/m3. The lowest average sawmill earnings in 2004 occurred in European countries as well as parts of Russia where they ranged from around break-even to a high of USD 15/m3 in the Baltic States.

North American sawmill profits lowest in the world in 2006 and Q2 of 2007:

VANCOUVER, BC, 12 SEPT 2007 — Sawmills throughout the U.S. and Canada achieved dismal operating results in 2006 where the profits at average1 mills were barely positive and slipped into negative territory in the second quarter of 2007, when lumber prices collapsed to below the cost of production. The cost of logs delivered to the mills has generally been rising in North America and, in conjunction with low lumber prices, has caused sawmills to incur deep operating losses not seen since 1991. These and other findings were released today in the latest issue of a report published by International WOOD Markets, PricewaterhouseCoopers, and The Beck Group. The report, titled Global Lumber/Sawnwood Cost Benchmarking Report—2006 and 2007 Q2, is the most comprehensive compilation available on global timber, lumber and sawnwood cost benchmarking, covering over 170 sawmills in 29 major forest products producing regions of the world.

Sawmills in South Africa, Chile and North-west Russia were the most profitable in the world – the 2006 and 2007 Q2 earnings2 at average mills were between two and five times greater than the overall global average earnings, a dismal USD 13/Mbf, or just 4% of lumber sales revenue. In North America, the U.S. South posted the best mill earnings–this was one of the few areas not punished by rising log costs. The worst sawmill earnings for all the regions in the report occurred in Brazil, the U.S. Inland West region, Quebec and the B.C. Coast. They all recorded negative earnings in 2006 as well as the second quarter of 2007.

The U.S. West Coast region reported some of the lowest earnings in 2006 (near zero) and 2007 Q2 (negative) due to rising delivered log costs and poor lumber prices. This region had the highest average sawmill earnings in the world in 2004. The B.C. Interior challenged US West mills for lowest operating cost honours at top-quartile mills but fell short in 2006, as in 2004.


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