Lumber companies in the US reached record profits thanks to high lumber prices and declining sawlog costs
Record high lumber prices in the US, stable income for residual chips, and slightly lower costs for sawlogs moved 2Q/20 gross margins for US sawmills to some of the highest levels seen since WRQ started reporting this sector’s profitability back in 2005. Lumber companies in the US Northwest have seen a dramatic shift in their financial health from late 2018 when most sawmills in the region ran at below cash-costs, to the 2Q/20 when gross margins were at their highest levels in at least 15 years.
Over in Europe, Swedish lumber companies saw slight improvements in profitability in the 2Q/20 because of increased prices for both domestic and exported lumber and slightly lower sawlog costs. In neighboring Finland, both lumber prices and net wood costs (sawlog costs minus residual income), saw minimal changes in the 2Q/20, thereby maintaining the current and historically low levels of gross margins. Sawlog prices in both countries have trended downward for about two years. However, the decline in wood raw-material costs has not kept pace with the declining lumber prices, leading to a significant drop in profitability in 2019 and early 2020. In other countries tracked by the Wood Resource Quarterly, including Austria, Russia, and Brazil, gross margins increased in the 2Q/20 mainly as a result of sawlog prices declining by 10-20% quarter-over-quarter.
It cannot be overstated how important costs of sawlogs are for a sawmill’s profitability. Depending on log quality, degree of automation, and end-product, the cost of wood raw-material can account for 65-80% of the total variable production costs.
Interested in wood products market information from around the world? The Wood Resource Quarterly (WRQ) is a 70-page report, established in 1988 with subscribers in over 30 countries. The report tracks prices for sawlog, pulpwood, lumber & pellets worldwide and reports on trade and wood market developments in most key regions around the world. For more insights on the latest international forest product market trends, please go to www.WoodPrices.com
Wood Resources International LLC
Hakan Ekstrom
Wood Resources International LLC (WRI), an internationally recognized forest industry-consulting firm established in 1987, publishes a global quarterly wood market report and have subscribers in over 30 countries. The Wood Resource Quarterly, established in 1988, is a 56-page market report and includes prices and trade or sawlog, pulpwood, wood chips, lumber and pellets, and market commentary to developments in global timber, biomass and forest industry.
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