STOCKHOLM, Nov. 29, 2021 /PRNewswire/ — Sawmills in Europe and North America enjoyed record profits during the first half of 2021, but fell in the 3Q when lumber prices plunged
Sawmill profits in North America and Europe continued to rise in the spring and early summer of 2021, surging to all-time highs on both continents. With lumber prices reaching unprecedented levels and costs for sawlogs moving up relatively less, profits for sawmills reached record highs in the 2Q/21. The gross margins, defined as the margin between lumber prices and net wood costs, were by far the highest in most regions covered by the WRQ since it started tracking quarterly sawmill profits in 2005.
The surprisingly strong demand for lumber and high operating rates at lumber manufacturers resulted in increased costs for sawlogs during the past year, with some of the most significant increases occurring in western Canada, the Nordic countries, and Central Europe.
Despite the higher production costs, the gross margins more than doubled in Europe and tripled in North America over the past year. However, in July and August 2021, margins fell substantially because of plunging lumber prices, while sawlog costs saw smaller price adjustments. As a result, many sawmills reduced operating rates in Western Canada and Northwestern US, where the revenues from lumber sales infrequently did not cover the cash costs.
In the US South, gross margins also fell as lumber prices crashed, but thanks to low sawlog costs, sawmills were still running at profitable levels into the 3Q/21. As a result, the estimated gross margins in August were noticeably higher than the average over the past decade.
Profit levels for sawmills in the Nordic countries have also increased in the past year, although at a slower pace than in Canada and the US. Higher revenues for lumber and byproducts more than compensated for recent increases in the costs for sawlogs in both Finland and Sweden in the 2Q/21. This positive development resulted in gross margins for sawmills in the Nordic countries hitting their highest levels in over 15 years.
Swedish lumber companies have seen their profits rise faster than their Finnish competitors. They have benefited from lower sawlog costs than lumber mills in Finland and have had a higher share of lumber shipments to high-paying markets, including the US, Norway, United Kingdom, the Netherlands, and Denmark. Some of the major destinations for Finnish lumber have been lower-cost markets such as the MENA region and China.
Are you interested in worldwide wood products market information? The Wood Resource Quarterly (WRQ) is a 75-page report established in 1988 and has subscribers in over 30 countries. The publication tracks prices for sawlog, pulpwood, lumber & pellets and reports on trade and wood market developments in most key regions worldwide. For more insights on the latest international forest product market trends, please go to www.WoodPrices.com
Wood Resources International LLC
Hakan Ekstrom, Seattle, USA
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SOURCE Wood Resources International LLC
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