North American Sawmill Profit Margins Saw Substantial Decline

SEATTLE (Scrap Monster): The latest Wood Resources Quarterly (WRQ) report states that profit margins of North American sawmills declined substantially during the second half of 2018, after touching record highs in Q2 last year. The margins of a number of sawmill in western U.S. and western Canada plunged to unprofitable levels, forcing these mills to announce production curtailment.

According to WRQ, softwood lumber prices declined at a faster pace during the latter half of 2018. This led to compression in margins of sawmills throughout the world. The lumber prices extended decline from Q3 ’18, recording substantially lower levels during the last quarter of the previous year. For instance, the average prices of southern yellow pine ell further by 17% in Q4 over the prior quarter. It must be noted that the prices had fallen by 12% in Q3 ’18, when compared with the quarter before that.

The decline in lumber prices outclassed the decline in log prices during early-2019, thereby leading to further reduction in sawmill profit margins.

Meantime, the lumber prices exhibited much lesser volatility in Europe and Russia as compared with the North American region. Log costs remained more or less flat in Finland during the entire year 2018. The sawmills in these regions reported broadly healthy gross margins. Many Siberian lumber producers reported reduced gross margins during Q4 ’18, primarily on account of the drastic fall in lumber prices, which hit their lowest level in nearly two years.