Average global losses in the sawmill industry were $12 per cubic meter in 2008

Jun 24, 2009. /Lesprom Network/. Sawmills in Eastern Canada performed far worse than their global counterparts in 2008 and early 2009, according to a new industry study, Chronicle Herald reported. The global lumber and sawn wood-cost benchmarking report was prepared by International Wood Markets Group Inc., a Vancouver-based industry consulting firm, with input from consultants PricewaterhouseCoopers and The Beck Group. Based on data from more than 29 countries or regions, it found that average global losses in the sawmill industry were US$12 per cubic metre in 2008 and $14 per cubic metre in Q1 2009, compared with a profit of US$8 per cubic metre in 2006. But average losses at sawmills in Eastern Canada, including Ontario, Quebec and the Atlantic provinces, were three times that global figure — US$37 per cubic metre in 2008 and even worse in the first quarter of 2009. The study attributed the poor results to the collapsing U.S. market, the relative strength of the Canada dollar against the U.S. dollar and the impact of Canadian export taxes on U.S. shipments. "It is clear from the survey results that much of Canada and Europe were the big financial losers in 2008 and so far in 2009, mainly from weak markets, overcapacity and cost structure issues," said Russell Taylor of International WOOD Markets Group. Mr. Taylor said in an interview the study focused on larger Ontario and Quebec sawmills, the "major players" that process lumber from Crown land. He suggested that smaller independent mills in Atlantic Canada and in Nova Scotia, where much of the woodland is privately owned, fared somewhat better, even though they haven’t been immune to the industry’s woes. "There’s too much supply chasing not enough demand," he said. "It’s ugly." Sawmills in Nova Scotia have cut back production and had extended downtimes due to the global economic downturn. Dave Thompson, a partner with PricewaterhouseCooper’s forest, paper and packaging group, said private woodland ownership in Nova Scotia gives the provincial industry more flexibility in dealing with market fluctuations. But he said the entire Canadian sawmill sector is still faced with the stark fact that U.S. housing starts are down from two million in 2005-06 to a half-million this year — a 75 per cent drop. "That’s the underlying challenge," he said, since most Canadian sawmill products go to the U.S. market. Regions with the most profitable sawmills in 2008 included South Africa, China and northwest Russia, the study found. But even those were only marginally profitable, at US$3-$4 per cubic metre. Sawmills in the Baltics, Central Europe, Chile and Brazil had the lowest costs in 2008. The highest costs were in Eastern Canada, Australia, South Africa, New Zealand and Russia. Mr. Thompson said Canadian sawmill operators need to identify cost variables and market opportunities in relation to other producing regions. "Given the expectation that lumber demand will be weaker and the market even more competitive for the rest of 2009, using detailed cost and revenue information on an apples-to-apples basis between competing regions is a critical part of any company’s marketing, operational and strategic plan," he said.