Sawmills in U.S. South and Russia achieve highest global sawmilling earnings

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Since 2008 until very recenty, the U.S. South had had the best figures in terms of sawmilling industry sales. The ongoing decline in foreign currency exchange rates of major producing and exporting regions against the U.S. dollar caused a massive erosion of lumber prices in many markets around the world. Nevertheless, the situation on some markets has changed dramatically. 

As International Wood Markets emphasizes in its 2015 Global Cost Benchmarking Report, the Russian ruble saw a 50% reduction (2014 average vs. Q1/2015 average) and this contributed to the Russian sawmills facing major cost reductions as well as soaring lumber revenues in U.S. dollar terms.

Wood Markets' survey took into consideration 32 countries and/or regions. Among them, U.S. South and Russian mills accounted for 6 of the top 8 positions in terms of earnings (EBITDA) at top-quartile mills. The global EBITDA average in 2014 for top-quartile mills was double that of 2012 on the strength of improved lumber markets, stable global economic conditions and a slow strengthening of the U.S. dollar.

US Mills Rise to the Top

On the North-Amercian scene, U.S. mills are still getting better overall earnings than the Canadian ones. As the Wood Markets underlines, the Softwood Lumber Agreement (SLA) is likely to be a key factor. The U.S. South sawmills performed best.

Currently, Canadian mills have to face rather low lumber prices. Despite this, local producers may see better earning with the local currency getting weaker agains the U.S. dollar and the non-renewal of the SLA starting on October 12, 2015, says International Wood Markets' President Russell Taylor. 

In Q1/2015, good earnings seen by North American mills, slid down due to weak demand, declining lumber prices, and excess production. The downward tendency continued both into Q2 and Q3 of 2015. Regardless, the U.S. South remained the highest margin region in the world in Q1/2015.

Russian Mills Achieve Stellar Results

Russia’s best mills have been improving their results in each global survey over the last four years, says Wood Markets. Mostly driven by curriency fluctuations, mills reached top earnings in 2014. Buyers were able to quickly push Russian lumber prices lower in US-dollar terms, especially in China.

Thus, in  2014 and Q1/2015, overall earnings of the Russian and U.S. mills were approximately on the same level.  “With a huge windfall of cash, a number of Russian sawmill companies have embarked on capital spending programs to create higher production, lower cost mills, not to mention considerable investments in lower cost Scandinavian logging equipment.” commented Russell Taylor cited in Wood Markets' press-release. 

European & Southern Hemisphere Mills Improve

Despite the rapid weakness in the euro relative to the U.S. dollar, European sawmills weakened through into Q1/2015. Earlier on, they managed to improve moderately over the disastrous results of 2012. 

A similar tendency was observed in the Southern Hemisphere regions (Australia, New Zealand, Chile, Brazil and South Africa): better results over 2012 earnings, but general weakness in Q1/2015.

Wood Markets underlines that since 2002 South Africa and Australia fared pretty well. Australia out-performed South Africa in 2014 and Q1/2015 at “top-quartile” mills to achieve the highest earnings of mills “down-under”.

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