Lumber producers’ profit margins improve slightly in Austria, Eastern Russia, Western U.S. and Western Canada

02-01-2020
lumber producers,profit margins,Austria,Eastern Russia,Western U.S.,Western Canada,Sweden,Finland,Wood Resource Quarterly

The financial health of the world’s lumber producers was mixed in the 3Q/19. The gross margins fell in Northern Europe, while they improved slightly in Austria, Eastern Russia, Western U.S., and Western Canada, reports the Wood Resource Quarterly. In North America, lumber prices started to flatten out and increased slightly in the fall.

Profit margins declined faster for sawmills in Finland than in neighbouring Sweden during 2018 and 2019, and in the 3Q/19 reached their lowest levels in 15 years.

LUMBER PRICES MAY BE REACHING BOTTOM

The financial health of lumber-producers in most of the regions continued to be poor throughout the fall. However, there are indications that lumber prices have started to reach their bottom in many markets in late 2019 and also that log prices have declined, in part to adjust to the weak demand for lumber. Gross margins for sawmills in western U.S. and western Canada improved slightly in the 3Q/19 from the previous quarter, although they were still below the five-year averages for the two regions.

Austrian sawmills have seen their profits increase in 2019 after a long period of low profitability. The improvements can mostly be attributed to reduced costs for sawlogs during 2018 and 2019. The sawmill sector in Eastern Russia has seen profitability improve in the 3Q/19 following a substantial decline in the second half of 2018.

FINNISH SAWMILLS SEE LOWEST PROFITS SINCE 2005

Domestic sawlog prices in Finland and Sweden have been declining for over a year because of lower demand from the region’s sawmills. However, the reduced wood raw material costs have not kept pace with the falling prices for lumber, which has resulted in lower margins for the sawmilling sectors in both countries.

Finnish sawmills have never had profits as low as in the 3Q/19 since 2005, according to WRQ, which has been tracking quarterly wood costs, product prices and gross margins worldwide. The gross margins for lumber producers in Finland have fallen more rapidly than those of their Swedish competitors during 2018 and 2019, mainly as a result of lower lumber prices in Finland than in Sweden.