FEA NEWS RELEASE — The FEA report, Global Timber / Sawmill / Lumber Cost Benchmarking Report was released in mid-December to subscribers. The 9th Edition of this report provides a detailed analysis and comparisons between 29 countries or regions on delivered log and sawmill costs, revenues and margins for both “typical” and “best” mills.
The results show some dramatic changes in the cost structures of some regions, where some have moved much higher in the last few years while others have seen major cost reductions. For example, the emergence of low-cost timber supply in Central Europe from the spruce bark beetle salvage program as well as ongoing windstorms have moved Germany, Austria and the Czech Republic from some of the highest-cost producers to the lowest ones. In contrast, British Columbia has moved from a normally competitive region to one of the highest cost regions as a result of U.S. import duties as well as over-priced government timber. Many other countries have seen shifts in their competitive positions as a result of various factors, including currency changes, timber costs or inflation factors. Similarly, the sawmill earnings across 2018 and up to 2019Q2 show significant changes, ranging from some very robust margins to a few regions with losses.
The report highlights that gaining competitiveness in volatile markets remains a key theme, where low-cost suppliers set the market and high-cost producers can get curtailed quickly. It is evident from the detail cost analysis that the competitiveness of the major producing regions is changing where delivered log costs, in particular, can make or break a region.
The lowest delivered log costs occurred in South America, Central Canada and Russia, providing some competitive advantages to these regions. The highest log costs continue to be found in Europe – in Finland and the Baltic States (but not Central Europe). While there continue to be variances in sawmill costs between regions, the differences continue to get smaller as top-quartile mills adopt best technologies.
The highest sawmill margins were achieved in some of the Southern Hemisphere countries and the lowest in European countries. More importantly, the delivered lumber costs to markets like the U.S. South have changed drastically since early-2018: European and South American mills now have the lowest delivered lumber costs – not North America mills!
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