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It Could Be Worse, Really

Article by Rich Donnell, Editor-in-Chief, Timber Processing June 2024

The results of this year’s U.S. Sawmill Operations and Capital Expenditure Survey have us longing for the old days, though the old days were only a few years ago, when lumber prices were setting records and the homebuilding and remodeling markets were going gangbusters.

Perhaps the negative thing about surveys in general is that when it comes to reporting the results, as we do throughout this issue, some generalization has to come with it. That is, the survey may reveal a significant percentage of lumbermen who are feeling less optimistic these days, and perhaps downright pessimistic, but that doesn’t mean there isn’t a percentage who are more upbeat.

Results of the softwood lumbermen and hardwood lumbermen are broken out into two separate stories. But in this space I’ve always liked to combine the results to provide a snapshot look at the entire U.S. lumber industry.

As usual, considerably more softwood lumbermen weighed in, but in total the number of mills represented in the results by softwood and hardwood lumbermen is around 190. These mills vary drastically in annual production, which of course is the real world.

The survey was 24 questions long, but the one multiple-choice question that it hangs its hat on each year concerns how lumbermen forecast their “lumber business situation” for the remainder of this year and into next year, as in, this case, 2024-2025.

Only 1% forecasted it as “excellent,” while 7% said “very poor.” What about the in-between? Well, 39% said “fair.” That leaves 24% who forecasted “good,” and 29% who forecasted “poor.”

Looking at the bright side—why not?—that means a quarter of the lumbermen expect at least a good business performance in the near future. Don’t let the fact that three years ago 92% forecasted at least a good business situation, and in fact of that number it was 46% who said good and 46% who said excellent.

In other words, the survey this year shows a whopping 67% of the lumbermen have fallen out of the good or excellent forecast in three years.

But at the same time—looking at the bright side again—it’s not like lumbermen have screeched to a halt when it comes to capital expenditure. For the remainder of 2024 and 2025, 26% of them have committed at least $1 million toward a mill project. And 15% of those have allocated at least $5 million. Certainly not as a robust as in recent years, but still significant.

I always keep at my side the September 2009 issue of Timber Processing, which was during the Great Recession. It was a 24-page issue with seven pages of advertisement and one of those was a mill liquidation ad. It was the thinnest issue in the magazine’s 48-year history. In our 2008 sawmill survey that April, 70% of the lumbermen said it was the worst business environment they had ever seen.

I doubt that 70% of the lumbermen responding to the current survey would say likewise about the present business environment (though the recent demise of several mills would probably have those ex-managers in agreement).

I’m not sure if comparing a current situation to an absolute worst case situation is recommended in the field of psycho-analysis, but if it helps, have at it.

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