Logs cheap, lumber expensive

[mar13]

I'm having trouble copying this link on my cell phone, but it leads you to a Bloomberg article. Basically plenty of harvest ready logs in the south, but demand for lumber is higher than the mills can produce. Do the mills are making a killing: logs are cheap and the market is high for the lumber.

Lumber Prices Soar, But Logs Are Still Dirt Cheap

Lumber prices have soared to records. Demand for wood is skyrocketing. The shares of wood suppliers are surging.

www.bloomberg.com

Harvest-ready trees exceed sawmill capacity throughout the southern U.S. Since it’s so expensive to transport heavy logs, supplies go to sawmills in the area and the fees are highly localized in the region, where many timberlands are privately owned.




In Alabama, the stumpage fees are slightly higher than Louisiana at $23.34 per short ton. But they’ve barely budged since 2016 and are half the price fetched in 2005.

In the futures market, lumber touched a record $1,326.70 per 1,000 board feet on Monday.

 

[peakbagger]

Sawmills are a cutthroat business and add in competition with canadian lumber and its tough business to be in most of the time. Usually the capacity that is in business is running full out. The ones that are in business have tight margins and my not make a profit for several years. With high prices more capacity will come on line and overcapacity will be an issue. All the remaining sawmill in my area have been trying to hire employees long before Covid and they continue to do so.

There is also the currently politically incorrect observation that enhanced unemployment benefits are keeping the workforce down. In my area there are plenty of low pay jobs and not enough workers. Most of the jobs are seasonal and in order to make a living someone usually has to move around chasing the work. The normal NH unemployment benefits are very low but with the enhanced benefits and other social safety net programs (several free no question asked food programs), at least a portion of the employment base that normally would supply these jobs are not working as their income is at least as high not working as working. The state was legitimately quite generous with the benefits not requiring any work search during peak of the epidemic but they are now starting to requite work search and following up on the search. The schools also have gone back to full time which mean families with children no longer have to stay home to keep and eye out on the children.

 

[Bad LP]

A friends son has a pile of logs waiting for trucking to the mill. Says it's about 100 log trailers worth. That's just one guy.
Roads were still posted two weeks ago when I was up north but I expect them to start opening soon.

 

[peakbagger]

I remember the "good old days" at our pulp mill getting ready for mud season. If we bought too much and it was short mud season the accountants complained but if we bought too little and was close to running out of wood the same accountants would complain that we did not buy enough. i remember some seasons where we were running with zero inventory, it went directly from the truck into the chipper. Several loggers would set up yards adjacent to state highways not subject to road bans and would roll the dice that they could sell the wood they piled up at a premium.

 

[mar13]

I read an article in the Wall Street Journal stating that about 30% of the mills in the south are now Canadian owned. Their tactic for getting around the tariffs. They've also modernized the mills which make them much more efficient (computers scan logs) at getting wood out of a log. The mills were designed to handle the most common sized log - if you have too big of logs, you're out of luck.

 

[Bad LP]

The biggest problem with the Canadian mills and lumber in general are the subsidiaries provided by their government.
I knew the owners of Burrus and that was one of the hardest hurdles on hardwoods.

 

[peakbagger]

Regionally its hard to compete against relatively low cost Hydro Quebec power across the border with our US power that is loaded with regional greenhouse gas fees and lot of other fees. Reportedly unemployment benefits are more generous for seasonal workers in Quebec and NB and more importantly the unemployed have health insurance so they can hang around during seasonal outages. The US has decided not to have government supplied health care and most Northern New England states pre Covid pushed individuals to take any work rather than hanging around for expected return to their seasonal employer. This means its harder for a US mill to restaff quickly compared to a Canadian mill. Since I am not on that side of the border its speculation,it would be interesting to hear from someone on the other side of the border and get their viewpoint.

In general I have seen statements in the past that the eastern sawmills along the border tend to get along with their counterparts in the eastern provinces. The normal complaint is that the western canada mills are different market and due to the insect outbreak they can undersell any US producer as if tits not cut its a fire danger. When I have see western canada mills logos on softwood lumber in northern NH there is some sort of malfunctioning market.

 

[Nealm66]

I read an article in the Wall Street Journal stating that about 30% of the mills in the south are now Canadian owned. Their tactic for getting around the tariffs. They've also modernized the mills which make them much more efficient (computers scan logs) at getting wood out of a log. The mills were designed to handle the most common sized log - if you have too big of logs, you're out of luck.

So true. There’s still a couple local mills that will take oversize at a fraction of what they should be worth. Tree farms have about a 35 year growth cycle now around here with the super trees which keeps the butt diameter below 36”. The state still struggling with 80-90 year old stands that aren’t allowed to be exported. Oops! Didn’t see that one coming