CHARLOTTE, N.C. — An additional 15 sawmills will close across the U.S. South in 2009, removing 750 million board feet of lumber production from the market, according to Forest2Market trend data. The reduction represents a 7 percent decline over 2008.

Mills most likely to close purchase under 350,000 tons of small diameter sawtimber per year and produce small-dimension lumber, such as 2x4 studs. Because demand for their product mirrors housing start numbers, these mills are particularly vulnerable.

“Raw material costs represent 70 percent of a mill’s total costs,” said Daniel Stuber, who oversees analytics and data quality at Forest2Market. “In the current market, the price floor for small logs is approaching pulpwood prices. As a result, small log mills can’t continue to cut their raw material costs. Nor can they adjust their product offerings to meet market needs for wider-dimension lumber.”

Sawtimber prices will also continue to drop in 2009. Forest2Market estimates the year-over-year drop from 2008 to 2009 will be in the single digits, perhaps as low as 3 percent.

Forest2Market data shows the 2009 trend will moderate significantly over the 2007-2008 trend line. Sawmill production in 2008 fell 23 percent from 2007’s level. Sawtimber prices in 2008 fell nearly 10 percent from 2007 prices.

“With a production decline of 7 percent and a price decline of 3 percent in 2009, it looks like the industry has accomplished the necessary work of right-sizing output,” said Stuber. “What this means is that if sawmills can manage their costs and make it through 2009, chances are good they will survive the recession.” Forest2Market’s timber price forecast models show that the housing market will begin to turn the corner in the first half of 2010.

Based in Charlotte, Forest2Market has developed sophisticated analytical tools to accurately forecast timber prices in the U.S. South and Pacific Northwest. The company’s delivered price benchmark product is used by industry professionals to index timber prices for contracts and supply agreements. Forest2Market’s price and benchmark databases are based on transaction-level data – not surveys. For more information, visit www.forest2market.com.

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