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Forest2Market Sawmill Outlook for 2009 On Track

September brought another round of sawmill closures. Last week, Columbus Lumber in Brookhaven, Miss. was forced to close due to a financing issue with its lender, Bank of America. That announcement followed on the heels of AbilitiBowater’s statement that it would shutter its Albertville, Ala. mill permanently on November 15.

In January of this year, as we developed our 2009 outlook for sawmills, our data suggested that a total of 15 mills would be closing throughout the U.S. South. As a result of these two announcements, the total number of closures now stands at 13 mills. To date in 2009, nearly one billion board feet of production has been removed from the market. One large mill, Weyerhaeuser’s Wright City, Okla., facility accounts for almost 25 percent of this total. Interestingly, our outlook estimated that lost production would come in at the 750 million board feet mark.

Alabama, where 6 of the 13 mills were located, has taken the biggest hit. Closures in that state represent 40 percent of the total lost lumber production across the South. If we treat Wright City as an outlier due to fact that it is the only mill of its size in the list, Alabama would account for 53 percent of the total reduction in lumber production.

The repercussions of these closures continue to reverberate throughout the industry and the communities where the mills were located. Concerns that more loggers will go out of business, that area pulp and paper mills will have to source mill residuals from further distances, that other area businesses will suffer as a result, are already the subject of multiple articles in the Brookhaven local paper just a few days after Columbus Lumber’s closure.

As part of the sawmill outlook, Daniel Stuber, Forest2Market’s Director of Operations and Analytics, said “if sawmills can manage their costs and make it through 2009, chances are good they will survive the recession.” We think this assessment is also on track. Based on our conversations in the industry, it appears that most mills are poised to survive. They have managed to trim their expenses to the degree that—even with reduced sales volumes and prices—they will be able to make enough profit to stay in business until the housing market recovers.