Demand for Lumber Continues to Rise but Not the Number of New Sawmill Facilities

The sawmill business is and has always been cyclical. Today North America’s sawmills cannot keep up with demand, resulting in wood prices that are at historical levels and are continuing to climb higher. However, sawmill owners and their executive teams are overall not in a rush to build new facilities. They know that to build a new mill from the ground up can take anywhere between 12 – 24 months and cost hundreds of millions of dollars. The execs also know that the lumber business is based on supply and demand. Increased production will lead to additional supply and as supply increases prices will deteriorate. So, instead of building new mills they are willing to ride the tidal wave of demand and benefit from the higher prices, knowing that this ride, like many others they have experienced over time, will eventually come to an end.