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TECHNOLOGY
46 TECHNOL OG Y SEP/OCT 2025 FDM ASIA | www.fdmasia.com

employed builds on the assumption that a sawmill is not 1. This study found that even miniscule changes in in either
making a loss or a profit due to current market conditions log costs, operating cost, or in lumber prices influence the
and b) costs and prices rarely, if ever, increase/decrease by profit of a sawmill for all mill sizes (4/8/12 MMBF).
the same percentage overall. Using the ART statistical test, a 0.1 percent change in

In addition, economies of scale lead to costs and price either log costs, operating cost, or in lumber prices were
changes on the size of each transaction. Hence, our theoretical found to be statistically significant (α = 0.05) for all mill
model shows the volatility of the sawmill business. However, reality sizes (4/8/12 MMBF).
is far more complex than what can be represented in a model. 2. A 12 MMBF production sawmill, based on this study, would
lose $4,510 if operating cost increased by 0.1 percent
Table 10. The Combined Effects of +/- Changes of 0.25
percent in Operating Cost, Log Cost, and Product Value and would gain $4,536 if operating cost decreased by
on Annual Profit for a 12 MMBF Sawmill 0.1 percent per year.
For log costs, the same sawmill would lose $4,411 if
log costs increase by 0.1 percent and would gain $4,446

if log costs decrease by 0.1 percent per year.
For lumber prices, the same sawmill would gain $3,428
if lumber prices increased by 0.1 percent and would lose
$3,419 if lumber prices decrease by 0.1 percent per year.
Hence, changes in operating cost have a slightly more
pronounce influence on profits compared to log cost and
lumber prices.

3. For a 12 MMBF sawmill, a 25 percent increase in operating
and log costs the sawmill would lose $1,130,724 and
$1,107,358, respectively.
A 25 percent decrease in operating and log costs would
cause gains of $1,130,743 and $1,107,393, respectively.
Conclusions With a 25 percent lumber price increase, the sawmill would
While reports document prevailing log and lumber prices, gain $855,602 and would lose $855,586 if lumber prices
operating costs are non-public information and are not would decrease by 25 percent.
commonly available.

To better understand the sawmill business, and for the In a best case/worst case scenario, where log cost and
industry to be able to address the break-even log problem operating cost increase/decrease by 25 percent and lumber
(where operating costs must be known), this study used prices decrease/increase by 25 percent, a 12 MMBF sawmill
LORCAT to estimate average sawmills’ operating cost for a can lose or gain over $3 million per year.
4, 8, and 12 MMBF production volume mill producing Red Even in the case of a more moderate 0.25 percent change
Oak lumber. for all three factors, the sawmill can lose $31,909 in the worst
Operating costs were estimated under the assumption case or profit $30,946 in the best case showing the volatility

that sawmills operating in today’s depressed markets make of the sawmill business. FDM
zero profit. ENQUIRY NO. 5102