Lumber & Plywood Product Manufacturing Industry Overview

Excerpt from Lumber & Plywood Product Manufacturing Report

The US lumber and plywood manufacturing industry (sawmills and plywood mills) includes about 5,000 companies with combined annual revenue of about $30 billion. Large companies include divisions of Weyerhaeuser, Louisiana-Pacific, Georgia-Pacific, and Universal Forest Products. The plywood, veneer, and engineered wood product segment of the industry is concentrated: the 50 largest companies generate about 60 percent of revenue. The sawmill segment is fragmented: the 50 largest companies generate about 40 percent of revenue.

Competitive Landscape

Demand is closely tied to the level of home construction. The profitability of individual mills depends on efficient operations, because most products are commodities. Large companies enjoy economies of scale in purchasing. Small companies can often compete successfully by focusing on a local market. Sawmills can operate with only a modest investment of capital, but plywood mills require expensive equipment and therefore are usually plants with high annual volume.

Products, Operations & Technology

Sawmills process raw logs in a few simple operating steps. Logs are debarked and cut into "cants" that are further cut into finished pieces of lumber, using either circle saws or bandmills. Once lumber is cut to size, it may be sold as "green" lumber or may be stacked and dried to a specific moisture content through air- or kiln-drying. Kiln-drying involves stacking wood in shed-like structures and ventilating with hot air for ten to 30 days. Many sawmills produce a range of "dimension" lumber, lumber of various standard lengths, widths, and thicknesses. Some sawmills specialize in producing only "stud" lumber, lengths of 5 to 10 feet with a cross section of 2 by 4 inches or 2 by 6 inches. Because their product is smaller, studmills can use smaller, cheaper logs.