Sawmills and Plywood Mills
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Industry Overview
The lumber and plywood manufacturing industry in the US comprises about 5,000 companies with combined annual revenue of $45 billion. Large companies include divisions of Weyerhaeuser, Louisiana-Pacific, Georgia-Pacific, and Universal Forest Products. The industry is moderately concentrated: the 50 largest companies hold about 50 percent of the market.
Competitive Landscape
Demand is closely tied to the level of home construction. The profitability of individual mills depends on efficient operations, because the products are commodities sold based on price. Large companies have big economies of scale in sawmill operations. Large mills can have annual revenue per employee of close to $300,000, while small mills may achieve only half as much. Local mills can often compete successfully with those of large companies because they can efficiently serve 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.
Plywood mills are more complex than sawmills. Raw logs are debarked, cut to size, and heated with steam or hot water. The resulting "flitch" is rotated on a large lathe and pressed against a long, sharp blade, to peel off a continuous layer of wood called a veneer. Softwood veneers are usually 1/10 of an inch thick and may be more than 100 feet long. The veneer is cut to size and dried. Sheets of veneer are then sprayed with glue (usually a phenol-formaldehyde (PF) resin or a urea-formaldehyde (UF) resin), stacked on top of each other with the grain of the wood in alternating directions, and sandwiched in a hot-press that forces the pieces together and cures the glue. The ends are then trimmed and the product may be sanded. The standard size for plywood is 4 feet by 8 feet, with a 3/8 inch thickness most common.
Oriented strandboard (OSB) is manufactured similarly. Debarked logs are cut into 100-inch lengths and fed into a waferizer where they're sliced into thin strands (also called flakes or wafers) that are several inches long. The strands are dried, mixed with resin and other additives in large blenders, and formed into mats on trays or moving belts. Several layers are laid down, with the wood strands in alternating orientation, and the mats are rolled and cured in a hot-press. OSB is generally made in the same sizes as plywood and has similar strength characteristics, but is cheaper because it can be made from smaller, lower-quality logs.
Other types of panels, including particleboard, hardboard, and medium density fiberboard (MDF), are made from wood residues like sawdust, shavings, and chips that are ground to a desired size, dried, mixed with resin, and hot-pressed. (The ingredients to manufacture these panels, and OSB, are called the "furnish.") Such boards aren't as strong as plywood and OSB. Engineered wood products (EWP), such as glue laminated timber (glulam); laminated veneer lumber (LVL); and engineered I-joists, are produced from lumber that is dried, glued, and hot-pressed to create beams with greater structural strength than dimension lumber.
A large sawmill may have an annual capacity of 350 million board feet (mmbf). The output of panel mills is measured in millions of square feet. A large plywood mill may have a capacity of 300 million square feet; some OSB plants have a capacity of 600 million square feet.
Sawmills are located close to their source of timber because of the high costs of transportation. Large operators often use timber from their own lands. Both large and small operators also buy timber from private lands and federal and state forests. Logs are bought at market prices. Average "stumpage" prices paid for sawtimber from private lands in Louisiana in one year were $395 per thousand board feet (mbf) for Southern pine and $285 for oak. Prices for sawtimber from federal forests were $315 for Douglas fir, $268 for Southern pine, and $317 for oak. Prices can vary sharply from year to year. Softwoods like Douglas fir and Southern pine are used for most lumber and structural panel manufacture. Hardwoods like oak and maple are used to make veneered panels for cabinet and furniture manufacture.
