By: Joy Crane

“We have been through thick and thin in the past and survived. But nobody in the sawmilling industry can remember a time like this. Sawn timber sales are at an all-time low because the economy, and therefore the building industry, is stagnating”, says Roy Southey, chief executive of Sawmilling South Africa (SSA).

The parlous state of the economy and stagnant markets are compounded by extreme environmental events, the rising cost of sawlogs, and increasing operational costs caused by loadshedding. Seven sawmills closed between mid-2018 and mid-2023, and 2,100 people lost their jobs (see Fig 1). There are 139 formal sawmills left, providing jobs for 14,900 people.

Crickmay Intermill Comparison

Using the Crickmay Intermill Comparison as a reference (see Fig. 2), Southey says the industry’s average production costs have increased by about 5.4% yearly over the past five years.

Crickmay’s Mandy Allpass explains that the information in the table shows the percentage split of the different elements, not the significant increases in the cost items. “Over five years, the average total production cost has increased from R2,994/m³ to R3,779/m³, and costs increased more significantly between 2021 to 2022”, she says.

Increasing costs

• Increasing sawlog prices

The cost of sawlogs is the single highest component in a sawmill’s production costs. For softwood structural sawmills, pine sawlogs account for approximately 55% of the total cost of production, excluding administration and overhead costs.

In 2022, the average cost of sawlogs delivered to sawmills increased by 14.7% compared to the average cost in 2021, much higher than the consumer price index (CPI), which was 6.9% for the same period.

• Slow markets

The softwood sawn timber market is demand-driven and showed a year-on-year increase in the price of about 3.7%, which is well below CPI.

• Loadshedding

Southey says loadshedding is a huge problem. It disrupts throughput, which increases operational costs. Sawmills that have invested in grid-tied solar systems are not out of the woods. One Mpumalanga sawmill has had 35 solar panels stolen or vandalised.

• Sustainability

With turnover not keeping up with inflation and costs exceeding inflation, it is becoming increasingly difficult for sawmills to be sustainable.

Hopeful news

Southey says it’s not all bad news. Three developments could have a positive impact on the industry.

• Economy

The South African economy shows signs of 0.6% growth in the second quarter of 2023. However, Stats SA says, “The construction industry lost steam in the second quarter. A decline in economic activity related to non-residential and residential buildings pulled the sector lower.

In his August newsletter, Southey says, “With the advent of spring and the end of the year approaching, time just seems to speed up. In the past, this was a period when bulging order books saw sawmills work to full capacity to clear outstanding orders before the annual shutdown. However, given this year’s difficulties, a late upswing is not certain. But, as they say in the classics, ‘Hope springs eternal in the human breast’”.

• Offshore markets

SSA has established an Export Working Group. The group is actively researching potential offshore markets to pave the way for individual sawmills to develop personal and commercial relationships that lead to sales and, hopefully, success.

• Australia

The Australian sawmilling company, Wespine and its marketing arm, Staxa, are working with a few South African sawmills to export sawn timber to Australia. Wespine belongs to Wesfarmers and Fletcher Building, which owns Bunnings, with over 300 hardware stores in Australia. Southey says the latest news is that Wespine has accepted South Africa’s quality standards for structural timber.

“Once again, it is not all doom and gloom”, Southey said. “Remember, cut straight and dry flat”!