In the second quarter of 2024, the sawmill and wood preservation industry experienced a slight recovery, with the production index rising by 0.2%. This marked the first uptick in real output since the third quarter of 2023, following two consecutive quarters of decline. However, the index remains 2.2% lower than it was a year ago, reflecting the largest year-over-year drop since the fourth quarter of 2021. Despite the marginal improvement, the industry faces ongoing challenges that limit significant growth.
The Census Bureau's Quarterly Survey of Plant Capacity Utilization sheds light on the operational trends within the sector. Utilization rates, which measure actual production against full production capacity, jumped from 61.9% in the first quarter to 70.7% in the second quarter. This increase indicates a more efficient use of available resources, though it did not result in a substantial rise in production. Average plant operating hours rose from 47.9 hours per week in the first quarter to 57.7 hours in the second quarter, signaling heightened activity across the industry.
Employment within the sawmill and wood preservation sector also saw its first increase in six quarters, with the workforce growing to approximately 89,400 employees. The industry suffered significant losses during the Great Recession, when employment plummeted from 105,630 in early 2008 to a low of 80,470 by late 2009. While employment recovered to around 91,000 in 2014 and has since remained stable, the sector continues to navigate economic fluctuations and demand shifts.
Combining the production index with utilization rates reveals a nuanced picture of the industry's production capacity. While production capacity has grown since 2015, it remains below the peak levels reached in 2011. Higher utilization rates have supported elevated production levels despite constrained capacity. This trend highlights the resilience of U.S. sawmills, which continue to operate above historical efficiency levels to meet market demand.
Nonetheless, the industry struggles to fulfill domestic softwood lumber demand. Census data underscores the importance of imports in bridging this gap. In September alone, softwood lumber imports totaled 1.1 billion board feet, with Canada supplying 987 million board feet. Canadian imports face an average Antidumping/Countervailing duty rate of 14.5%, reflecting ongoing tensions over alleged subsidies provided by Canadian provincial governments. These tariffs, in place since the 2015 expiration of the softwood lumber agreement, have benefited U.S. producers by supporting expanded production capacity.
Despite these measures, the industry's output still lags behind demand, underscoring the complexities of maintaining a balance between domestic production and reliance on imports. As the sawmill and wood preservation industry navigates these challenges, its recovery and growth will depend on strategic investment in capacity expansion and continued efficiency improvements.
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