All logs in one basket

August 12, 2022. – Traditionally plywood mills have been built on domestic log supply. There has been plenty of forest around, and the procurement area has been defined as a distance radius around the mill. Some mills still enjoy this luxury, but for some things have started to change. Log supply used to be easy and secure, but those days have passed.

Today’s procurement obstacles relate to weather, competition, and global politics. For many, all three factors impact how full the log yard looks.

The warming climate brings more frequent rains, floods, forest fires, storms, bark beetles, you name it. These incidents appear unexpectedly and are difficult to protect from.

If a competing firm erects a plywood mill in your neighborhood, you both share the same raw material basin. More competition brings scarcity and higher prices for round wood. 

Political risks contain things like protectionism, sanctions, export bans, trade wars, and customs duties. These supply risks favor domestic log supply but are poison for companies sourcing over borders.

When sourcing from abroad, the freight’s share of the mill-gate price increases. Container freights are expensive and they fluctuate according to the global trade flow changes. In foreign sourcing, transport price brings a new moving element to the raw material cost calculation.

Companies are currently exploring new sources of raw materials. For a short-term shortage, anything helps, but in the long run, plywood mills look for secured continuity at a decent price. That may lead to procurement contracts, strategic partnerships, joint ventures, and oversea investments. A one species log yard may become a combination of logs and veneer in different species. When that happens, product managers will be busy updating the technical documents.