Where the money goes: a sawmill's cost structure

A sawmill buys a variable, price-volatile raw material, converts it with expensive equipment, and sells products whose prices it does not set. Almost every economic question comes back to three levers: what you pay for logs, how much sellable value you get from each log, and how fully you use the capital already sunk.

Three structural features

• Price taker on both sides. Logs are bought on regional markets; sawn timber is sold into international, cyclical markets. The margin is the gap between two numbers the mill does not set.
• Physical yield. Every cubic metre of log that does not become sawn timber becomes chips, sawdust or bark, worth much less per cubic metre. Yield is therefore a money question as well as a technical one.
• Capital intensity. Sawline, kilns and log yard are paid for whether or not they run, which creates operating leverage (lesson 4).

What open studies show about costs

Open mill-level cost data is thin, because it is commercially sensitive. The studies below show structure, not a current benchmark. Their denominators differ, so the shares cannot be compared directly.

Sweden, survey of mills (SLU master's thesis, dated 2006; the year of the cost data is not stated):

The survey average total cost was 1,554 SEK per m³ against average net sales revenue of 1,556 SEK per m³. The mill-to-mill spread of the margin left after variable overheads and grinding ran from 111 to 708 SEK per m³.

Germany (Thünen Institute, saw and planing works, 2006 and 2010): the raw wood share of gross production value rose from 35.1% to 41.5%, while the gross production margin fell from 5.4% to 2.1% of production value.

Finland (Silva Fennica 2025, 36 sawmills, 2012 to 2021): the median net profit ratio stayed between -0.6% and +3.4% in every year except 2021, when it was +14.8%. Mean material cost was 11.3 million euro and mean salaries 1.6 million euro per sawmill-year.

Canada (BC Interior, 2018 benchmarking for the Council of Forest Industries): delivered wood was the highest input cost in every region; the BC Interior index was 152 against 100 for the US South, and it was the least profitable of seven regions.

Across regions the message is the same: logs dominate, labour matters but does not dominate, and margins are thin.

Worked example: reading the Swedish table

Share of logs in total cost: 976 / 1,554 = 0.628, so about 63%, matching the table.

Average result: 1,556 - 1,554 = 2 SEK per m³, about 0.1% of cost. The source does not say how by-product revenue was treated, so read this as indicative only.

Spread of margin after variable overheads: 708 / 111 = 6.4. The best surveyed mill had more than six times the margin left to cover administration, depreciation and profit. The average hides this, which is why distributions matter more than averages.

Why not compare 63% (Sweden) with 41.5% (Germany)? Because the Swedish figure is a share of total cost and the German one a share of gross production value. Different denominators give different numbers for the same mill.

Checklist: before you compare two cost structures

• Which denominator is used (total cost, production value, turnover)?
• Which year and currency? Is the year even stated?
• Which unit (per m³ of sawn timber, of logs, per mill-year)?
• How were residue revenues treated?
• Is the sample of mills comparable in size, product mix and region?

Key points

• Logs are the largest cost in every study cited: 63% of total cost in the Swedish survey, delivered wood the top input in every BC comparison region.
• Margins in the evidence are thin: Finnish median net profit ratio between -0.6% and +3.4% in all years but 2021.
• Cost shares from different studies use different denominators; never compare them line by line.
• The spread between mills (111 to 708 SEK per m³ in Sweden) is larger than the average margin.
• The cost data in the studies is old or narrow; use it for structure, not as today's benchmark.