Prospects for sawmill profitability have increased significantly in 2010, leading curtailed and closed sawmills in the South to reopen, according to Forest2Market.

In recent months, two Arkansas mills-JP Price Lumber, Monticello, and Victory Lumber, Camden-have started accepting logs. Other mills have added shifts to keep up with orders.

Forest2Market's lumber price database, Mill2Market, shows southern yellow pine prices have risen 25% from an average of $247 per thousand bd. ft. (MBF) in 4th quarter 2009 to $308/MBF in 1st quarter 2010. The price that mills receive for their residuals-the sawdust and shavings created as a by-product of the lumber milling process-also increased, by 3% quarter over quarter.

"While we've seen a 28% increase in revenue at the mill, input prices have been rising much more slowly," said Forest2Market 's Daniel Stuber.

Sawtimber prices, which make up approximately 75% of a mill's operating costs, have increased nearly $2 per ton from 4th quarter 2009 to 1st quarter 2010. Though this is an increase of just 5%, the total impact on a mill is higher-representing an increase of roughly 7.5%-because sawtimber costs are such a high percentage of overall costs.

"When you compare a total increase in revenue of 28% next to an increase of 7.5% in raw material costs, the position of sawmills in the market looks significantly better than it did last quarter," said Stuber. "Assuming manufacturing costs remain the same (and increased production generally leads to a decrease in per unit costs), profitability has improved by more than 20% this quarter. And while this increase sounds considerable, we have to remember that mills were pretty much running at breakeven levels (or at slight losses) in the 4th quarter of 2009."