Sawmill production across the United States is essentially flat, even as the industry continues to expand its capacity, according to a new analysis by the National Association of Home Builders. The findings, drawn from the Federal Reserve’s G.17 Industrial Production report, point to a slow‑burning contradiction at the heart of the sector: mills are capable of producing more lumber than ever, yet the market gives them little incentive to do so.
NAHB’s review shows that the sawmill utilisation rate — the share of potential output that mills actually achieve — has been drifting downward since 2017. The measure, released quarterly by the Census Bureau, remains one of the clearest indicators of the sector’s long‑term health. In the second quarter, the rate ticked up slightly to 68.1 per cent from 66.5 per cent in the first. Although the improvement is welcome, it follows years of underperformance.
Production, measured on a four‑quarter moving average, rose just 0.9 per cent over the same period. Even so, output remains only 0.3 per cent above 2023 levels — a reminder of how little real growth the industry has managed to generate despite years of investment and expansion.
According to NAHB, the stagnation reflects a familiar mix of pressures: material shortages, order limitations and labour constraints that continue to hold mills back. “The utilisation rate has been on a downward trend since 2017 because capacity has grown while production has not,” it said in its analysis, underscoring the widening gap between what mills could produce and what they actually do.
The weakness in production follows two years of falling lumber prices, particularly through 2024, when supply consistently outpaced demand. Mills responded with curtailments and closures, leaving excess capacity across the sector. NAHB suggests that this oversupply is likely responsible for the early‑2025 decline in the capacity index, as mills adjusted to a market that no longer rewarded high output.
At the same time, the broader economic backdrop has offered little relief. Housing construction — the single most significant driver of lumber demand — slowed steadily through 2025, creating a market in which supply repeatedly exceeded demand. Even with combined duties approaching 45 per cent on U.S. imports of Canadian softwood lumber, domestic prices remained weak in December, highlighting how little pricing power mills currently hold.
The Labour market has also played a role. Employment has fallen over the past several quarters, a trend NAHB links to increased automation and capital investment. Mills are producing more with fewer workers, yet the gains in efficiency have not translated into higher overall output. Instead, the sector finds itself in an uneasy middle ground: technologically more advanced, yet still constrained by market forces that limit production.
Looking ahead, the outlook for 2026 remains clouded by uncertainty. Should residential construction rebound, lumber prices could swing sharply, especially if mills continue to operate below capacity. Many facilities across North America have been producing at a loss for much of 2025, and further closures or curtailments could tighten supply just as demand begins to recover.
NAHB warns that such a scenario could usher in a period of volatility, with prices rising quickly if supply contracts too sharply. For now, the sawmill sector remains suspended between potential and reality — an industry equipped to produce more lumber than ever, but a market that has yet to justify it.
