A mathematical model to support investment in veneer and LVL manufacturing in subtropical eastern Australia

Tyron J. Venn, Jack W. Dorries and Robert L. McGavin

Forest Policy and Economics, 2021, vol. 128, issue C

Abstract: In subtropical eastern Australia, hardwood sawmills are exploring opportunities to adapt to declining availability of traditional, large hardwood native forest logs through the manufacture of veneer and laminated veneer lumber (LVL) from comparatively abundant small, native forest logs. This paper introduces an operations research model that evaluates the financial performance of veneer and LVL investment opportunities. Application of the model to subtropical eastern Australia revealed that production and sale of green and dry veneer was not financially viable. One-stage LVL manufacture was profitable at larger scales of production; however, the superior investment alternative was the manufacture of two-stage LVL. Strong economies of scale were revealed in the production of LVL. The mix of logs procured for veneering had a large impact on financial performance due to the combined effects of mill-delivered log cost, the rate at which logs can be processed and veneer recovery from log volume. Encouragingly for forest growers and wood processors, it was optimal for 42.6% of log volume to be small logs at the 30,000 m3 y−1 of log processing scale. The major policy implication arising from this study is that opportunities for processors to profitably manufacture LVL will be enhanced by government forest policy and codes of practice for private land that permit utilisation of small logs, particularly from suppressed trees that will never attain the specifications of traditional log types. The model framework and several parameter estimates adopted for analysis are likely to be useful for forestry decision-making environments outside Australia.

Keywords: Log procurement; Processing scale; Engineered wood products; Mathematical programming; Optimisation; Financial analysis; Forest industry (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:forpol:v:128:y:2021:i:c:s1389934121000824

DOI: 10.1016/j.forpol.2021.102476

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