That dust is pure gold

CASCO, Maine - As huge saws rip through logs at the Hancock Lumber sawmill, sawdust flies through the air and coats equipment, floors and rafters. Far from a nuisance, though, the sawdust is commanding premium prices as housing construction slumps and energy costs grow.

From Maine to Oregon, the price of sawdust, along with other wood byproducts, has soared.

When they can find it, sawdust buyers - including dairy farmers and makers of particleboard and wood pellets - are paying up to $50 a ton or more. That's double what they paid a year ago, some say.

There was a time when sawmill operators could barely give away their sawdust. They dumped it in the woods, buried it or incinerated it just to get rid the stuff. These days, they have ready markets for sawdust, as well as bark, wood chips and board trimmings that can't be sold as lumber.

"Now the only things in a sawmill that aren't salable are the whine of the saw blade and the steam from the kiln," said Peter Lammert, a forester for the Maine Department of Conservation who has tracked the industry for decades.

At the Hancock Lumber sawmill in this small town west of Portland, logging trucks arrive daily loaded with logs of eastern white pine. As they go through the mill, the logs are debarked, cut, sized, planed, graded and sorted, transformed into lumber.

Along the way, sawdust and wood chips fly through the air. Much of it falls through grated metal walkways and onto a maze-like system of conveyor belts that carry and separate all of the leftover wood byproducts, all of which is sold for different purposes. The bark becomes mulch for landscaping; the shavings are used for animal bedding; larger scrap pieces are used in biomass power plants.

The bulk of the byproduct is sawdust, which is eventually blown through a metal pipe and into a nearby storage shed. On a recent day, the shed was filled with a 20-foot-high mountain of sawdust that sawmill manager Mike Shane estimated weighed about 150 tons.

In the cold months, the mill uses the sawdust to power its own furnace for heat and to run its kilns that dry the lumber. But when the weather warms up, it sells the supply to dairy farmers for animal bedding and to plants that manufacture wood pellets that are burned in wood stoves and furnaces.

In the past year or so, the price has roughly doubled, Shane said. "A truckload of sawdust has gone from $600 to $1,200," he said.

In the first three months of 2008, U.S. sawmills shipped about 114 million board feet of lumber per day, said Henry Spelter, an economist with the U.S. Forest Service forest products laboratory in Madison, Wis. That's down from 135 million board feet per day the first three months of last year, and 160 million board feet in 2006. The reason: Fewer homes are being built.

Less lumber means less sawdust.

At the same time, wood-pellet plants are popping up in need of raw supply, thereby increasing the demand, he said.

"The result, not surprisingly, is higher prices," Spelter said.

David Spacht, owner of a small sawmill near Norristown that specializes in wood for furniture, said he has not jumped on the opportunity to jack up prices for sawdust because he still feels fortunate to be able to get rid of it. "You have to remember, my business is not sawdust."

Spacht, who sells most of his sawdust to horse farms for bedding, said he has kept his price for a pickup truck-load of sawdust at $20, but raised the price for a bag of dry shavings - about seven cubic feet - to $6 from $5 at the beginning of the year. "Guys are fighting for it," he said.

Ralph Caldwell, who owns 400 dairy and beef cows at his Caldwell Farms in Turner, Maine, has changed from sawdust to sand for bedding - even though he's also a sawdust distributor, buying from sawmills and selling to other farmers.

In the past year, a trailer-load of sawdust has gone from $800 to $1,400, he said. He gets calls from New Hampshire and Vermont farmers who are paying $300 or $400 more than that, and some tell him they can't even find sawdust.

Sawdust is the biggest expense for wood-pellet manufacturers, who are seeing demand go up from consumers seeking alternatives to oil to burn in their furnaces. Corinth Wood Pellets L.L.C. in Corinth, Maine, now pays close to $50 a ton for sawdust, said George Soffron, director of operations.

That's up from around $40 a ton not long ago and can add up quickly when buying hundreds of tons a day, he said. But he doesn't expect the prices to stay high forever.

"When the housing market comes back and the price of lumber goes up, the price of sawdust should go down," he said.