Not saying it's wrong but that seems a strange. Around here there are still small mills - some with strange strategies where they will drive lumber large distances. Although they do specialize in this or that product. And seem profitable even though they are small. Meaning that the market can perhaps be entered with a small mill.
But in many economic fields there are unstable states where all producers can be worried but happy not to expand and just raise prices - as long as nobody else expands. "Eventually" can be a long time.
It's not about the size of the mill, but the capital cost to build a new one. No one is willing to invest the capital in building new mills because the old ones can always undercut their prices and kill them long before they turn a profit. It's the economic equivalent of a prisoner's dilemma.
Lumbermills are a local industry since transportation is a very significant fraction of the final cost. No one is shipping wood from Oregon to a mill on the East coast to sell to a construction company in California, so every mill is very much sensitive to local competitors.
Ironically it's the larger mills that are insensitive to this dynamic, since they supply huge national customers like the big box stores or export to international markets. If Home Depot or Lowes decide their suppliers need a new mill, they finance it and it gets built.
This is what suprised me when I did a (very cursory) look in there. It seems some mills do ship back and forth quite a ways along the West Coast.
And I don't know that Home Depot and Lowes have that much of the market. They are not the ones that serve large construction projects. But if they did, it would be enough of a long term market that they could influence prices by funding new mills in exchange for more say into the price, a share of any profit, both, whatever. If they had this capacity, they could solve this funding issue.
Natural monopolies due to high capital costs are businesses like TSMC and ASML - you're not going to get a "small new entrant" with 4nm lithography for making high-end microchips.
There are local versions - a veterinary emergency hospital with veterinary oncologists and cardiologists in a smaller city without other metros for hundreds of miles, for example.
But in many economic fields there are unstable states where all producers can be worried but happy not to expand and just raise prices - as long as nobody else expands. "Eventually" can be a long time.