Lumber and plywood costs have skyrocketed since the start of 2020. At the beginning of the pandemic, many lumber companies slowed down their manufacturing thinking consumers wouldn’t be spending money on renovations or new construction. However, the opposite happened and homeowners took advantage of their time at home to renovate. With the stimulus and unemployment checks, Americans took the opportunity to rush over to Home Depot and Lowes to buy the materials to build that extra room or renovate that bathroom they had been putting off.
Lumber mills couldn’t keep up with the demand, which resulted in higher prices and slower lead times. It is simple economics happening within the industry and it doesn’t seem like prices are about decrease.
Wood is pretty abundant around the southern most part of North America. Over the years, lumber mills have become very efficient with turning a log into 2x4s and sheets of plywood. Their efficiency has proven not to be enough in today’s market and many mills are looking to expand, but building a new mill normally takes about two years. Not only is the timing extensive, but finding labor is another obstacle. Some COVID-19outbreaks within production teams have not helped lead times and many people receiving stimulus and unemployment checks are not motivated to go back to work. Both these reasons combined does not add up to be a successful comeback story for the industry.
Along with the labor shortage, there have been natural causes that have affected the output of production. According to the Canadian Forest Service, beetles called the mountain pine beetle in British Columbia have attacked close to 18 million hectares of forest which is almost 50% of the total volume of commercial pine trees that would have had the ability to produce close to 752 million cubic meters of sellable pine.
In a sense, you could say money does grow on trees. Lumberjacks are going as fast as they can to get their hands on the next tree. With prices so high, it’s hard not to take advantage of the current times.
Prices will eventually drop if the demand drops. As Americans get back to normal living, they won’t be as excited to take on new projects around the house. Some believe that by the end of 2023, the increase in demand for housing will come to an end.
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