Lumber prices were sky-high in 2021, and this challenging economic reality might not improve much as the new year kicks off.
No matter which way you look at it, 2021 was hardly a typical year. Between supply chain shortages, inflation, the overheated housing market, and record-shattering lumber prices, more than a few of us are looking forward to saying goodbye to this tumultuous year. But will 2022 be any better?
At least when it comes to lumber prices, it seems the answer is not entirely promising. A variety of experts, including those whose businesses have ties to the lumber industry or rely on lumber supplies to operate, predict that high prices will remain for the foreseeable future.
“Lumber prices are expected to rise in the next year and if this fluctuation of high prices continues the price will have tripled by 2025,” says Richard Fung, a custom home builder with Forever Homes. “Right now the price of lumber per board foot is $1,024.30. The prediction is, next year the price will be as high as $1,516.96 per board foot. The price has been rising throughout the entire year.”
Here’s a closer look at some of the issues that continue to impact the lumber market and how consumers (including DIY remodelers) can prepare for the coming year.
Heavy rains and flooding in lumber country
While the vast majority of the lumber supplies in this country originate from within the United States, a portion of our lumber market is supported by imports from British Columbia. And for those who might have missed the headlines, British Columbia was severely impacted by flooding and rain earlier this year, which was bad news for the region’s lumber industry.
The floods disrupted highways and rail routes, which, in turn, impacted lumber and pulp shipments. Local forestry officials said in late November that weekly lumber shipments had fallen by as much as 30%. What’s more, pulp shipments to a key export location in Vancouver averaged less than 20% of their normal.
“The US imports more than $5 billion worth of lumber from Canada, which is around 83% of our imports. With access to this stock cut off, local production has been under a lot of pressure,” says Alex Williams, a certified financial planner and CFO of FindThisBest, a comprehensive guide for shopping retail products. “Unless the supply shortages and rising demand issues are sorted out, prices will likely increase well into 2022.”
The rain and flooding were just the latest challenge for British Columbia’s lumber industry and the supply of wood the province sends to the United States, notes Todd Morgan, director of forest industry research at the University of Montana’s Bureau of Business and Economic Research.
Over the past 10 years or more, British Columbia has also been impacted by an epidemic of mountain pine beetles that by 2020 had destroyed 15 years of log supplies in the province. The proliferating beetles are the result of climate change, as scientists say they thrive in the warmer global temperatures and the absence of the harsh, cold winters that normally keep them in check.
“BC been challenged for years now by the mountain pine beetle outbreak and now they’re living with that hangover from beetles creating a shortage of log supply,” says Morgan.
Wildfires in the western United States
Mountain pine beetles aren’t the only problem the lumber industry is facing amid worsening climate change. This past year also provided a vivid example of the significant uptick in extreme weather conditions such as wildfires, which are also being caused by the planet’s changing global temperatures, not to mention a decrease in rain. Fires ravaged some of the most important lumber regions of this country, causing yet more pressure on the lumber industry.
“Wildfire activity in states like California and Oregon over the past few years has impacted the amount of logs going to sawmills. Oregon, in particular, is a leading softwood lumber producer in the United States,” says Morgan.
Labor shortages at sawmills
Labor shortages have also been sweeping the nation in 2021 amid COVID-19, and the lumber industry has felt the impact. Sawmills in particular have struggled with production amid staffing issues. This too has affected lumber prices, as many sawmills are unable to produce as much supply as they have in years past.
“Producers are attempting to boost productivity at mills, but most are experiencing manpower shortages. Factories have been disrupted by outbreaks of COVID-19 among production personnel. Mills have a hard time finding new employees as well,” says Robert Johnson, a carpenter, woodworker, and founder of Sawinery, a carpentry website and business.
“There has also been a long-term shift away from blue-collar jobs,” adds Johnson. “Furthermore, mills are typically located in rural areas where the population is declining.”
Transportation costs and trucking industry disruption
The cost of transporting lumber has also gotten more expensive in 2021 thanks not only to rising fuel costs but also a shortage of truck drivers. Like other industries experiencing labor challenges, the trucking industry has been struggling to find qualified drivers and has had to increase the wages it pays. All of these pressures are reflected in the sticker price for lumber.
“Domestically, trucking is definitely a challenge and that can affect hauling the logs out of forest to sawmill and then taking lumber from the mill to Home Depot or some other merchant,” says Morgan.
The year ahead in lumber prices
Despite all of these challenges, lumber prices somehow managed to come down in May and June quite a bit from their earlier record highs, says Morgan. But by September, they had started to tick back up again. At this point, experts predict it is entirely possible lumber prices will be far higher this coming spring and summer than they are right now.
“Lumber futures, which are traded on the Chicago Mercantile Exchange, are about $200 per thousand board feet for March and May 2022, or 30% higher than they are now, suggesting some traders expect lumber price increases,” says Morgan. “Spring and summer are usually the busier home building and repair and remodel season, which can add to seasonal demand and drive up prices.”
An October letter from The National Association of Homebuilders (NAHB) to President Biden supports Morgan’s predictions. In the letter, NAHB expressed fears about a massive price spike for the spring of 2022. This fact combined with an expected doubling of duties that the U.S. pays on lumber from Canada does not bode well for the year ahead.
So what does it all mean for you and your home remodeling and building plans? Experts suggest talking to contractors sooner rather than later to secure pricing. Or if you’re working on a DIY project, get your supplies as soon as possible.
“Consumers should look to pre-buy lumber in bulk if they’re planning long-term projects,” says Scott Rubzin, CEO of Tiffany Property Investments LLC.
The DIY segment of the population might also consider using alternative materials for building and renovation projects. The options could include engineered wood, recycled wood, or metal. You can also shop around and look for reclaimed wood stores in your area to save money on DIY projects.
“For the do-it-yourself folks, get your materials list together now and try to do some comparison shopping, keeping in mind that spring and summer may be busier and with higher prices,” says Morgan. “If demand for building materials goes up like it did last year and earlier this year, producers may still be facing supply shortages that can lead to higher consumer prices.”
Source: bhg.com