COVID-19 is putting a tremendous strain on construction. Firm leaders and contractors across the country are feeling the effects. Concrete form suppliers are also feeling stifled. The next time you go scouting for concrete formwork ties, you may notice that lumber has a much higher price tag than you remember seeing. Here is why lumber prices are at an all-time high.
Why lumber prices are rising
In August 2020, lumber’s cost was at an all-time high at $639 per thousand board feet. This price hike was attributed to the ripple effect of 2018 tariffs and recent forest fires. However, one month later, the lumber price jumped again by $19, totaling to $641.60 per thousand board feet.
During 2020’s second quarter, the price of lumber futures hit a four-year low after sawmills began to close in response to COVID-19. The cost of lumber has slowly increased throughout the pandemic as lumber mills shutdown. Of course, after closing their mills, owners see an increasing demand for lumber. Some lumber mills are starting to open again, but the price is continuing to rise as demand also increases.
Demand for lumber is increasing
According to the Wall Street Journal, there are several factors behind the drive in lumber prices. Demand is up because there is an increase in:
• Residential construction and do-it-yourself projects. With COVID-19 keeping people at home in quarantine, many are dusting off their toolboxes to get to their list of home projects, like building decks.
• Low mortgage rates. Homeowners making the most of low mortgage rates during the pandemic are choosing to refinance. By doing so, they use the money they receive for remodeling and renovation projects in their home.
• Outdoor dining and seating for restaurants. Many restaurants are providing outdoor dining options for their customers to stay open. Those that didn’t already have this option scrambled to place orders with businesses and contractors to have dining and seating built.
Lumber mills unprepared
The high demand for lumber has been surprising for lumber mill owners. Many closed their doors at the beginning of the pandemic for safety purposes. More recently, sawmills are beginning operations again, but they are struggling to keep up with the high demand they are facing. This factor has also contributed to the high prices of lumber.
Mills that are reopening now have to play catch-up to make up for lost time while closed. Mark Dumain oversees activity on the futures market for LBM Advantage, a lumber buying cooperative. Dumain said the mills are also having to recover from decreased inventory.
The future of lumber prices
If you’re leading a construction firm or work for one, you are probably wondering how the high prices will affect your company. Dumain pointed out that the impact of high lumber prices will mainly affect residential construction, and that it is likely that it will have any significant effect on commercial construction. The biggest transition that commercial construction faced with materials was during the pandemic-induced shutdown, where many companies moved from using lumber to other materials like steel and other metals.
By Dumain’s estimates, lumber prices are not likely to fall anytime soon. He said the new housing market will continue to see demand, which will continue to drive up prices even when supply and demand are equivalent. There has been an incredibly high confidence level in the housing market for new single-family homes despite economic uncertainty. Dumain, however, suggests that demand in new homes will likely decrease if lumber prices continue to increase.
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