Have you recently asked yourself why lumber prices are so darned high? Well, you’re not alone. The cost of wood products has been one of the many unexpected challenges faced by the construction industry during the COVID-19 pandemic.
According to the National Association of Home Builders, this past April the price of lumber was up to $1,200 per thousand board feet, a 250% increase over April 2020. The uptick has caused the price of the average new single-family dwelling to increase by $35,872, an amount that could put that potential dream home out of reach for many. Through June 2021, the price increase has remained steady.
But this isn’t just a product of the pandemic; the roots go deeper than that.
In 2015, America relied heavily on Canada for its supply of softwood lumber, with the largest share of imports at approximately 41%. That same year the Softwood Lumber Agreement of 2006, which had provided certain restrictions to both parties, expired, allowing Canadian producers unregulated access to U.S. customers. Canada wanted to export more, while America wanted to import less. Cue the trade dispute montage.
Fast forward to 2017, when the Trump administration introduced a tariff that averaged 20% on Canadian softwood lumber exports. The seed was thus planted, and prices immediately began to rise as both sides adjusted for necessary production levels.
The catalyst of the current price hike was the 2020 COVID-19 pandemic, when worldwide government-mandated shutdowns affected mill production, transportation, importation and distribution, crippling supply. At the same time, with most of the American labor force working from their dining rooms and tens of millions furloughed, home improvement projects once on the back burner were now taking center stage, skyrocketing demand. The price increases that started in 2017 were now reaching historic levels.
It’s difficult to predict how long all this will last. The tariff with Canada was decreased to 9% in December 2020, but the subsequent price correction clearly has yet to reach the consumer and may never shine through the treetops. The U.S. Department of Commerce, meanwhile, recently published a report indicating that the country needs to double the tariff to 18%, leaving the regulatory side of the situation up in the air.
As the world begins to see workforces normalizing, the upcoming spring harvest may help adjust for the supply shortage. The biggest question mark is demand. Will consumers continue remodeling their basements, or will the projects collect dust as the world opens back up?
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