Here in Australia and around the world, profitability and gross margins in the lumber arena are skyrocketing. Around the world, lumber prices are at record highs. And in the US, lumber supplies fell as lumber prices rose 134% last year–adding about $14,000 to the price of the typical new single-family house construction in the US, says the National Association of Home Builders (NAHB).

Then they elevated further. As of the week of Feb. 18, the cost of lumber per thousand board feet stands at $992, says Random Lengths. Prices have risen 180% since the beginning of the pandemic. The NAHB figures that present lumber prices are adding $24,000 to the price of a new single-family home.

What happened? When states went under lockdown last spring, sawmills across the country shut down—leading to a falling lumber supply. Simultaneously, quarantining families decided to renovate their homes—hence an elevated demand for timber.

Prices started to descend last fall, falling to $550 per thousand board feet in November 2020. The correction seemed on the horizon; yet the U.S. explosion in COVID-19 cases in the last part of 2020 saw the slowing of sawmill production, especially in regions cutting much desired California redwood. That sent prices soaring once again.

And aside from renovations, homebuilding is also flourishing during the pandemic, which is also impacting the lumber shortage. In December 2020, the American house market achieved a 14-year high in new housing starts.

This boost is owed to low interest rates and the rise in millennial homebuyers, plus the fact that older Americans are waiting to sell their homes until the end of the pandemic to sell their homes. So buyers are building their own.

To correct this issue, more timber harvesting operations are emerging in southern states like Texas and North Carolina. Yet things might not start to improve until the second half of 2021.

 

Source: Fortune and Timber Industry News.Com, The Real Deal.Com