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Lumber prices skyrocket over past year, primarily due to COVID with help from a beetle

The Rural Blog

Lumber prices have skyrocketed over the past year, due to scarcity caused by tariffs and a Canadian beetle infestation, but the higher prices aren’t necessarily being passed on to timber producers. In the U.S., lumber costs 180 percent more right now than it did in April 2020, according to the National Association of Home Builders. The Federal Reserve Board says it’s “the sharpest rise since 1946, when the post-World War II housing boom kicked in,” David Brooks reports for the Concord Monitor.

The increase has in turn raised the cost of building the average single-family home by almost $24,000, and nearly 81,000 new homes across the U.S. are awaiting construction partly because of the cost of materials. Samanth Subramanian reports for Quartz.

The pandemic is largely to blame.

“Early in 2020, sawmills first ground to a halt, anticipating a crash in demand. Then it turned out that people still wanted wood—to repair or renovate their homes during lockdown, or to build new homes outside cities,” Subramanian reports. “Interest rates were, and continue to be, low; it was a good time to finance and construct new houses. So the sawmills started up again around July.” But many mills had to shut down after employees were exposed to or sickened by the coronavirus, which in turn slowed lumber output and caused shortages.

The high prices have been “a boon for lumber mills, although the pandemic has complicated their ability to take advantage,” Brooks reports. “But issues from the global supply chain to manpower limits to tree-species distribution means the benefit so far has been spotty at best, especially for landowners,” at least in New England.

Part of the problem is that New Hampshire, and many parts of New England, are home to hardwood trees like cedar. The construction industry uses mostly fast-growing softwoods like pine, including pressure-treated softwoods that can resist rot. With pine in short supply, builders turned to cedar, but cedar mills are running at top capacity and it can take a year and a half to add significant processing capacity, according to industry consultant Eric Kinglsey. Many mill owners are hesitant to add such capacity, he told Brooks, because it may not pay off if the current boom fizzles out too quickly.

The pine beetle

Canadian lumber once provided a pressure-relief valve, with the pine forests of British Columbia providing 15% to 17% of the lumber for U.S. markets. These days it’s more like 10% or less, due to the mountain pine beetle. Cold winters once kept its population in check, but a warming climate allowed it to live longer and reproduce more quickly starting in the late 1990s, and the insect has destroyed hundreds of millions of acres of forest in British Columbia, Subramanian reports.

That capacity will take decades to rebuild, and the softwood tariff on Canada, which President Trump imposed in 2017, doesn’t help matters, says the Wall Street Journal editorial board: “The Commerce Department cut the levy to 9% from 20% in December. But as long as the orders are in place, this lower rate—what importers are mandated to pay in ‘duty’—is merely a cash deposit for what is due next year. Lumber buyers know Commerce can make a new finding of a higher duty, which would apply retroactively on Canadian lumber they have already imported. This backward-looking assignment of duties introduces enormous uncertainty, creating an incentive to rely on domestic supply.”

In the meantime, the U.S. must find more wood somewhere.

One option “is to import more lumber, particularly from Europe, which has stock in surplus,” Subramanian reports. “Over the past five years, Austria, Germany and the Czech Republic have had to harvest nearly 250 million cubic meters of spruce damaged by another bark beetle infestation, this too brought on by the warming climate. Ironically, if one beetle has depressed wood supplies to the US, another may yet elevate it.”

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