How the construction industry handled the rise and fall of lumber prices – Trade Observer
When lumber prices peaked at $ 1,670 per thousand board feet in the raw materials market in early May, contractors and homebuyers began to prepare for the worst. The past two months have seen an even more pronounced drop in lumber futures, which closed at $ 521.40 on July 14, after falling 70% from their peak.
The volatility has created stress for many builders, but solid timber contractors claim they have benefited somewhat from the timber rush.
“The good thing is that the price of lumber never caught anyone’s attention,” said Chris Evans, president of Swinerton’s Timberlab. “Every day people write more articles about solid wood buildings and how to have more sustainable and renewable products in our buildings. This is to make society in general aware that wood is a viable product to use. You can use wood as an interior finish for staircase systems, office building fit-out projects, you can use it to make complete structures. The rise and fall in the price of lumber has made everyone more sensitive to this. “
Inevitably, Timberlab – a branch of national contractor Swinerton that focuses on solid timber construction – had to put some projects on hold.
“We have told our customers that we can just wait six months to make a purchase,” Evans said. “When we saw the prices go up, we really felt that this was a short-term problem and that the prices would fall back into alignment in due course. On the multi-family side, this has certainly put projects on hold.
Timberlab is currently working on the Ascent, a 25-story timber-and-concrete tower in Milwaukee, Wisconsin, which will be the tallest timber tower in North America. Their other projects include two wooden residential buildings in Seattle – which peak at four and eight stories – the roof of Portland International Airport and the University of Southern Maine Student Center.
The huge increase in lumber prices was triggered by a unique confluence of factors, including the shutdown of sawmills at the height of the pandemic, with domestic and Canadian lumber producers losing hundreds of acres of forest because of wildfires and a wave of consumers building decks for their homes and outdoor rest areas for their businesses.
“Sawmills are starting to salvage wood that has been cut and burnt,” said Sam Dicke, Timberlab sales representative. “We are working with a company called Frères Lumber in Lyon, Oregon, at the Portland International Airport. They lost much of their private forest land in [last year’s] Beachie Creek Fire. More hectares burned in 10 days than in the previous 10 years.
While wood prices have returned to where they were in December 2020, they remain almost double what they were in January 2020, before the start of the pandemic. But, prices are unlikely to stay inflated in the long run, construction industry experts say.
“My personal opinion is that the prices will return to a normalized level,” Evans said. “The market just can’t handle such high prices for a long time. We think by the end of the year it will be at much more normal bandwidth. “
Brian Sampson, president of the New York chapter of Associated Builders and Contractors, a construction trade group, estimated that lumber and other raw material costs would begin to normalize in the first quarter of this year. 2022.
“If we move quickly in six months, you risk losing the foreground because the cost has gone up so quickly,” Sampson said. “But, you will be better in the back with the projects that you are offering now. When you look at the cost of construction in general, they’re all running pretty high now. By the same time next year, things will have stabilized and become more predictable. “
In New York City, Sampson said contractors have certainly felt the effects of high lumber and steel prices.
“Incredible volatility puts a lot of stress on entrepreneurs,” Sampson said. “Many of our entrepreneurs have felt this pinch. They had to pay the additional cost of the wood – some of that cost that they can pass on to the customer, others not, contractually. It will also have an impact commercially, especially on plywood. “
He added that residential projects, in particular, tend to rely more on wood.
The increases in the price of lumber “have had a very profound impact on construction in the city,” Sampson said. “The affordable housing market tends to be a very wood-rich industry. “
In addition, raw material prices remain high overall, with the cost of roofing shingles reaching 100-200%, for example, and the cost of structural steel and copper remaining quite high. Even construction cost consultant Rider Levett Bucknall reported the biggest quarterly increase in construction costs in 20 years in his second quarter report released last week.
“You’re going to continue to see an escalation,” Sampson said. “Amazon and Walmart are the two organizations that suck the vast majority of the country’s steel. We do not expect a measurable drop in the cost of goods for the next three quarters, until the second quarter of next year. You’re probably talking about a good six to nine months.