A Long View on Lumber Prices
By Mike Rainville
It does not take much to experience, or at least hear about, problems in the building material supply chain. Shortages and high prices, due to high demand and disrupted supply chains, are predictable indirect impacts of an event like the pandemic. After some lag time, similar problems have hit the woodworking sector. We now hear of cries asking the government to “do something”, which assumes the government can manage the markets.
What we are seeing are arguably the mechanics of normal supply and demand economics when things get knocked around a bit. As much as we would like lumber to be always available and stable in price, like bread and milk, it is more like petroleum, and sometimes like toilet paper. In the long view, market fluctuations are not unusual. We are used to spikes when certain species go “hot”. Well, right now it happens to be broader in impact.
I don’t claim to have an industry-wide view, but I do have my own experience of buying lumber for over 40 years. Here is what my spreadsheets tell me. Lumber prices have been stable across 2015-2020, and at approximately the same as I was paying in 1996! (Actual billing, not adjusted for inflation.) We’ve seen price spikes in 2000, 2005, and 2014. Most notably, we were paying much more in 2014 than I have seen so far in 2021.
Each company has its own unique supply circumstances but to the extent that we each are being affected, we should be circumspect. Despite legitimate concerns about industry trends that predate Covid, today’s challenges are not due to major long-term structural supply chain changes. It is a real problem, but it should be short-term. In my view, part of the use of the various Covid relief funds (the government “doing something”) was to help mitigate the inevitable supply chain ripples that would result from the turbulence we have experienced.