The hottest commodity of the last year was one you probably didn’t realize you needed to care about: Wood.
Lumber has long been the subject of debate over trade policy, ecosystem conservation, and climate change. But in a white-hot housing and remodeling/home improvement market, lumber prices spiked to new highs. DIYers grappling with cabin fever as well as increased demand for home remodeling contractors and home builders looking to increase housing supply sent the lumber market bonkers. Meanwhile, sawmills shut down and later faced a labor crisis, causing a shortage and subsequently causing record-breaking prices.
In some ways, the shortage is a simple supply and demand problem, but the great lumber crisis of 2021 also highlights all sorts of other things, including the global supply chain, climate change and environmental protection, labor shortages, US-Canada trade relations, and the out-of-control housing market. Here, we strive to explain the Great Lumber Panic.
As North America went into lockdown in March, 2020, a slew of businesses shut down. Lumber production facilities were no exception: Sawmills laid off workers, cut hours, and struggled to balance staying open with minimizing COVID transmission risk.
(Quick note: Though the terms are often used interchangeably, there’s a distinction between lumber and timber. Lumber is wood that’s been processed into rectangular beams used primarily to build homes; about 20 percent of all wood harvested in the US goes to lumber. Timber is unprocessed wood and trees, which can be turned into lumber or pulp, paper, fuel and other staple products.)
Initially, the sawmills closing down seemed broadly inconsequential; after all, Americans were stuck at home, and sending construction workers out put them at significant risk of contracting COVID-19. At the time, basically all economic activity stopped, which included homebuilding and remodeling.
Few producers anticipated that before long, there’d be an uptick in DIY home improvement projects like deck building and home office creation. Repair and remodelling (R&R) markets were responsible for the majority of the lumber demand spike, notes Paul Jannke, principal of Forest Economic Advisors (FEA). A June, 2020, survey by architecture firm The Farnsworth Group found that more than 70 percent of homeowners had started new DIY projects at home, many of them attributing long hours in lockdown to their sudden desire for refurbishments. Stimulus checks offered Americans more money to pay for these endeavors.
Interest in home-buying spiked over the pandemic, too, creating a housing boom that has yet to wane. But housing starts—new build construction projects—have been historically low since the 2008 recession, and haven’t quite recovered yet. The US is just not building as many houses as it used to. Many who couldn’t afford to buy during the COVID-19 housing boom had no choice but to channel their COVID-19 cabin fever into where they currently reside.
“Everyone's stuck in their houses, they're looking around, they're seeing all the things that are wrong with it, they have to work from home, and oh, by the way, their kids have to study from home too,” Jannke said. “I might just want to add on another room.”
MOMMY, WHERE DO 2x4s COME FROM?
According to Jannke, just over 70 percent of wood used in the US is grown here. The rest is imported, and around 83 percent that wood comes from Canada, much of it from British Columbia: This is highly valuable wood from Spruce, Pine and Fur (SPF) trees that many regard as better for homes than the more prevalent species of tree found in the US, like yellow pine, grown in the southeast, between Texas and New York.
The US is home to 514-million acres of timberland, 30 percent of which is managed publicly (by federal, state or local agencies), according to Rocky Goodnow, vice president of North American timber service at FEA. The remaining timber (359 million acres, Goodnow says) is owned by private companies and individuals. Many of these producers are small operations—47 percent of lumber is produced by non-corporate entities—competing in a deregulated environment. But in Canada, lumber production is managed by provincial governments, and, critics say, is unfairly subsidized.
This rubs some in the American lumber industry—like the US Lumber Coalition—the wrong way. Some say Canada is able to sell logs to US clients at lower prices because federal subsidies keep costs low. Others have accused the country of “dumping,” that is, selling wood to the US at a price below the cost of production and crowding out the market, making it harder for American sawmills to compete.
For decades, the US has gone back and forth on tariffs it imposes on Canadian lumber; a recent tariff proposal has proven polarizing: The US Lumber Coalition lauded the move as a step toward “a level playing field,” while the National Association of Home Builders (NAHB) critiqued it for threatening the already surging cost of homes. (The NAHB says the rising cost of lumber has made the average single-family home $36,000 more expensive on average).
The years-old trade dispute is often used to explain fluctuations in the lumber market. But researchers say this time around, the argument is overblown (the closing of the border between U.S. and Canada has also not had a direct impact; trade has continued more or less as normal).
“It has nothing to do with tariffs,” said Rajan Parajuli, assistant professor in the Department of Forestry and Environmental Resources at North Carolina State University, who notes that Canadian lumber prices don’t differ enough from US market prices to have a tremendous impact on US producers. Parajuli is among a few from the school who studied the impact of trade disputes with Canada on lumber prices; in a 2016 paper, he found that American consumers eat the cost of tariffs in higher lumber prices, and lost $2.3-billion between 2006 and 2015 due to trade limitations between the US and Canada.
“The real economics say that the consumers are the losers,” Parajuli said.
THE SAWMILL PROBLEM
By May of last year, wood prices were rising, but there was hardly the production capacity to supply it. This created a shortage, one that remains today, even as prices finally cool, in part because saw mills are struggling to attract new workers. June jobs data from the Bureau of Labor Statistics (BLS) showed that mill employment levels fell by a few thousand jobs over the course of the pandemic, and only recently reached pre-pandemic rates in April. But as mills aim to scale up production even further, some are still feeling pressure to attract workers.
The lumber shortage has been, maybe as you'd expect, a topic of obsession for people in the housing industry. A podcast made by the NAHB has dedicated the majority of its recent episodes to the lumber shortage and when it might get better.
“I've raised my wages over 10 percent across the board,” Ross Stock, general manager of Western Cascades Industries saw mill in Oregon, said on a May episode of the podcast, called Housing Developments. “I'm hiring in every direction. And I've had limited success finding people.”
Much of the job market is reckoning with wages and working conditions in a post-pandemic economy right now, and working in a sawmill is not particularly lucrative. It's also dangerous.
“You can work in a mill, and make $20 an hour and it's hot, because they're not air conditioned, and it's kind of heavy labor,” Jannke says. “Young folks are not choosing to get into this industry.”
Jannke notes that automation is changing the nature of new hires in saw mills (“A modern sawmill is not the same thing as a sawmill from 20 years ago,” he said. “Today, you need people who have computer science degrees.”) But the manual jobs that remain can be dangerous; BLS occupational injury data shows fatality rates were more than 30 times the rate across the job market, with around 66 deaths per year between 2006 and 2015.
Sawmill owners are starting to pay workers more to compensate for shortages, and weekly paychecks have increased by an average of 10.4 percent since before the pandemic, the Washington Post recently reported. But Jannke says wage increases might not be enough to up production and fill the supply gap. “We're trying to ramp up our capacity really, really quickly,” he said. “That's a lot of labor that you have to get in rural areas.”
The US Department of Commerce is taking aim at shrinking the supply gap by reducing competition from Canada. It recently recommended increasing tariffs on lumber imports from 9 to 18 percent as a way to privilege American lumber production and boost jobs at home. Proposed on May 21, the increase would need several rounds of review before going into effect—and it has already garnered controversy.
What about wildfires? Will this summer’s heat impact our tree supply?
Yes and no. Jannke says this year’s record heat across much of the US, including lumber-producing regions in the Pacific Northwest, is “quite concerning.” Last year saw record-breaking wildfires and this does interrupt the supply chain: Saw mills had to shut down and evacuate to avoid the fires, loggers left their jobs to fight blazes, and wood stores were lost. He anticipates that this summer’s wildfire season will be similarly devastating.
“Since the demand supply is so tight right now disrupting the supply of lumber is just not a good thing,” he said. “It’s pretty scary.”
The impacts of climate change are as bad news for the industry as they are for ecosystems. And some fear that clear-cutting practices create a vicious feedback loop with wildfire risk: Open patches of forest raise overall temperatures, while woody debris leftover from logging becomes easy tinder, making forests more vulnerable to blazes.
But industry experts like Jannke say that, even in a changing climate, our wood supply remains strong: “We've been harvesting below our growth rates for a while. So the problem is not that the industry is harvesting too much,” he said.
This is largely because of the US timber market’s design, notes Dr. Robert Bardon, associate dean of Extension at the NC State University College of Natural Resources. Producers have a vested interest in keeping their trees growing and plant almost immediately after cutting.
“We've not seen instances of not having enough trees to harvest in, oh, 100 years,” he says.
Cutting down trees does cause disturbances to ecosystems, but Jankke believes the industry has become “more conscious” of this in its harvesting patterns, striving to cut in such a way that minimizes harms to animal and plant species.
Of course, changing weather patterns do have the potential to harm tree growth patterns: In western Canada, for example, a bark beetle called the mountain pine has proliferated, infecting and killing trees at growing rates, primarily because of climate change. These beetles fly from tree to tree to lay eggs underneath their bark, often carrying with them a fungus that disrupts the flow of water and nutrients within the tree, causing it to die. By 2012, the mountain pine beetle had attacked more than 53 percent of British Columbia’s merchantable pine trees.
The beetle's prevalence was spurred on by climate change: These beetle populations are unable to withstand freezing temperatures and typically die each winter. But warming temperatures allow mountain pines to live longer, causing outbreaks that infect trees at a larger scale.
It’s possible that changing weather patterns affect US lumber stock the same way: Though it’s still too soon to tell, the effects of the climate crisis on ecosystems are wide-reaching and any number of factors can harm tree species.
THE CRISIS ENDS (?)
Though lumber prices are still far above pre-pandemic levels, they fell by more than 40 percent in June, indicating that the crisis is not as acute as it recently was. This could be because sawmills are finally filling empty jobs, or it could be because demand for at-home projects is falling as COVID-19 restrictions lift and people go back into the world.
The cash price per 1,000 board feet of lumber is now $1,113, down from an all-time high of near $1,600 at the end of May (for context, it was $400 for the same amount in February of 2020.) Some people, of course, could consider building homes with alternative materials, like steel (which is facing its own shortage) or concrete. But Jankke, Parajuli and Bardon all caution that, ironically, this is less sustainable than building a home out of wood, which absorbs carbon dioxide from the atmosphere even after a home is constructed.
“It can potentially be part of the solution to the climate crisis,” Jannke said.