Industry Groups Spar Over the Cause of High Lumber Prices

Lumber prices have remained high for several months, with supplies of lumber equally low. This is a special concern of home builders across the US. Shortages of lumber have affected the production of new homes, while climbing lumber prices threaten to make the residences that are completed unaffordable for many consumers. Considering that demand for homes – both newly built ones and existing residences – has never been higher, the lack of available lumber and its high cost when in supply has left all industry parties looking for solutions.

One idea floated by some is for the US to reverse the tariffs levied on Canadian-made softwood lumber. Because of these tariffs, many Canadian firms stopped selling lumber to the US, and those that did suffered sales declines as their lumber was now much more expensive.

Recently, the US Lumber Coalition – a group representing US producers of softwood lumber – put out a press release detailing what it thought were the causes of high homes prices, which included:

• high labor costs
• rising land prices
• the overall increase in demand for all other wood-based building materials – not just lumber

The US Lumber Coalition reported that lumber was only a small part of the cost of building a new home, and that its members were doing their part to ameliorate the shortage of lumber by maximizing production. Furthermore, the US Lumber Coalition claimed that ending the tariffs on Canadian-made lumber would do little to reduce lumber prices, but would greatly affect US lumber producers, who would be hard-pressed to compete with Canadian suppliers.

In response, the National Association of Home Builders (NAHB) – whose members are among the largest consumers of lumber in the US – issued a press release that challenged many of the findings of the US Lumber Coalition, such as:

• lumber and wood products play a much larger role in home building
• sawmills did not ramp up production as rapidly as needed in response to surging lumber demand

The NAHB, in turn, called for the lifting of tariffs on Canadian lumber, claiming that the US does not have sufficient production capacity to meet its domestic market needs. Furthermore, by allowing more Canadian lumber into the US, not only would supplies increase, but costs would go down, making lumber – and new homes – more affordable.

Freedonia Group experts will continue to monitor the US lumber market and how lumber supplies and pricing continue to affect the overall US home building and construction industries.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products and Consumer Goods areas. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.