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Lumber Supply Issues Continuing to Provide Challenge to Construction Industry

by Freedonia Industry Studies

August 5, 2020

As the US economy continues to grapple with the effects of the COVID-19 pandemic, certain parts of the construction industry have proven to be bright spots. As we’ve seen, DIY construction, home renovation by professionals (particularly of outdoor products like decks and fencing), new housing construction, and some types of nonresidential remodeling has posted a recovery from declines seen in March and April.

However, a shortage of lumber may put a damper on further growth in the construction industry.

Sawmills curtailed activity in the early days of the pandemic, expecting (like many others) sharp drop-offs in construction activity. However, governors in many states declared construction an “essential” industry, keeping job sites humming – if at slightly reduced volumes. Furthermore, many homeowners found themselves at home with time on their hands to complete projects, such as building decks or creating a new home gym or office. Thus, demand for lumber surged.

With supplies “extremely lean,” as reported by one producer, it is expected that this shortage of lumber – and correspondingly higher prices – will continue for some time. This could have a number of deleterious effects to the US economy, such as:

  • slowdowns in new housing activity as builders erect fewer homes (that will cost more to purchase)
  • homeowners delaying renovation projects until lumber prices reach more reasonable levels
  • contractors adjusting operations – such as having fewer workers on shifts – to account for higher material costs
  • suppliers looking to increase imports of lumber – despite the prospect of tariffs – to make up for the shortage of supply

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. 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.

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