Lumber 101 – What Lumber Pricing Trends Actually Mean For The Industry

Lumber may not be something on the minds of many people, but for contractors, it’s an essential building block. Think about it—if it weren’t for lumber, we probably wouldn’t have such great buildings to work in, cozy homes to dwell in, or structures to explore.

Towards the end of 2018, we saw the cost of lumber become increasingly expensive. And as prices elevated, businesses and contractors were greatly affected. Although cost has been slowly decreasing, this demonstrates how unstable the market can be. We spoke with our Outside Sales Director, Ron Kalinowski, to get more insight on the current market trends occuring in the lumber industry.

The rise and fall of lumber prices: three market trends.

1. Trucking shortage. The number one thing that seemed to hit lumber prices was the shortage of finding and hiring truck drivers to transport the lumber to  its final destination. According to Kalinowski, “this year, they’re estimating that, in the United States, we’re going to be short over 51,000 truckers that are needed to move freight throughout the country.” When lumber is much more difficult to move due to the lack of drivers, the lumber industry finds it more challenging to make a profit while keeping their prices low and paying the cost for that lumber to get delivered.

Compounded with the shortage of truckers in the US as a whole, new regulations for lumber drivers have made many of them hesitant to work in the industry any longer. A role that once included flexibility, now mandates that each driver must log their time electronically—creating a much more restricted and monitored environment that made most drivers frustrated.

2. Tariffs. In 2017, new tariffs were passed on Canadian lumber that caused higher costs of wood. Some experts say the tariff’s have made it hard for the lumber industry to keep their prices down. Many others have said an increase in demand for new homes and supply shortages due to wildfires have played an equally important role in the rise of prices. Upon discussing these tariffs with Kalinowski, he mentioned, “the price increases started about 2 years ago. If you went a year prior to that, it was probably the lowest pricing that had been recorded in years. There was ramping up in prices prior to the tariffs, but nothing like we’ve seen over the last year.”

Although the tariffs are relatively new to the industry, they’ve already produced tangible effects. According to the National Association of Home Builders, the tariffs have caused home prices in the U.S. to soar by an average of $9,000 per home. This makes it difficult for first-time buyers looking for starter homes in a market whose inventory is already insufficient.

3. Rising cost of goods. Pricing for goods go up and down all the time. But this price uncertainty has been a contributing factor to increasing lumber costs. Speaking to this further, Kalinowski explained, “If we get a price for something at 8 o’clock this morning, it may change two or three times before the end of business, as we’re going to purchase product. Realistically, on the materials end, they can’t lock in their pricing.” Such irregular quotes have caused many to experience a loss in purchasing confidence.

How to predict and control your lumber costs.

The key to surviving the high price of lumber and not losing money—or even worse—going out of business, is for companies to be able to understand future lumber costs.

Lumber prices are always changing. Whether they go up or down, it creates an unstable market for businesses trying to stick to a budget. The easiest way to accomplish this to get quotes for lumber frequently. Be sure to get quotes in the planning phase as well as right before you purchase the lumber to build. The fluctuations in lumber prices can easily swing costs upwards or downwards. Frequent quoting means that your job is never over or under budget unexpectedly.

Want monthly updates on the state of the lumber industry? Subscribe to Lumber/Panel House Package Price Index updates. We’ll pass along a synopsis of how the market impacts the price of lumber and panels.