Among North American homebuilders, Canadian softwood lumber is the gold standard when it comes to wood. Canadian spruce-pine-fir or Canadian SPF from Alberta and British Columbia is widely used in Canadian and American homes and in fact around 30% of lumber used in the US comes from north of the border.
Lumber supplies are down and prices are up and while COVID was a major catalyst due to DIY projects and commercial wood needs increasing heavily, there are many other reasons. Pests, political decisions, environmental concerns and natural disasters have all driven the costs of lumber up while limiting supply.
The National Association of Homebuilders estimates that the lumber shortage has added $24,000 onto the cost of a new home recently so it’s not insignificant. With house pricing skyrocketing in many cities around the world, it’s large concern.
Let’s take a closer look at 9 reasons there is a lumber shortage in America.
Pests are a constant source of trouble for lumber supply
Over the past several decades, numerous pest infestations particularly in British Columbia have cost the industry hundreds of millions of dollars over many years according to the Federal Government of Canada. Of particular concern are the mountain pine beetle, spruce budworm, western spruce budworm and white pine blister rust among others.
Another side effect of pests killing trees is the wood that ends up getting used for lumber is very dry. Some suggest that up to 70% of pine wood
processed at one major mill in western Canada is from trees that were killed by a beetle infestation.
This very dry wood can easily light up if a nearby fire accidentally gets out of control or during very hot dry conditions in summer.
Tariffs placed on Canadian softwood imports has cost builders and homeowners
The softwood lumber dispute between Canada (supplier) and United States (buyer) has existed for decades, dating back to 1982. While Canada has been accused by several US administrations of unfairly subsidizing the industry, several courts including the World Trade Organization have gotten involved over the years to try to resolve the ongoing dispute.
The dispute continues to this day and in 2017, the Trump administration announced 20% average tariffs on Canadian softwood lumber, tariffs that generally end up getting passed onto the customers in the US.
While the cost of lumber in a home is a small cost of the total house price, combined with the overall shortage in lumber due to the other reasons mentioned on this page, the price of wood has increased significantly. And the tariffs have added to that cost.
COVID-19 caused several issues for wood and lumber suppliers
When COVID-19 caused the world to effectively shut down in early 2020 for months, it gave many people free time to do things around the house. Building a treehouse, a new deck, cabinetry or other wood-based projects drove the demand for lumber sky high just as businesses and borders shut down and trade slowed down and completely stopped in some places. Restaurants increased wood usage by building outdoor structures to make up for the fact that they weren’t allowed to offer service inside the restaurant.
When businesses shut down for months on end, many that were already in a precarious position never reopened and we’re not just talking about restaurants and other businesses that relied on foot traffic.
The lumber and wood industries are expensive ones to take part in. A new mill might cost up to $100 million and take up to 2 years to build and aren’t necessarily profitable quickly.
This is why you see many old outdated sawmills that look like they should be condemned but are still operational and why very old and rusted equipment that is manually operated is often still seen used in smaller mills.
The increase in demand for wood – which was already occurring anyway on a global scale before COVID – combined with a lack of supply is not a combination for success.
Speaking of lumber supply issues…
Ongoing supply issues of lumber are caused by mill closures
If you’ve watched the Netflix show Big Timber, you know that the subject of the show is western Canadian logger and sawmill owner Kevin Wenstob. The show details the trials and tribulations of his industry and the daily challenges he faces.
Early in season 1, it shows several episodes where he brings a new customer on board and has to supply that customer with 100 truckloads of lumber and details everything that goes into securing that much wood. It was a huge order worth several hundred thousand dollars in value.
Turns out that this particular customer is no longer in business and his sawmill was closed for one year before being bought by someone who wanted to give the business a go.
Sawmills across Canada and US have experienced the same thing for years: Closures and downsizings.
We already spoke on this website about whether the logging industry is dying and how the industry has changed over the past few decades for a number of reasons.
As mentioned earlier, sawmills are expensive to run and increasingly small mills are being pushed out by larger multinationals.
Battles between environmentalists and loggers have impacted lumber supply
Environmentalists and scientists are battling the lumber industry to either decrease or maintain current timber production limits as allowed by governments.
Environmentalists challenge the lumber industry on how much timber they can cut, which forests they can cut from, and try to strengthen forest rules around the world. These actions directly oppose what lumber companies would like to see done.
In the Black Hills National Forest in the western part of South Dakota and northeastern Wyoming, scientists are calling for an up to 60% reduction in timber production allowed.
People around the world are also becoming more aware of environmental concerns and are increasingly voting at the ballot box and in terms of who they choose to do business with.
The lumber industry is clearly facing battles from several fronts.
Regulations and land that is increasingly protected from logging has affected lumber supply
We already spoke about costly tariffs from the US on Canadian softwood that tend to get borne by new homeowners in the US. These aren’t the only regulations enacted by government that hurts the lumber industry.
Around 14% of land in the US is protected and much of that land are forests that can’t be cut from. Other forests have selective logging which may prohibit loggers from accessing potentially profitable wood.
Global regulations against illegally sourced wood help to protect forests but also has an impact on timber supply.
Sometimes, one level of government is pitted against another regarding the issue of timber supply. 14 counties in western Oregon once sued the state for $1.4 billion for what they feel is mismanagement of the state’s forests. While one level of government might want to be seen as protecting the environment, local ones may feel more pressure to save jobs.
Clearcutting and other methods of logging have been banned or at least curtailed in many jurisdictions so that lumber companies need to be more selective as to how and what they cut.
Wildfires are a constant threat to trees and the lumber supply
60% of forest fires in British Columbia are caused by lightning strikes and the remaining 40% are caused by humans whether by accidentally starting a fire by dropping a spark or heat source or by another means.
These statistics come courtesy of the Government of British Columbia.
In California where their large forest fires also gain widespread attention to the costly human and environmental damage often done, the same causes exist but there are several other reasons too. Due to the extremely hot summers and associated long dry season plus a very large population, California’s forests are very susceptible to catching fire.
Wildfires are a particular problem on parts of the west coast in British Columbia in Canada and parts of the Pacific Northwest in the United States. While climate change is believed by many to contribute heavily to fires that destroy forests and homes, there are other reasons as well as the stats above show.
Wildfires in Washington – another lumber-producing state – have even been caused by sparks from downed power lines that toppled during heavy wind.
Old lumber mills use old equipment that may also be outdated and improperly maintained
Lumber mills are expensive to build. A new mill may take up to 2 years to build and cost up to $100 million from what I’ve read. So if you don’t have the money to build a new wood mill what do you do? Often, the answer is to keep an old one running perhaps longer that you should.
Pitch wood – also known as fat pine or fat wood – come from trees that have cones that produce significant amounts of resin. The resin is highly flammable and if it comes into contact with a flame, can quickly turn into a larger fire.
While some people have spoken about resin-laden trees literally exploding from the heat, this doesn’t actually happen. There have however been several instances in British Columbia of lumber mill explosions that were concluded to have occurred due to excessive wood dust buildups and faulty or otherwise improperly maintained dust collection systems. One explosion killed two workers.
Many of the mills still in use were built decades ago and use similarly aged equipment that may or not be maintained properly and at a minimum may be very outdated to deal with changes in lumber that is processed.
Outdated lumber mills, accidents and explosions are a concern for the lumber industry and the people who work there.
A mismatch between lumber demand and production capacity often leads to shortages
From 2007 – 2017 around 10% of the mill capacity in the Pacific Northwest was closed permanently due in large part to the housing market crash encompassing sawmills, pulp and paper mills, as well as mills that specifically produce conifers, pine wood and hardwoods.
Fast forward ahead several years to 2020, the onset of COVID-19 caused global lockdowns including sawmills but a sudden uptick in DIY projects for consumers as well as commercial businesses scrambling to deal with the new realities of social distancing. Case in point: Restaurants who suddenly needed to build wooden outdoor patios and decks to accommodate outdoor dining.
On top of that, record low interest rates and uncertainly regarding savings rates which actually went negative in some countries saw an increase in home building and buying which put a further strain on supply.
It has been shown that the steep and sudden rise in lumber prices were a direct result of increased timber demand and not a supply issue. While there can be supply issues at any given time, the recent lumber price increase was due to demand growth.
According to stats supplied by Forest2Market, US new house permits bottomed in May 2020 as global lockdowns came into full effect but then quickly rebounded and peaked 8 months later in January 2021.
Further, many sawmills had downsized or otherwise reduced staff, expecting a massive slowdown or timber shortage that would curtail their business activity for the foreseeable future.