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Could a framing lumber shortage be underway?

Thursday, July 13, 2017  
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Construction Dive

By Joe Dyton • July 11, 2017

 

Dive Brief:

  • A Builders revealed that 21% of single family builders are having trouble accessing framing lumber compared to 7% who said the same in July 2015.
  • Following framing lumber, the largest reported shortages so far this year have been for ready-mix concrete and trusses, with 14% of builders saying they were short on both.
  • The share of builders reporting a shortage of framing number follows recent price increases in the material, and it is the highest that mark has been since the recession. The previous high occurred in October 2004.

 

Dive Insight:

  • Builders’ reported difficulty accessing framing lumber comes amid an ongoing dispute between the U.S. and Canada over their softwood lumber trade. The most recent Softwood Lumber Agreement and a one-year ban on legal action between the two countries lapsed last fall and negotiations failed to produce a new deal. This spring, the U.S. announced preliminary duties on Canadian softwood lumber imports, following investigations into countervailing and antidumping allegations. The previous deal had removed such duties.
  •  The mere possibility of the tariffs caused lumber prices in the U.S. to increase 7.2% in Q1 2017 and 12.9% year-over-year in March. The new tariffs add between 17.41% and 30.88% to the cost of softwood lumber imports, based on producer. (Three Canadian provinces – Newfoundland and Labrador, Nova Scotia and Prince Edward Island – will be exempt from the duties once they are confirmed.)
  •  Until an agreement is reached between the U.S. and Canada, lumber prices — and supply will remain uncertain. One-third of U.S. lumber supplies are imported and more than 95% of those imports are from Canada, according to the NAHB. Both countries have said they’re looking elsewhere for places to buy and sell their lumber, and Canadian producers have threatened litigation. 
  •  This is the two countries’ fifth lumber-related dispute in 40 years, according to Reuters, so while the market will likely feel the effects of higher prices and low demand, it’s a cycle many in the industry are familiar with. Still, the lumber price increases join a host of supply-side headwinds that are challenging builders to meet demand and stressing affordability for buyers, particularly for lower-cost housing.
  •  Both sets of duties are still preliminary, with a final decision expected later this summer. Final decisions tend to lower the tariff rate somewhat.

 

 


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