Lumber up by over 200% since onset of pandemic
The price of lumber, also known as timber, a type of wood that has been processed into beams and planks, has reached $1,420, as it soared since the beginning of the pandemic.
Having reached a then record of $1,188 just a week ago, lumber is up by well over 200% since lockdowns came into effect.
The price squeeze triggered circuit breakers yesterday and caused trading of the commodity to cease for the day.
Supply Issues
“The market is in trouble. It could spiral out of control in the next few months,” Dustin Jalbert, senior economist at Fastmarkets RISI, told Fortune. It comes down to a lack of supply at a time when demand is growing for lumber as housebuilders are looking to get to work.
The undersupply has been caused by the pandemic. As lockdowns came into effect across America, production of lumber stopped, while many people took it themselves to carry out DIY projects. This was then compounded by the arrival of a housing boom caused by record-low interest rates which came about as a result of the recession. By March, housebuilding reached its highest level since 2006 exacerbating the undersupply of lumber
Possible Signal of Inflation
It will not be received as welcomed news to home builders but the commodity’s ceiling could be even higher, as a potential sign of inflation in the US economy.
“The pipeline for lumber and other wood products demand remains quite deep in 2021…Builders have plenty of ongoing projects to keep working through, which is keeping lumber and panel demand high, and making it very difficult for mills to ramp production up fast enough to rebalance the market,” says Dustin Jalbert, senior economist at Fastmarkets RISI, where he specializes in wood prices.
It is a part of a wider trend of commodity prices, which have surged in recent weeks, including corn, coffee, sugar and copper. In the UK, IHS Markit recorded that rapid cost inflation persisted across the UK private sector, led by higher fuel bills, staff wages, commodity prices and freight surcharges. “A combination of greater operating expenses and stronger customer demand meant that average prices charged continued to increase at one of the fastest rates for the past three-and-a-half years,” the composite PMI said.