9 ms·

Why is lumber so expensive right now?

64 points by Anon84 5y ago

kevinsky 5y ago
a simplified list, not one word about duties levied on imported wood even though the United States has not been able to supply it's own needs for years
ltbarcly3 5y ago
Its inflation. Despite very high levels of production, there is even higher demand and a willingness to pay the higher prices. When you consider the fed printed trillions of dollars for easing in the last year this should be even more apparent.
- rabidonrails 5y ago
  Where are you seeing the "high levels of production?" The attached article seems to say just the opposite.
  - cptskippy 5y ago
    It just says they ramped down production in anticipation of decline due to the pandemic. The article then discusses the challenge of expanding or opening a saw mill. You don't talk about expansion if you're running below peak capacity.
    - mikhailt 5y ago
      https://www.msn.com/en-us/money/markets/wood-production-hits-13-year-high%E2%80%94but-lumber-prices-are-still-up-171percent-since-covid-started/ar-BB1fagN3 https://www.msn.com/en-us/money/markets/wood-production-hits... They talk about opening new sawmills because a huge number of them went out of business since the last great recession. It's a supply/demand issue and the production relative to COVID or last recession hasn't recovered.
    - abakker 5y ago
      This is a highly complex problem. One reason to run below capacity is that many of the trees that have grown in the souther US were left standing to grow longer during persuades of low demand in the last decade. Now that there is high demand it has become apparent that not many sawmills in the south of the UD have the capacity to saw larger trees, and many of the bigger mills that can are in Canada which is being impacted by tariffs that make shipping them back and forth not so economic.
  - adam_arthur 5y ago
    Lumber production at all time high, as easily found in many articles. It's called demand pull inflation. Suddenly populace has many more dollars, and thus can buy out supply of whatever... In this case, new housing stock. Or it could be driven simply by changes in preferences... The exact breakdown can't be known. Whether it persists or not is the important question. https://www.google.com/amp/s/fortune.com/2021/06/10/lumber-prices-2021-chart-price-of-lumber-production-wood-supply-costs-update-june/amp/ https://www.google.com/amp/s/fortune.com/2021/06/10/lumber-p... A lot of people handwave away shortages as a supply side issue, but an increase in demand leading to a shortage is not supply side at all. The distinction is subtle but important.
- deleted 5y ago
  [deleted]
- michaelmrose 5y ago
  The price is off the wall high a 377% increase. Inflation isn't 377% its 4.2%. The price of lumber spiked nearly 100x faster than inflation. Actual inflation is such a small component of the spike that it would be hard to see through the noise.
  - swader999 5y ago
    Inflation numbers are an average of several prices.
    - imtringued 5y ago
      This implies that lumber is a tiny portion of the basket of goods and is irrelevant for the majority of consumers. Edit: My point is that if it is such a tiny portion, then a nation wide change in demand can have a huge impact on pricing without necessarily requiring monetary policy as cause.
- mikhailt 5y ago
  What high level of production? Please cite your source for this. The production is still lower than it was prior to the last recession and they're ramping to match pre-COVID levels. It may be high relative to the last decade or pre-COVID but in the long run, it hasn't recovered to the pre-recession levels. (https://www.msn.com/en-us/money/markets/wood-production-hits-13-year-high%E2%80%94but-lumber-prices-are-still-up-171percent-since-covid-started/ar-BB1fagN3 https://www.msn.com/en-us/money/markets/wood-production-hits...) In other words, you have to include past levels when you say it is very high level, it isn't high relative to last year nor last decade either. Inflation on its own doesn't explain ~100-400% price hike in the past year. Inflation hasn't even broken 10% yet. It also doesn't explain that this started long before COVID as well. This is mostly a supply and demand issue; the supply has taken a huge hit since the recession and lot of companies went out of business since then. COVID didn't help the matter.
  - adam_arthur 5y ago
    Prices only tend to rise due to supply demand imbalances. That's exactly how inflation manifests... and in the real world it won't happen at a uniform rate across all goods. As a thought experiment, imagine we print 2x the money supply and hand it to all citizens. Suddenly they can buy twice as many goods, so we would expect shortages, and prices to rise to compensate. But likely a surge in discretionary income will hit certain types of goods first. We won't see people start stockpiling toilet paper with their newfound money, will we? Most people have all the toilet paper they need already. Funds will hit discretionary things, before spreading through rest of the economy as it circulates. This thought experiment demonstrates an extreme, but this is the exact policy we enacted, just to a lesser degree.
    - Scoundreller 5y ago
      While everyone probably caches a bit more toilet paper than before, a whole swathe of people took the plunge on a bidet and will buy 90% less toilet paper in perpetuity. At the face of it, a shortage looks great for producers, but can bite them in the long-term.
    - imtringued 5y ago
- dragonwriter 5y ago
  > Its inflation. Yes, the increase in price of a good is the definition of inflation. That’s a tautology, not an explanation. (It is not general inflation, because the lumber price increases are way out of line with general inflation.) > When you consider the fed printed trillions of dollars for easing in the last year this should be even more apparent. That... doesn't explain the specific increase in lumber not seen across the broader market of goods and services.
  - ltbarcly3 5y ago
    No, it's not the definition of inflation. If Monet becomes very fashionable and his paintings double in value, that's not 'inflation' it's just something increasing in value. When the government prints trillions of dollars to bail out corrupt wallstreet firms and hedge funds so that the super rich can avoid the consequences of their high risk investment strategies, and this causes the purchasing power of money to decrease, that is inflation, and that is what is happening. Wood just has a low ability to flex up production quickly compared to many other goods. The price of a Big Mac has gone up 12% in the last year and a half. I encourage you to pick something and price compare it from pre to post covid and see if inflation might not be higher than the official number.
1helloworld1 5y ago
Seems like a regular run-of-the-mill supply and demand mismatch. Once new mills are open, and existing mills start ratcheting up production, the prices will fall.
- cptskippy 5y ago
  > Once new mills are open That's assuming someone wants to open one. The demand was spiked by the pandemic which is subsiding. According to the article a new mill take 2 years and technology impacted by the microprocessor shortage.
  - 1helloworld1 5y ago
    Lumber prices are already falling from the record high. https://finance.yahoo.com/news/lumber-prices-post-biggest-ever-210144368.html https://finance.yahoo.com/news/lumber-prices-post-biggest-ev...
    - cptskippy 5y ago
      Which makes sense give the vaccine rollout and lessening of pandemic restrictions.
      - cmpxchg8b 5y ago
        Did you read the article? The problems actually started before the pandemic.
        cptskippy 5y ago
        Yes and we're exacerbated by the pandemic. The article said mills lowered production assuming there would be reduced demand during the pandemic but there was increased because people were stuck at home doing projects. Now that the pandemic waining and people are heading back out, is it not safe to assume some of that demand will be subsiding?
    - 5y ago
nathanaldensr 5y ago
Instead of reading about commodities on a site called "The Hustle," may I recommend reading another site that is specifically about lumber? Madison's Lumber Reporter[1] is a great site for tracking lumber prices. [1] https://madisonsreport.com https://madisonsreport.com
- TooSmugToFail 5y ago
  I think both the OP’s article and your comment were very useful. The Hustle gave me a useful overall explanation of the phenomenon, while your comment pointed me to an ‘insider’ resource to refer to for up-to-date information.
- spoonjim 5y ago
  This is way more useful to the non insider. Industry publications would assume a lot of existing knowledge.
- onlyfortoday2 5y ago
  LOL waffle post. The name of a website has nothing to do with the quality of the content.
jiveturkey 5y ago
sadly, this article is missing a very important data point. demand in 2019.
imwillofficial 5y ago
Tons of lumber piling up in lumber yards. Easy answer this is market manipulation by a few big players. Reprehensible during a global pandemic.
- mgarfias 5y ago
  Citation?
  - bmm6o 5y ago
    There's no reputable source. It's widely stated without more evidence than pictures of lumber yards by the QAnon-adjacent.
    - hattmall 5y ago
      Its true, drive by a mill and compare with Google maps. I don't know what better source, you can see this first hand by going to a mill. I have.
      - Demonsult 5y ago
        Take a photo maybe?
    - imwillofficial 5y ago
      What the hell is “Qanon-agacent” Is that just a way to deny things you don’t like to hear without critical thought? My data comes from inside sources in the lumber industry. Yours comes from… where exactly?
- privateSFacct 5y ago
  Where is the source for this. We do have Biden putting tariffs on Canadian lumber to help keep prices high, but that's the only thing I'm aware of.
  - rdsnsca 5y ago
dugditches 5y ago
Lumber? Try everything. The price and lead times on raws are incredible now. Buying steel now is almost 2x in cost. With having 'caps' put onto orders, so that suppliers can keep their customers on. The resin shortages which hurt the plywood industry also have spilt over into other markets. For example PVC/CPVC manufacturers are experiencing shortages in resins used in their manufacturing of pipe. Thus they're limiting order sizes to their companies and buyers to keep more of them on. Meanwhile lots of factories and construction have never been busier with more demand for raws. So with large leadtimes, supply chains and manufacturing gets choked up and it just kind of ripples out.
- mturmon 5y ago
  I understand there are shortages of Romex style electrical cable, not because of copper, but because of insulation. Perhaps because of the resin issue you mention?
- deleted 5y ago
  [deleted]
dcow 5y ago
Is it just me or do “markets” feel like a really dumb AI that is incapable of any sort of strategic planning? It feels like it has the maturity if a child in grocery store swooping up all the candy and scoffing at all the vegetables. Undoubtably markets are great for a lot of things but simply devastating when ineffectively applied to mission-critical goods and services that involve contextually aware knowledge and meta-level thinking. It seems like theres a missing component that would observe swings in demand and try to smooth out the impacts by e.g. subsidizing industries where demand has tanked or taxing industries where demand has skyrocketed in a tapering way (tax that reduces over time as the rate of change of the price of the commodity changes) to avoid something like shuttering a sawmill because of a temporary swing in market economics.
- missedthecue 5y ago
  Markets can strategically plan though. It's why turkey doesn't cost several thousand dollars a pound every November in the US.
  - remirk 5y ago
    That is because the same happens every year. Even a bad AI or child (using OPs example) can plan for that. But when it comes to events that happen sporadically markets seem to have issues where most sane adults would be able to handle it.
    - jjeaff 5y ago
      It's probably a sane choice for most products to -not- prepare for very rare disasters like a hundred year pandemic. After all, markets optimize for profit, not convenience or safety. These shortages will all smooth out relatively soon. It can cost a lot of money to be prepared for everything.
      - dcow 5y ago
        Sometimes the most efficient option is not the safest or happiest or winning option. If our prime goal was cheapest lumber 99% of the time, then sure a traditional market is very good at that. I would happily pay for 1% more expensive lumber all the time to avoid paying for 1000% more expensive lumber (read: not being able to buy lumber) when I really need it.
627467 5y ago
Apparently the assumption in this title is already date: https://twitter.com/zerohedge/status/1404057396293550082?s=19 https://twitter.com/zerohedge/status/1404057396293550082?s=1... @nntaleb comment: > First, learn to tell the difference between inflation and congestion. Inflation: price rises cause prices to rise. Congestion: squeezes are followed by series of price collapses.
wcoenen 5y ago
Brochure (PDF) about the Chicago Mercantile Exchange lumber futures market: https://www.cmegroup.com/trading/agricultural/files/AC-243_RanLenLumberBrochure.pdf https://www.cmegroup.com/trading/agricultural/files/AC-243_R...
Dork1234 5y ago
Every time I see posts about/like this and people comment why companies wont ramp up production. I wish they would look into the Beer Distribution Game and the Bullwhip effect. https://en.wikipedia.org/wiki/Beer_distribution_game https://en.wikipedia.org/wiki/Beer_distribution_game
aroberge 5y ago
If all this were true, there would be no reason for the U.S. to want to double tariffs on Canadian lumber: https://markets.businessinsider.com/news/stocks/lumber-prices-us-increase-canadian-tariffs-despite-rising-prices-2021-5-1030468561?op=1 https://markets.businessinsider.com/news/stocks/lumber-price... This is purely protectionism, and keeps lumber prices artificially high. (Mind you, the reverse is true in the dairy industry with the trade barriers that Canada imposes.)

64 points by Anon84 5y ago

a simplified list, not one word about duties levied on imported wood even though the United States has not been able to supply it's own needs for years

ltbarcly3 5y ago

Its inflation. Despite very high levels of production, there is even higher demand and a willingness to pay the higher prices. When you consider the fed printed trillions of dollars for easing in the last year this should be even more apparent.

rabidonrails 5y ago
Where are you seeing the "high levels of production?" The attached article seems to say just the opposite.
- cptskippy 5y ago
  It just says they ramped down production in anticipation of decline due to the pandemic. The article then discusses the challenge of expanding or opening a saw mill. You don't talk about expansion if you're running below peak capacity.
  - mikhailt 5y ago
    https://www.msn.com/en-us/money/markets/wood-production-hits-13-year-high%E2%80%94but-lumber-prices-are-still-up-171percent-since-covid-started/ar-BB1fagN3 https://www.msn.com/en-us/money/markets/wood-production-hits... They talk about opening new sawmills because a huge number of them went out of business since the last great recession. It's a supply/demand issue and the production relative to COVID or last recession hasn't recovered.
  - abakker 5y ago
    This is a highly complex problem. One reason to run below capacity is that many of the trees that have grown in the souther US were left standing to grow longer during persuades of low demand in the last decade. Now that there is high demand it has become apparent that not many sawmills in the south of the UD have the capacity to saw larger trees, and many of the bigger mills that can are in Canada which is being impacted by tariffs that make shipping them back and forth not so economic.
- adam_arthur 5y ago
  Lumber production at all time high, as easily found in many articles. It's called demand pull inflation. Suddenly populace has many more dollars, and thus can buy out supply of whatever... In this case, new housing stock. Or it could be driven simply by changes in preferences... The exact breakdown can't be known. Whether it persists or not is the important question. https://www.google.com/amp/s/fortune.com/2021/06/10/lumber-prices-2021-chart-price-of-lumber-production-wood-supply-costs-update-june/amp/ https://www.google.com/amp/s/fortune.com/2021/06/10/lumber-p... A lot of people handwave away shortages as a supply side issue, but an increase in demand leading to a shortage is not supply side at all. The distinction is subtle but important.
deleted 5y ago
[deleted]
michaelmrose 5y ago
The price is off the wall high a 377% increase. Inflation isn't 377% its 4.2%. The price of lumber spiked nearly 100x faster than inflation. Actual inflation is such a small component of the spike that it would be hard to see through the noise.
- swader999 5y ago
  Inflation numbers are an average of several prices.
  - imtringued 5y ago
    This implies that lumber is a tiny portion of the basket of goods and is irrelevant for the majority of consumers. Edit: My point is that if it is such a tiny portion, then a nation wide change in demand can have a huge impact on pricing without necessarily requiring monetary policy as cause.
mikhailt 5y ago
What high level of production? Please cite your source for this. The production is still lower than it was prior to the last recession and they're ramping to match pre-COVID levels. It may be high relative to the last decade or pre-COVID but in the long run, it hasn't recovered to the pre-recession levels. (https://www.msn.com/en-us/money/markets/wood-production-hits-13-year-high%E2%80%94but-lumber-prices-are-still-up-171percent-since-covid-started/ar-BB1fagN3 https://www.msn.com/en-us/money/markets/wood-production-hits...) In other words, you have to include past levels when you say it is very high level, it isn't high relative to last year nor last decade either. Inflation on its own doesn't explain ~100-400% price hike in the past year. Inflation hasn't even broken 10% yet. It also doesn't explain that this started long before COVID as well. This is mostly a supply and demand issue; the supply has taken a huge hit since the recession and lot of companies went out of business since then. COVID didn't help the matter.
- adam_arthur 5y ago
  Prices only tend to rise due to supply demand imbalances. That's exactly how inflation manifests... and in the real world it won't happen at a uniform rate across all goods. As a thought experiment, imagine we print 2x the money supply and hand it to all citizens. Suddenly they can buy twice as many goods, so we would expect shortages, and prices to rise to compensate. But likely a surge in discretionary income will hit certain types of goods first. We won't see people start stockpiling toilet paper with their newfound money, will we? Most people have all the toilet paper they need already. Funds will hit discretionary things, before spreading through rest of the economy as it circulates. This thought experiment demonstrates an extreme, but this is the exact policy we enacted, just to a lesser degree.
  - Scoundreller 5y ago
    While everyone probably caches a bit more toilet paper than before, a whole swathe of people took the plunge on a bidet and will buy 90% less toilet paper in perpetuity. At the face of it, a shortage looks great for producers, but can bite them in the long-term.
  - imtringued 5y ago
dragonwriter 5y ago
> Its inflation. Yes, the increase in price of a good is the definition of inflation. That’s a tautology, not an explanation. (It is not general inflation, because the lumber price increases are way out of line with general inflation.) > When you consider the fed printed trillions of dollars for easing in the last year this should be even more apparent. That... doesn't explain the specific increase in lumber not seen across the broader market of goods and services.
- ltbarcly3 5y ago
  No, it's not the definition of inflation. If Monet becomes very fashionable and his paintings double in value, that's not 'inflation' it's just something increasing in value. When the government prints trillions of dollars to bail out corrupt wallstreet firms and hedge funds so that the super rich can avoid the consequences of their high risk investment strategies, and this causes the purchasing power of money to decrease, that is inflation, and that is what is happening. Wood just has a low ability to flex up production quickly compared to many other goods. The price of a Big Mac has gone up 12% in the last year and a half. I encourage you to pick something and price compare it from pre to post covid and see if inflation might not be higher than the official number.

1helloworld1 5y ago

Seems like a regular run-of-the-mill supply and demand mismatch. Once new mills are open, and existing mills start ratcheting up production, the prices will fall.

cptskippy 5y ago
> Once new mills are open That's assuming someone wants to open one. The demand was spiked by the pandemic which is subsiding. According to the article a new mill take 2 years and technology impacted by the microprocessor shortage.
- 1helloworld1 5y ago
  Lumber prices are already falling from the record high. https://finance.yahoo.com/news/lumber-prices-post-biggest-ever-210144368.html https://finance.yahoo.com/news/lumber-prices-post-biggest-ev...
  - cptskippy 5y ago
    Which makes sense give the vaccine rollout and lessening of pandemic restrictions.
    - cmpxchg8b 5y ago
      Did you read the article? The problems actually started before the pandemic.
      - cptskippy 5y ago
        Yes and we're exacerbated by the pandemic. The article said mills lowered production assuming there would be reduced demand during the pandemic but there was increased because people were stuck at home doing projects. Now that the pandemic waining and people are heading back out, is it not safe to assume some of that demand will be subsiding?
  - 5y ago

nathanaldensr 5y ago

Instead of reading about commodities on a site called "The Hustle," may I recommend reading another site that is specifically about lumber? Madison's Lumber Reporter[1] is a great site for tracking lumber prices. [1] https://madisonsreport.com https://madisonsreport.com

TooSmugToFail 5y ago
I think both the OP’s article and your comment were very useful. The Hustle gave me a useful overall explanation of the phenomenon, while your comment pointed me to an ‘insider’ resource to refer to for up-to-date information.
spoonjim 5y ago
This is way more useful to the non insider. Industry publications would assume a lot of existing knowledge.
onlyfortoday2 5y ago
LOL waffle post. The name of a website has nothing to do with the quality of the content.

jiveturkey 5y ago

sadly, this article is missing a very important data point. demand in 2019.

imwillofficial 5y ago

Tons of lumber piling up in lumber yards. Easy answer this is market manipulation by a few big players. Reprehensible during a global pandemic.

mgarfias 5y ago
Citation?
- bmm6o 5y ago
  There's no reputable source. It's widely stated without more evidence than pictures of lumber yards by the QAnon-adjacent.
  - hattmall 5y ago
    Its true, drive by a mill and compare with Google maps. I don't know what better source, you can see this first hand by going to a mill. I have.
    - Demonsult 5y ago
      Take a photo maybe?
  - imwillofficial 5y ago
    What the hell is “Qanon-agacent” Is that just a way to deny things you don’t like to hear without critical thought? My data comes from inside sources in the lumber industry. Yours comes from… where exactly?
privateSFacct 5y ago
Where is the source for this. We do have Biden putting tariffs on Canadian lumber to help keep prices high, but that's the only thing I'm aware of.
- rdsnsca 5y ago

dugditches 5y ago

Lumber? Try everything. The price and lead times on raws are incredible now. Buying steel now is almost 2x in cost. With having 'caps' put onto orders, so that suppliers can keep their customers on. The resin shortages which hurt the plywood industry also have spilt over into other markets. For example PVC/CPVC manufacturers are experiencing shortages in resins used in their manufacturing of pipe. Thus they're limiting order sizes to their companies and buyers to keep more of them on. Meanwhile lots of factories and construction have never been busier with more demand for raws. So with large leadtimes, supply chains and manufacturing gets choked up and it just kind of ripples out.

mturmon 5y ago
I understand there are shortages of Romex style electrical cable, not because of copper, but because of insulation. Perhaps because of the resin issue you mention?
deleted 5y ago
[deleted]

dcow 5y ago

Is it just me or do “markets” feel like a really dumb AI that is incapable of any sort of strategic planning? It feels like it has the maturity if a child in grocery store swooping up all the candy and scoffing at all the vegetables. Undoubtably markets are great for a lot of things but simply devastating when ineffectively applied to mission-critical goods and services that involve contextually aware knowledge and meta-level thinking. It seems like theres a missing component that would observe swings in demand and try to smooth out the impacts by e.g. subsidizing industries where demand has tanked or taxing industries where demand has skyrocketed in a tapering way (tax that reduces over time as the rate of change of the price of the commodity changes) to avoid something like shuttering a sawmill because of a temporary swing in market economics.

missedthecue 5y ago
Markets can strategically plan though. It's why turkey doesn't cost several thousand dollars a pound every November in the US.
- remirk 5y ago
  That is because the same happens every year. Even a bad AI or child (using OPs example) can plan for that. But when it comes to events that happen sporadically markets seem to have issues where most sane adults would be able to handle it.
  - jjeaff 5y ago
    It's probably a sane choice for most products to -not- prepare for very rare disasters like a hundred year pandemic. After all, markets optimize for profit, not convenience or safety. These shortages will all smooth out relatively soon. It can cost a lot of money to be prepared for everything.
    - dcow 5y ago
      Sometimes the most efficient option is not the safest or happiest or winning option. If our prime goal was cheapest lumber 99% of the time, then sure a traditional market is very good at that. I would happily pay for 1% more expensive lumber all the time to avoid paying for 1000% more expensive lumber (read: not being able to buy lumber) when I really need it.

627467 5y ago

Apparently the assumption in this title is already date: https://twitter.com/zerohedge/status/1404057396293550082?s=19 https://twitter.com/zerohedge/status/1404057396293550082?s=1... @nntaleb comment: > First, learn to tell the difference between inflation and congestion. Inflation: price rises cause prices to rise. Congestion: squeezes are followed by series of price collapses.

wcoenen 5y ago

Brochure (PDF) about the Chicago Mercantile Exchange lumber futures market: https://www.cmegroup.com/trading/agricultural/files/AC-243_RanLenLumberBrochure.pdf https://www.cmegroup.com/trading/agricultural/files/AC-243_R...

Dork1234 5y ago

Every time I see posts about/like this and people comment why companies wont ramp up production. I wish they would look into the Beer Distribution Game and the Bullwhip effect. https://en.wikipedia.org/wiki/Beer_distribution_game https://en.wikipedia.org/wiki/Beer_distribution_game

aroberge 5y ago

If all this were true, there would be no reason for the U.S. to want to double tariffs on Canadian lumber: https://markets.businessinsider.com/news/stocks/lumber-prices-us-increase-canadian-tariffs-despite-rising-prices-2021-5-1030468561?op=1 https://markets.businessinsider.com/news/stocks/lumber-price... This is purely protectionism, and keeps lumber prices artificially high. (Mind you, the reverse is true in the dairy industry with the trade barriers that Canada imposes.)