Why wood has gotten so dang expensive

https://constructionphysics.substack.com/p/lumber-price-faq

by Whitespace • 5 years ago

281 129 5 years ago

constructionphysics.substack.com

h2odragon2• 5 years ago

The is from May; prices have fallen quite a bit off peaks I hear and some speculators are now trapped under big loads ordered 2 months ago now being delivered.

There's "we bought a sawmill!" ads here in the rural lands now for fresh sawn green pine and oak; which isn't "lumber" yet in any useful sense. I've seen porches being built that won't last the summer.

dragontamer2• 5 years ago

It was clearly a sawmill issue. Lumber was expensive but timber was cheap.

I don't know how to calculate if more sawmills are needed (permanent backlog) or if it's a temporary backlog. I figure that speculation is for the commodity traders and maybe some stock / sawmill speculators.

In practice, guess and check may scale better? But I've also been to towns where the sawmill shut down and destroyed the local economy, so guess and check may be immoral (even if it's somewhat profitable)

burnte• 5 years ago

This is an easy one to calcucate, you don't even need to do real math. There's a spike in consumer demand due to COVID. People are pouring money into their houses rather than external entertainment and travel. That's a temporary change.

yskchu• 5 years ago

Yes it has fallen a lot (nearly 50%) from the May peak:

https://www.google.com/amp/s/www.businessinsider.com/lumber-...

punkrex• 5 years ago

My FiL works in the industry on large projects, and the word from suppliers is that in Jan, prices should drop 50% from where ever Dec ends up, as there is going to be a ton of supply.

bcrosby95• 5 years ago

There's "we bought a sawmill!" ads here in the rural lands now for fresh sawn green pine and oak; which isn't "lumber" yet in any useful sense. I've seen porches being built that won't last the summer.

I'm curious why this is. Is it the drying stage, or something else?

alamortsubite• 5 years ago

Yes. The wood will twist and bend as it dries.

ArkanExplorer• 5 years ago

https://en.wikipedia.org/wiki/Wood_drying

Wood for construction needs to reach an equilibrium moisture point with the outdoor air after its cut.

If its dried outside, it takes months to years to dry, depending on the humidity level and temperature.

The wood is dried because it makes it lighter, and the shrinkage and swelling has already played out during the drying process... instead of when its in place!

drewzero1• 5 years ago

Yes, wood that is used to build something before it has been dried will warp and curl.

tastyfreeze• 5 years ago

You can build out of green lumber. But, as wood dries it will twist, warp, and crack. If you happen to live somewhere humid building with green wood is an invitation for fungal rot. For both durability and square building it is better to dry the wood first.

JoeAltmaier• 5 years ago

Green sawn wood is usually stacked, and the stack's own weight will hold the boards relatively straight as they dry.

Build something, and the whole structure can bend and curl.

hn_throwaway_99• 5 years ago

It seems like the spectacular boom in home renovation will have to lead to an eventual bust at some point - people generally don't want to do a major renovation that often.

That said, it seems like the huge spike in building materials did a very good thing by making many people postpone renovations until prices come down, which should help smooth out the peak-to-trough chart of building construction.

pengaru2• 5 years ago

plywood at my local home depot is still very much at its highest price ever when I checked last week ($135 for a 1-1/8" 4x8 sheet of t&g subfloor)

There's "we bought a sawmill!" ads here in the rural lands now for fresh sawn green pine and oak; which isn't "lumber" yet in any useful sense. I've seen porches being built that won't last the summer.

The allegedly "kiln dried lumber" home depot has been selling has been criminally wet throughout the last year too. Not only have people been paying through the nose for the stuff, it's been nowhere near ready to use. I had to let boards I bought for building gambrel rafters sit for a month on my covered deck before attempting to cut them to the pattern. And even after that, a bunch of them shrunk another 1/4" from the pattern in the subsequent month of waiting for me to install. Infuriating to pay so much for stuff that isn't even top quality and ready to go. I also had to throw a few away from splitting and twisting during the drying process...

axaxs2• 5 years ago

Yeah, prices are still ridiculous. Apparently it takes a couple months for the aforementioned price drops in futures to trickle down. If HD bought it for 100, they ain't gonna sell it for 50 regardless of what sawmills are doing(unless of course forced to with overstock and such).

cptskippy• 5 years ago

Oddly the good stuff wasn't much affected. I was making a work bench and picked up a 4x8 of red oak plywood for under $60 in May. Not what I would normally use but half the price.

rootusrootus3• 5 years ago

criminally wet throughout the last year too

That is not a recent thing. Home Depot wood has been dripping wet for many years. It's routine to put a screw into it and have water running past the head as you tighten it. I typically buy 50-100% more than I expect to use on the assumption that a good chunk of it will warp as it dries and become useless.

xienze• 5 years ago

The allegedly "kiln dried lumber" home depot has been selling has been criminally wet throughout the last year too.

Eh it’s always been that way. Warped and with plenty of knots too. It was considered poor quality back when a 2x4 cost $2.50.

gotorazor• 5 years ago

KD-HT is a pretty standardized, commodity product. I used to work at a lumber yard on their Heat Treat process. I am pretty sure that the lumber I see at Home Depot are the same lumber that I use to work on. It's not like they have their own mills and ovens. They buy the same commodity lumber like everyone else.

TBH, the lumber yard I worked at you to flood. We would have bundled stacks of lumber float all across the yard. We can pretty much take them the next day and ship them to a construction site. KD-HT lumber is pretty good like that.

Now, most of our large customers just have a reasonable expectation of the product. It's wood. It's gonna warp. It's gonna split. It's like most things like fresh fruits, or meat, or leather. There is a lot of variability.

dev_tty01• 5 years ago

Yeah, its a shame the article left off what is probably one of the biggest reasons for the price spike. Speculation. 4x price spikes in a relatively stable commodity aren't explained by simple supply/demand economic factors. The article is a couple of months old and we can now see the speculative bubble unwinding.

https://markets.businessinsider.com/commodities/lumber-price

Down 8% two days ago. Down over 50% from the peak. No doubt prices will remain above trend for a while, but 4X is just another case of speculative nonsense over-amplifying the realities.

themodelplumber4• 5 years ago

Just from a technical perspective, the 1Y chart on that page shows some real promise, for example higher highs and higher lows on multiple time scales.

I'm not terribly interested in lumber but if you want a good price, with that chart it seems like now may be a great time to buy given the current low. It may also be the last time at that price level for a while. (No promises, just what I'd speculate based on the chart)

Edit: To clarify, this comment is mostly registering my surprise. I see no cabal speculation activity, just a big invite for your neighbor to buy some for their active retirement fund at these levels. Think about that as another variable.

asdfasgasdgasdg3• 5 years ago

Is it speculation or is it hedging? We weren't speculating on toilet paper when it was massively out of supply early in the pandemic. Rather, there was a demand shock, and maybe a bit of a supply shock too. If TP's spot price had been meaningfully allowed to float, I have no doubt that it would have traded at 4x its long term average, even if you had factored in only consumer demand.

All that is to say I don't see compelling evidence here that speculation is the cause of the problem. I can as easily see more benign explanations.

kevin_thibedeau• 5 years ago

I'm keeping fingers crossed copper will fall back down. I was pricing out some heavy gauge wire last year for a project and passed because I wasn't ready to work on it. Now I'm kicking myself for not pulling the trigger.

ketamine__• 5 years ago

How does speculation drive the price of lumber up?

divbzero• 5 years ago

It’s fascinating how consistently the shortage and glut cycle plays out across a diverse range of commodities. The common elements seem to be an undifferentiated product and some delay in the production cycle. The length of shortage and glut depends on the length of delay, which is exacerbated if production depends on fixed assets that take a long time to build and a long time to wear down (e.g. ships).

humbleMouse• 5 years ago

This is old news, lumber futures are around 800 dollars now.

typon• 5 years ago

"old news"? That's still double the price compared to 2019

spamizbad• 5 years ago

They’re now at 775. They are still declining rapidly.

beebeepka• 5 years ago

"in the US"...

This habit if speaking as if one is the center of the universe is a bit tiring

syops2• 5 years ago

If a large enough percentage of users of a site are from a given country then isn’t it natural that those users will unconsciously make a corresponding assumption in their posts. This is especially so since for most Americans talk about neighboring countries is low.

dang4• 5 years ago

Last I checked, about 50% of HN readers were in the US, and of course many of those come from other countries originally.

dang4• 5 years ago

Please don't take HN threads on generic flamewar tangents, and definitely not nationalistic flamewar. That is even more tiring.

https://news.ycombinator.com/newsguidelines.html

kube-system2• 5 years ago

Lumber price soared globally as well, for the same reasons. COVID was a global thing, after all.

https://m.dw.com/en/demand-for-lumber-soars-in-germany-and-s...

That being said, as the article mentions, most lumber in North America is from Canada, not the US.

oblak• 5 years ago

I understand but the article is clearly written with the US in mind. In that sense, adding a few more letters, for context, would've been appreciated.

jbay808• 5 years ago

Yes, I can confirm that lumber prices in Canada went sky-high.

unnah• 5 years ago

Also, lumber is traded globally. US buyers have been importing more lumber from Europe during COVID than before. I guess that means that the demand has been higher in the US.

qwertox2• 5 years ago

The shortage isn't that much a result from the pandemic and people doing more DIY-projects, but because the US and China (and also Germany, if we talk about local wood) are building a lot of houses. China buys more wood from Germany now that Russia has set an export ban on wood. The only odd thing which I see is that the export ban is supposed to start in January 2022 [1] so I don't understand why China is already starting to buy more wood from Germany.

[1] https://www.margulesgroome.com/publications/russias-proposed...

kube-system2• 5 years ago

Those DIY projects, increase in home improvement, and increase in housing demand has been due to the changes in people's consumption patterns because of changes in people's work patterns due to the pandemic.

praptak• 5 years ago

Okay, people stay at home more, so they need more space, so there's demand for construction.

What about the spaces people used to occupy before covid moved them home? Does it drive demand for demolition?

cpach• 5 years ago

I guess people hope to return some day. To public libraries, pubs, restaurants, etc.

rantwasp3• 5 years ago

i wish this was a demand and supply thing but I am really afraid this is going to turn out to be inflation. And it’s actually all the prices that are going up - we’re just talking about wood because we have a good narrative around it.

treis• 5 years ago

Lumber prices have tripled for dimensional lumber. It's clearly a short term supply/demand thing and not an inflation thing.

Robotbeat2• 5 years ago

10 to 20% would be really high inflation but we’re talking about like 200 or 300% wood prices. Nah, even if we happen to have higher inflation than any other year in the last century, lumber prices will still fall a lot.

alkonaut• 5 years ago

Office rents will probably take a hit in the new normal but I’m guessing everyone now just waits to see what happens.

What’s clear is that many of us with two people who will work from home a lot the coming years have at least one room too few and are building extensions. My builder bought a $25k load of materials and left it on my lawn before summer for an extension they’ll build in August, because their supplier advertised that prices would increase 50% in July.

mcguire• 5 years ago

Weren't rents in SF falling drastically in the second half of 2020?

lmm• 5 years ago

No-one's really sure what will happen to office space (and even cafes/bars/etc. that relied on office workers for their clientele) after this. Anecdotally my employer has already closed what was previously their main building.

If we're permanently in a more work-from-home world then yes, we'll eventually see demand for remodelling and demolition of downtown offices, though only once the economy and population have picked up enough that there's demand to use the space for something - blighted buildings from the last recession sitting idle for years is a thing that happens. The suburban business parks I can imagine just decaying forever, like low-end out-of-town malls were doing pre-pandemic - there's no other use for them and the land just isn't valuable enough.

kevinthew• 5 years ago

Great summary and analysis. The context on the cracker shutdowns in February makes it all the more clear. This processing bottleneck has been playing out across the commodities sphere as the 2nd order impacts from COVID play out.

cube00• 5 years ago

It was sad to hear the larger construction companies using their buying power to purchase all available stock and store in their warehouses with no assigned jobs. They were pushing smaller construction companies to the wall when they couldn't access any stock for jobs they actually had on.

mathgladiator• 5 years ago

It's like the real-life monopoly game being played in real life. Buy up all the houses, don't upgrade them to hotels until you can buy them back.

sokoloff3• 5 years ago

If you are a construction company and anticipate a possible/likely disruption in one of your critical raw materials and have the funds to protect your business, what else would you do? It doesn’t sound predatory; rather it sounds eminently sensible.

SQueeeeeL• 5 years ago

Tragedy of the Commons is sensible. Businesses exist to maximize their own existence. Must suck to be one of those tiny firms lol

SavantIdiot• 5 years ago

"Because the storm occurred with very little warning, many factories weren’t able to shut down properly, resulting in polymers congealing and solidifying in the equipment"

Wow, I'm surprised there weren't back-up generators if power failure means machine destruction.

ttyprintk• 5 years ago

The backup systems relied on natural gas, which was cut off, and/or secondary electrical which was disabled by Texas regulators.

I also wonder if those backups didn’t anticipate having to run the machines as well as keeping ambient temperature up.

seaorg• 5 years ago

Take it from a guy who works in the industry. https://youtu.be/zCvEFXSYFS8

AtlasBarfed3• 5 years ago

When will empress tree farming start? it's vields are 2-4x the rate of other woods and supposedly is construction usable?

avhon1• 5 years ago

That seems unlikely in the U.S., since it's an invasive species that out-competes native trees.

https://www.invasivespeciesinfo.gov/terrestrial/plants/princ...

Robotbeat2• 5 years ago

How is that an argument against farms of it? Does Europe not grow maize because it’s a New World crop?

coryrc2• 5 years ago

It's weaker than SPF and would require engineering hours to substitute.

AtlasBarfed3• 5 years ago

https://www.worldtree.eco/empress-lumber/

It doesn't appear to be fundamentally weaker for many applications. If it's yields are 3-4x times what "SPF" is, then maybe use slightly larger boards in support roles?

I'm not associated with worldtree.eco, and obviously they are advertising a product, but I can't really find any more discussion on the pro/cons of empress tree wood production.

The invasiveness problem I heard was specific to a particular species of empress, there are empress species that don't spread so aggressively.

mothsonasloth• 5 years ago

I am in Scotland and we are struggling for all sorts of materials:

- PIR insulation

- Membranes (DPM, Roof membranes, Vapor check)

- External Cladding (red cedar, siberian larch)

- Concrete

I've had all range of excuses; Covid19, Brexit, Suez Canal and Americans are stealing lumber from Europe.

There are some lumber mills in the Highlands of Scotland that are shipping CLS and other framing timber straight to USA.

myself248• 5 years ago

Americans are stealing lumber from Europe

I'm picturing Carmen Sandiego putting a freighter full of lumber in her pocket...

jjav• 5 years ago

Any good source for a graph tracking lumber prices week to week at the retail shelf (as opposed to futures pricing which is easy to find)?

qwertox2• 5 years ago

Just today I was listening to a German podcast on this topic ("Warum Bauholz zurzeit knapp und teuer ist") [1]. Main explanation of it having become so expensive in Germany as well is the high demand in the US, China and in Germany itself. Russia has set an export ban on wood, so China is buying more from Germany.

Germany currently has a surplus of wood, yet the prices aren't low. Sawmills are the main benefactors of the current situation, they're processing wood like never before, also because last year a lot of trees were affected by beetles, fungi, storms and the like. So this lower quality wood (which is perfectly fine to use) has been mainly exported. 40% of the processed wood is exported.

Sawmills are buying the trees for cheap due to the surplus that the forest owners (around 96% of the owners own less than 20 ha) are saying that they're now considering to stop selling wood and wait for the fall or next year if they can handle it.

Then again, if they stop selling the wood, the state- or community-owned forest owners (around half of the German forests are privately owned, the other half by the state or communities) might not be able to to pay for the machinery and workers which usually work the entire year around. Also private owners have got together and share machinery and personell which needs to get payed during the entire year. So to some degree they are forced to continue cutting down trees to sell them.

[1] https://www.deutschlandfunk.de/probleme-der-baubranche-warum...

GeorgeTirebiter• 5 years ago

Why has wood gotten so expensive? It's not like this stuff grows on trees! Oh, wait....

RickJWagner• 5 years ago

I'm a wood working hobbyist.

I used to pay about $3 for an 8 foot 2x4 at the local big-box / lumber store. I looked this week -- $9 for the same lumber!

I'm going to wait for this to blow over before I build anything, I think.

aazaa• 5 years ago

The article is from May. A lot has happened since then.

This chart of lumber futures gives an idea of the recent past (zoom out 1-5 years for perspective):

<https://www.tradingview.com/chart/?symbol=CME%3ALBS1!>

In a nutshell: a huge advance and now what appears to be a crash (~ -50%) is currently in progress.

The bigger picture is how indicative this compressed boom-bust story is of the future of the surge in US inflation. Lumber is showing us how easy it is for the market to reject ridiculous prices. What's unclear is how low lumber, and other goods/commoditiies that have seen similar booms, can go.

Edit: this links seems to work better

https://www.tradingview.com/symbols/CME-LBS1%21/

dang4• 5 years ago

I added angle brackets around your first URL to make it work. I hope that's ok.

https://news.ycombinator.com/formatdoc

jrochkind1• 5 years ago

Is lumber already cheap to the consumer? Or you (and the futures markets!) are predicting it soon will be?

If the latter... what do the future markets currently say about expectations of when prices will be back down to what they were or lower?

Ie... when should I plan on building my deck?

gscott• 5 years ago

I know someone who picks up loads from sawmills and it turns out there was no lumber shortage. They were just holding back on shipments to drive up prices taking advantage of the inflation trend.

ur-whale• 5 years ago

Is this just a US thing or is it global?

cmrdporcupine• 5 years ago

global

RyanGoosling• 5 years ago

Guys, maybe you can help me. Should I buy a house in California in this market? Or will it all crash when the foreclosure ban ends at the end of July???

Johnny555• 5 years ago

Compounding these issues was the Texas Ice Storm in February, which knocked out roughly 80% of US polymer production. Because the storm occurred with very little warning, many factories weren’t able to shut down properly, resulting in polymers congealing and solidifying in the equipment.

I'm surprised it's not cost effective to have backup generators to power critical equipment long enough for a graceful shutdown if an ungraceful shutdown can keep a plant offline for a month or longer.

Why wood has gotten so dang expensive

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