Both plywood and lumber have gone up and down over the years, but 2020 and 2021 have seen consistent high prices, and for lumber, those prices haven’t been seen in the past 25 years. Not only is lumber expensive, but it’s becoming difficult to find for both commercial builders and DIYers.
Over the past ten years, lumber has sat around $300–$400 per 1000 board feet, but in 2020 it jumped to $940, and in 2021 we saw that price rise to $1561, and while there have been a few brief dips in certain months the price has stayed well above $500 consistently.
Why Are Plywood and Lumber So Expensive?
During the pandemic, people have been building homes, adding extensions to their houses, and working on a huge variety of DIY projects, all in huge numbers that simply hadn’t been seen before the pandemic. It’s a case of the demand skyrocketing and the supply not keeping up.
Wood production is actually at a 13-year high; prices are through the roof for wood, but new house construction hit a 14 year high in March 2020, and while it’s dropped off slightly in 2021, it’s still at higher levels than before the pandemic. Unfortunately, wood mills can’t keep up with the demand, and they’ve had almost two years to figure it out.
The expectation was that people would slow down, save money, and not buy and sell houses. However, the opposite has happened with almost every city continuing with building and renovating homes, with sales of new houses happening almost immediately in some places.
People are working from home, which means more time and bigger requirements from their home that they’re now doubling their time at if they haven’t returned to the office and won’t be returning any time soon.
Why Else Are Plywood and Lumber So Expensive?
Major markets like China are demanding more wood, and it’s projected to increase by 5% every year until at least 2025. As a result, US mills are selling wood to China that would have previously gone to US buyers, that wood will be made into furniture and flooring to sell back to the US and other countries.
The US imports around 30% of its wood to meet demands, much of that has historically come from Canada, but due to the mountain pine bug issues in British Columbia, the supply is less than previously, so more expensive imports from Europe are being used, which adds to the already high price.
Early in the pandemic, lumber mills shut down and stopped producing due to infection concerns; there wasn’t any thought that lumber would be heavily required, but that wasn’t the case, and inventory was taken up by home builders and DIYers buying up supply from Home Depot, Lowes, and others, because the lumber mills were closed a supply issue was created. There has been no room to build up inventory, so any delay or stoppage causes major supply issues now.
As supply is currently limited, many larger companies are buying as much lumber and plywood as they can and storing it for future use, especially with the assumption that prices could go even higher. With increased buying from larger consumers, the supply issue gets even worse, and prices continue to go up while lumber may be sitting around waiting for use.
Historical Issues with Saw Mills
After the Great Recession of 2008, sawmills started to go out of business, and more than 30 large mills were closed, which severely hampered the US’s ability to produce lumber in large quantities. Unfortunately, they can’t currently be reopened because there is a labor shortage, and there just aren’t enough staff to get the sawmills opened back up.
What Is Being Done About The Plywood and Lumber Shortage?
Major lumber companies are investing in new sawmills in new locations, including the US south with an ample supply of Southern yellow pine. Historically most lumber in the US has come from the Pacific Northwest, including Canada, but the demand is pushing companies to new locations.
Unfortunately, it will take some time before these new sawmills are operational, so this isn’t a short-term fix for the current supply problem driving prices so high. In the meantime, existing sawmills are boosting production and trying to expand to process even more lumber, but labor shortages may be a limiting factor.
The National Homebuilders Association is also currently lobbying the US government to remove tariffs on imported wood, which adds additional costs to lumber that just increases the prices. Unfortunately, efforts have so far not been met with success.
Plywood and Lumber Price Increase Comparisons
Plywood is still doing reasonably well in price; though it spiked in 2020, it’s started to correct already, with demand falling for it.
On the other hand, Lumber has been skyrocketing in price and is the more significant concern going forward.
|Dec 2021||Dec 2020||Dec 2019||Dec 2018||Dec 2017||Dec 2016|
|Lumber Price US per 1000 board feet||1,069.30||884.4||413.3||333||431.9||317.3|
|Plywood Price US cents per sheet||479.01||526.16||500.37||486.85||483.53||470.33|
Will Plywood and Lumber Prices Drop?
It’s unlikely that plywood or lumber prices will drop back to pre-pandemic prices in the short term due to continued demand for new housing, keeping inventory low, and with no real solution available to increase supply quickly. So the prices may go down, but experts predict it will sit above $600 per 1000 board feet for some time.
Right now, the options to increase supply are waiting for the larger wood companies to open new sawmills that will increase supply, but that is years away, and there may still be issues with workers that can or want to work in a mill as risks are high and wages generally low. The hope would be that these new sawmills are as automated as possible.
With the National Homebuilders Association trying to get tariffs removed on imported wood not being successful, that will not be a good option either; in fact, the US government is looking to increase tariffs on imported timber, making it even more expensive.
Overall, there are no good options to increase supply enough to meet demand and build back up wood reserves, so prices will be high long-term and may never recover once they’re set higher.
Benjamin is a certified financial advisor, with over 10 years of experience in the industry. He is knowledgeable about various business and financial topics, such as retirement planning and investment management. Ben has been recognized for his work in the financial planning industry. He has also been featured in various publications.