COVID-19, Lumber, and Economics 101 – The Love Triangle No One Saw Coming

June 10, 2021

Over the coming months, we urge our customers to plan ahead with lumber lead times and pricing.

Volatile Lumber Prices

The volatility of lumber prices seem to have always been a big grey area for many. With the pandemic being so prevalent the past few years, we now have a great example as to why the prices of lumber can change in the blink of an eye. Here at G.E. Frisco, we are striving to educate our customers and keep them up to date on everything lumber! With these efforts in mind, we thought we would use these past couple of years as a way to help explain the lumber market to those within the construction industry, and anyone else who may be interested in learning something new!

Lumber is a Commodity

Many don’t know that lumber is a commodity, similar to corn, oil, or even crabs (for our fellow Marylanders). Pricing is directly affected by the supply and demand of the product. This means that the pricing of lumber increases and decreases based on how much lumber is available to ship and how much the market demands. For example, if lumber mills decrease production intentionally or mills are shut down, supply decreases. If the market demand for lumber has increased at the same time, as we saw in past months with a strong housing market, a relatively mild winter, and a strong spring season, then lumber prices will increase. The opposite is of course true as well. The larger the imbalance, the more rapidly prices will move.

The Role of COVID-19 on Lumber

Now comes the big question. “How can something like COVID-19 alter the supply and demand of lumber”? Well in terms of supply, COVID-19 has directly affected lumber mills. Some mills have had to shut down due to outbreaks or decreased their shifts/staff, thinking that demand would decrease as well. This means that they were producing less lumber, in turn reducing the total supply.

On the other hand, COVID caused an unexpected spike in the demand for lumber. As people were at home more and had more disposable income, home projects such as decks, fences, and renovations/additions increased. With more people buying lumber during a period where lumber production was low, the prices had gone up rapidly to all-time highs.

This large imbalance was initially seen during the summer months of 2020, but supply and demand started to equilibrate in September and October for a short period of time as dealers slowed down purchasing due to high prices and expected seasonality. This did not last long, however, and in December we started to see a rapid rise in prices again, which continued on throughout the spring 2021 season.

Since Summer 2021, prices dropped rapidly and we started to see more normalized pricing, but many factors are still at play to drive rapid and volatile price changes. COVID has disrupted supply chains across all types of industries but it should be noted that COVID is not the only factor that has caused production issues. While it is a major lingering factor, natural disasters, weather, labor, and trade issues continue to cause problems. Additionally, in 2008 and 2009, 15-20% of all mills shut down and were never brought back online. All of these factors have continued to create large imbalances in supply and demand that are causing rapid price movements. We are doing everything we can to ensure that our customers are taken care of as well as fully informed regarding the situation. We are hopeful that there will continue to be more normalcy, but we believe that volatile pricing will be here for a while.

Plan Ahead

Over the coming months, we urge our customers to plan ahead both from a lead time and pricing standpoint. Our team is standing by to make sure our customers are updated and informed. We hope that this was helpful and useful to shed light on the current market. If you have any further questions please feel free to contact us at info@gefrisco.com or call 301-249-5100 and speak to anyone in our sales department.

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