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What Saw Mills Experienced During Lumber Price Spikes and Why

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Building Materials

What Saw Mills Experienced During Lumber Price Spikes and Why


August 2, 2021
saw mill
Photo: Grecaud Paul | stock.adobe.com

Remodeling, DIY, and home building demand pushed lumber prices to new heights this past year, and it might make sense to believe lumber mills greatly benefitted, but is that the case? Housing, timber, and raw material reporter Ryan Dezember from the Wall Street Journal tells Georgia Public Broadcasting no. Home building slowed greatly the past 10 years as a result of the Great Recession, leaving an incredible amount of pine on the table during those years. When building demand slowed, the price of widely available logs dropped. Now, the supply chain has reached a pinch point at the mills, says Dezember, because the number of mills in the US has shrunk over time, giving the pricing power back to the mills. 

Steve Fennessy: What was the situation going into the beginning of the pandemic and how did the industry imagine what was going to happen, and what actually did happen?

Ryan Dezember: Before the pandemic — most of us have trouble imagining what it was like — it looked like the housing market was finally coming back. Well, then all of a sudden, here comes COVID-19. Everything shuts down. A sawmill is not a work-from-home type of business, right? You have to be there, so to speak. And they had to shut down just like all the other businesses. It was a great period of uncertainty. And one thing that a lot of people felt certain about was that Americans weren't going to be rushing out and buying new homes. And then the opposite happened. People did go out and buy homes. A lot of people were looking around in their apartment buildings and cities saying, “You know, maybe I don't want to share a building with a bunch of other people, if there's a pandemic. Maybe if I'm going to work from home, I want to have a home office and a yard for the kids to play in and somewhere for the kids to have their home schooling.” You have people stuck at home who are like, “You know what? Let's finally build that deck. Let's redo the kitchen.” And they're running out to Home Depot and buying wood. And then you have all these restaurants and cities across the country that are doing something that they had never done before, which is build decks and patios en masse. And the sawmills and the whole supply chain were not prepared for that. And that was a tremendous shock of demand. The mills have had this very unexpected and very sharp surge in demand for for wood products during the pandemic. No one saw that coming. No one in the industry. Homebuilders didn't see it. Lowe's and Home Depot didn't see it, but it happened and it sent the price on just a crazy arc this year.

Steve Fennessy: How high were they getting compared to historical averages?

Read More
 

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