Three Reasons Why Lumber Costs are Increasing
Since the start of the Covid-19 pandemic in 2020, lumber prices have skyrocketed by over 300%. Needless to say, this surge in lumber costs are having a consequential impact on renovation budgets and new home prices alike. Builders are having to slap individual customers with hefty surcharges and delays.
Who or what is to blame?
Many people have mistakenly blamed this increase solely on Covid-19 and even on an alleged greed on the part of the lumber industry. But is this really the case?
Since the spike in lumber costs have directly affected our clients, we’ve looked into the core issues driving the price hikes. We’ve dug deep down into the truth of what is really happening and came up with three main stresses that could explain the bulk of the increases:
1. Global warming
Yes, it’s a happening!
In the past 20 years, global warming has wreaked havoc on many commodities, especially lumber. And it’s only now catching up to us.
The effects of global warming have devastated many forests in North America and the world. In a report just released by Global Forest Watch, the Earth saw nearly 100,000 square miles of lost tree cover last year — an area roughly the size of Colorado. The change represents nearly 7% more trees lost than in 2019. The forests of the tropics, often called “the lungs of the Earth”— that store huge amounts of carbon, shrunk by 16,000 square miles just last year, a whopping 12% increase from the previous year.
From clear cutting, to forest fires, to an increase in pests that ravage trees, the effects of global warming and climate change on forests and ultimately lumber, are many-fold and increasingly relentless.
Forest fires and lumber prices are both on the rise
Global warming coupled with human negligence have sparked massive forest fires that have devastated hundreds of thousands of hectares of valuable trees. This devastation has had a major impact on the availability of lumber as a commodity. Plus, the loss of the carbon-absorbing powers of forests and the release of all of their stored carbon in fires, has in turn, contributed to more global warming.
According to the latest research, more fierce and frequent fires are reducing the worlds’ forest density and tree size and damaging the ability of forests to capture carbon in the future.
Pests that attack trees are also on the rise
In North America, global warming has also allowed various species of beetles to thrive and destroy trees. In Ontario and British Columbia alone, beetles such as the Emerald Ash Borer Beetle, have devastated thousands of trees. Also Dendroctonus ponderosae: the mountain pine beetle, has been wiping out pine trees not only in Canada but also in many Northern American forest ranges.
The beetles have been in forests for decades, but they’re usually kept in check by cold winters, said Kevin Mason, managing director of ERA Forest Products Research, a Montreal-based research company. Just these two types of beetles alone are responsible for forest devastation for decades. Because there is limited regrowth and the sustainability of lumber has been diminishing dramatically, this has resulted in a decreasing supply of available lumber.
In the late 1990s, the beetles started to live longer and reproduce quicker—an outcome, scientists believe, of a warming climate. They swarmed through the pines of British Columbia, attacking more than 44 million acres of forest, an area four times the size of Switzerland. “You could go up in an airplane above British Columbia and see the damage,” Mason said. “I’m a little color-blind, but others could see it better than me. The dead pines had a red tinge to them, so you could fly an hour and just see this red kill.”
2. The Covid-19 pandemic
The Covid-19 Pandemic has brought on its own set of challenges in the lumber industry. With the rapid spread of the virus, especially in the United States where most of the lumber processing plants and saw mills are located, lockdowns have forced many lumber processors to temporarily or permanently close their doors due to the exposure of the virus. This has compounded the shortage of lumber we have faced throughout the past years.
To compound the situation, rail companies such as CN have seen temporary lay-offs of employees which has put an additional strain on the supply chain by limiting the availability of transportation of materials.
With the pandemic forcing many people to work from home, more and more people have had an increase in disposable income which has allowed the renovation and home improvement industry to boom. This too has put a strain on lumber prices as the demand has surged and there isn’t enough materials available. Furthermore, the pandemic has pushed people into making the decision to sell their homes and move to the suburbs and cottage country where there has been a surge in building permits throughout the past year, further pushing the lumber shortage.
New home builders have also seen an increase in sales — also putting a strain on the demand for lumber. Not only has all of these combined forces force the construction industry to to increase their fees, but the situation has also created a delay in construction completion because of a lack of materials.
3. Stumpage fees
In Canada, a stumpage fee is a form of tax levied on individuals or businesses when they cut down trees on Crown land. For every tree cut down, provinces charge a fee. For example, in Alberta alone, this stumpage fee doubled this past year from $36.56 to over $67.00. This increase in one province alone may not seem like a lot, but when multiplied by the thousands of trees cut down annually, this results in millions of dollars in stumpage fees that inevitably get passed down to the end users, the homeowners.
In late December 0f 2020, RBC has indicated that lumber prices will not only remain high but continue to in crease into 2021 and beyond. The lumber crisis will likely continue to persist well into 2022 and beyond.
How this all impacts you and what you should do
As the lumber shortage and demand continues to increase with no sign in the future of a correction, homeowners need to re-evaluate their budget for their renovation projects.
As an example, last summer we built a 400 square foot deck, with lumber costs alone being just over $12,500 dollars. This same project today would cost over $31,700 just in lumber alone! Already in 2021 we have seen a lumber increase of 12% compared to December of last year.
Does this mean you should hold off on your projects and wait for lumber prices to drop?
The unfortunate answer is no. The longer you wait, the more the costs will increase and put a greater strain on your budget and plans. Keep in mind that as much as lumber is the single biggest cost of any construction project, other materials are also on the rise such as concrete and structural fasteners. So, the sooner you start your project, the better. If you’re lucky, your construction team will have the experience and know-how to mitigate the increase in raw materials as much as possible.
Need help with your next cottage renovation?
Titan Renovations North is a full-service, family-owned general contracting business. We offer a full range of cottage contracting services to optimally maintain and improve your cottage.
From cottage renovations, to building a new deck or dock, to building a new cottage, we have the expertise to make your cottage dreams a reality.
Being Baeumler Approved, and fully insured, our company provides work that meets or exceeds Ontario Building Code standards.
Contact us today for a free consultation.
