Are we as an industry taking on too many risks?

In today’s climate, prices for raw materials are changing daily. The inventories most suppliers have on the ground are still at the highest cost ever seen. In order to sell these inventories on hand, they will either have to maintain a high cost to the consumer, take a loss, or buy several times the current inventory value on hand to try and average their cost down to a point that meets the market’s perception of today’s material cost. Many lumber yards nationwide have bought substantially at or near peak pricing as both fears of continual increases settled in and demand for housing continued to rise. The amount and value of the inventory in these yards today are astounding. The quantity too value of this inventory can be as much as 3 to 4 times less as the same value had in January of 2020. Because of this extreme inventory value among all materials in our industry, it will take a significant amount of time to see the decreased pricing we are beginning to see on random length print land on any job sites. We are expecting these lumber yards who bought heavily at the peak to begin to buy heavily again to average down their cost of goods. Depending on how heavily they buy and what supply looks like at that time, we could see prices rise yet again pushing the hope of normalized pricing from months to years out. Because of this uncertainty, pricing jobs at all levels of the construction supply chain from nails to the finished homes has become a gamble.

Demand for Lumber
Demand for lumber has skyrocketed during the pandemic, sending prices to all-time highs. This video explains what is driving the lumber boom, who is profiting and why those growing the trees aren’t reaping the benefits. Illustration: Liz Ornitz/WSJ