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While construction remains a bright spot for the U.S. economy during the pandemic, soaring costs and shortages of materials are creating havoc for companies across the country. This is especially true of lumber.

LMC Construction Vice President Kyle Anderson said he’d seen a 40 percent increase in material prices over the past couple of months. For one recent $2 million project in North Portland, he said, from the time the contract was awarded to the time of procurement, the cost of materials jumped to $430,000.

鈥淲e’ve dealt with material inflation and supply shortages before, but nothing like this 鈥� this drastic in a short period of time,鈥� he said. 鈥淚’m hearing that message pretty consistently with subcontractors and with wood suppliers.鈥�

Idaho Pacific Lumber Company, a leading supplier for multifamily construction, routinely releases market reports. In the Pacific Northwest, the cost of 4-by-8 sheets of 15/32 Oriented Strand Board (OSB) has risen from $395 per 1,000 board feet (MBF) last year to $1,550, said Scott Sunday, vice president of purchasing and sales for Idaho Pacific Lumber.

鈥淟umber has more than doubled in price, panels quadrupled, and OSB quadrupled,鈥� he said.

Project teams across the country are stopping work, Sunday said, because they can’t find the materials they need. Items ranging from metal fasteners to dishwashers are becoming scarce. But nothing is causing more concern than lumber.

Just before talking with the 91视频, Walsh Construction senior project manager Ed Sloop had spoken with someone about how to deal with lumber 鈥� it was his fourth call of the week on the subject.

Sloop, Walsh Construction’s chief estimator, has been watching the market particularly close for the past several months trying to determine the best time to buy materials or, more frequently, how to account for a project’s cost with escalating prices.

鈥淚t’s just gone crazy,鈥� he said of lumber. 鈥淭hat is the single biggest impact to us.鈥�

How did we get here?

The Associated General Contractors of America last month released a survey on the impacts of COVID-19 on the construction industry. Results showed that backlogs and shutdowns at factories, mills and fabrication facilities 鈥� both domestically and internationally 鈥� are causing the majority of the supply issues.

While many manufacturing facilities and mills responded to the pandemic like a recession was imminent, Sunday said, builders for the most part did not. There was a slight pause early on, but then construction was deemed an essential business and work picked up again. This led to pent-up demand for materials such as lumber, Sunday said.

Even after factories and mills resumed operations, COVID-19 case counts led to some pausing again. Suppliers couldn’t catch up.

At the same time, the single-family market started booming 鈥� and the home improvement market ramped up. Even greater pressure was placed on supply.

Historically, single-housing construction has significantly impacted supply of lumber. But in 2006, the market fell off a cliff. According to Trading Economics, housing starts dropped from a little over 2.1 million in 2006 to under 750,000 in 2008 鈥� an approximately 65 percent drop.

But single-family construction has since recovered slowly, and that trend became even more apparent entering 2020, Sunday said.

Then COVID-19 arrived. The pandemic shocked producers, but not builders. Demand for lumber failed to wane.

It wasn’t always that way, said Steve 鈥淭iny鈥� Morlock, a counter crew leader for Milwaukie Lumber Co. who has been in the industry 30 years. In 2007-08, he said, there was a glut of lumber and not enough demand, which led to a number of mills closing down.

Now those mills that remain can’t produce enough.

鈥淭he single-housing market combined with certain factories or mills being affected by COVID shutdowns 鈥� Those two items together combined then created a perfect storm,鈥� Anderson said.

Then in late summer 2020, the lumber supply caught fire 鈥� literally.

Disastrous consequences

In a letter to Idaho Pacific Lumber customers in mid-March, Sunday wrote: 鈥淚n regard to lumber, the results of the 2020 forest fires last September in the western United States had a (devastating) effect on the industry. It was reported the Oregon alone lost 15 billion board feet of timber, enough to build a million homes. The amount of logging equipment lost in these fires is in the hundreds of millions of dollars.鈥�

The loss of that amount of lumber 鈥� as well as equipment 鈥� due to the fires has been 鈥渃atastrophic to the lumber market,鈥� Sunday said. It 鈥渁ll added to this terrible situation that we’re in and being so undersupplied.鈥�

While the coronavirus has disrupted job sites, the volatility of the lumber market could have a more devastating effect, Sunday said.

鈥�(It’s as) bad as it could possibly get,鈥� he said. 鈥淚f we get another fire season, it’ll truly cripple the industry.鈥�

LMC Construction in the past could procure lumber for projects in two to three weeks, Anderson said. Now it’s closer to six to eight weeks, he said, adding that he’s definitely worried about the schedule for any project getting out of the ground and heading toward framing.

Walsh’s Sloop has similar concerns.

鈥淲hen you’ve been told, 鈥楬ey you can’t have doors until after you’re supposed to have occupancy,’ that’s a problem,鈥� he said.

Project start and end times are all daisy-chained, Sloop added, and at some point, subcontractors will have to send their people to the next job. Unfortunately, delayed deliveries of materials could lead some contractors to turn to weekends to get work done on time, he said.

Where are we headed?

Both Sunday, who has 36 years in the industry, and Anderson, who has 24, said they’ve never seen lumber market volatility like what is happening now. And change might not come for some time.

鈥淲e’re expecting the remainder of 2021 to be turbulent on that front (lumber),鈥� Anderson said. 鈥淗aving any kind of shutdown on already 鈥� a strained market is going to make things worse.鈥�

For the lumber market to normalize, it needs either a substantial infusion of supply (unlikely anytime soon, according to Sunday) or a decrease in demand 鈥� perhaps because of projects being put on hold.

Delaying projects would be a dangerous game to play, especially amid market volatility, Anderson said. He would prefer to see project teams simply account for cost increases.

Meanwhile, as COVID-19 vaccinations take place and mill shutdowns cease, supply might be able to catch up.

Morlock, of Milwaukie Lumber Co., said he’s seen logs at mills waiting to be processed. However, he added that even if operators were to work 24 hours a day, only so many logs can be processed at a time.

鈥淚 think we’re going to be in this kind of pricing into 2022 and maybe well into 2022 before seeing any type of release,鈥� Sunday said.