Tuesday, 11 May 2021
Record Lumber Prices and the Impact on FSC
As we write this article, US lumber futures have hit their highest prices ever, with July 2021 futures on the Chicago Mercantile Exchange set at $1,541 per 1,000 board feet. As anyone trying to build or remodel a home or office knows, lumber prices have quadrupled over the past year. While this dramatic increase has been widely covered, we wanted to dig into its specific implications for the market for FSC-certified construction materials.
To get a sense of the market, we reached out separately to four committed, knowledgeable FSC suppliers: Amanda Vincent at RoyOMartin, Ryan Temple at Sustainable Northwest Wood, Claire Steadman at 84 Lumber, and Diane Haugen at Certified Wood Products. Following is a summary of their insights.
“Increasing prices, material shortages and freight issues are making it hard for anyone in the building industry right now, not just FSC,” cautioned Claire Steadman, “as prices continue to rise and material continues to be scarce.”
As for the drivers behind the rising prices, according to Amanda Vincent, “the current housing market, while unprecedented, is not unforeseen. The United States is currently 3.8 million housing starts short of what we need to fill the market. Now, millennials are buying, remote workers are migrating, and boomers are seeking retirement homes. We are simply playing catch-up for the last decade of pent-up demand that was exacerbated by the pandemic.”
With the potential for a massive investment in infrastructure on the horizon, demand is expected to remain strong. “Roads, bridges, trains, and buses all require wood products, with FSC plyform panels and mariner plywood panels being the most used wood products for those jobs,” Vincent added.
But what about the price of FSC-certified products relative to uncertified alternatives? According to Ryan Temple, “for a variety of reasons, escalating lumber prices have tended to reduce the percent premium typical when upgrading to an FSC product. As a result, we have seen the interest in FSC somewhat increase in the current market.” But that said, “as the cost of a lumber packet has sky-rocketed, the appetite for even a very small premium may not be enough to persuade one to purchase FSC when the overall project is already significantly over-budget.”
From Diane Haugen’s perspective, however, “we are experiencing an increase in the demand for FSC-certified forest products! We feel this is because corporations, government, health care, higher education, community and civic organizations are serious about executing on their sustainability initiatives for environmental impact, social and economic responsibility and climate change mitigation.”
With futures markets in record territory, it’s likely prices will continue to increase. On this point, our experts agree. For example, Claire Steadman notes, “all reports suggest that this will continue. If you need the material and it’s available, my suggestion would be to buy now but only what you need.”
Ryan Temple echoed this point: “my general message has been to not expect large price drops any time soon and drops to pre-pandemic pricing are not in the foreseeable future.”
To increase sales of FSC-certified products, Diane Haugen highlighted that “Certified Wood Products makes FSC-certified forest products more competitive by purchasing rail cars and truckloads direct from the mills, most of whom we have a long-standing relationship with. We also break units for our customers, so they do not have to buy more than they need.”
Ryan Temple indicated that “Hardwoods and finish materials have not seen the same level of price increases as softwood plywood and framing lumber” and that “There is a specific opportunity to increase competitiveness in FSC structural items. If a distributor is willing to reduce their gross margin for FSC in this market, this creates an opportunity for customer acquisition.”
Amanda Vincent offered a word of caution: “In this competitive market, we will see an influx of imports that do not meet US standards, are not third party certified, and that will not be warrantied.”
The bottom line appears to be that while a four-fold increase in lumber prices does not indicate a systemic benefit for the FSC system, there are specific products and markets that present strong opportunities for FSC certificate holders and retailers. With demand expected to remain high, these opportunities are likely to persist and even perhaps increase in the months ahead.