Demand at new and unforeseen levels
Stay-at-home orders and travel restrictions have kept Canadians at home, with an unspent travel budget. Restaurants and entertainment outlets being closed meant that people were spending more time at home. It was the perfect storm, as these trends converged and many people started renovation projects, both indoors and out, and demand for construction materials soared.
Housing starts also mushroomed in suburban and outlying areas, as working remotely became a more widespread practice, and commuting distance became less of a limiting factor.
At the same time, in order to stimulate a pandemic-slowed economy, governments, including the Québec government, ramped up infrastructure projects, driving demand even higher.
With demand suddenly so strong, supply was never able to catch up to demand, which had increased exponentially in all construction material categories. “We quickly saw shortages and empty shelves and bins at many home renovation centres across the country” explains Harold Sheepwash, executive vice-president at Trans Canada Forest Products.
Limited supply
In parts of the country, Covid outbreaks forced temporary mill shutdowns, and new public health rules limited the number of employees in the mills, causing a reduction in production figures, reducing supply at a critical point in time.
With supply chains depleting at record levels, and production slowed by the pandemic and unable to respond to the increase in demand, the inevitable result was a sharp increase in prices.
A market out of balance
Even though the pandemic continues to affect everyone’s lives in unforeseen ways, and high prices create a level of uncertainty in the lumber markets, demand remains high, and with it, the expectation that prices will also hold at current high levels, if not continue to increase.
“In my entire career, I have never seen forest products prices at such high levels.” Says Mr. Sheepwash. “Even commodity items have more than doubled in price, and we don’t expect them to soften in the short term.” With producers struggling to meet demand, and quoted deliveries several weeks, if not months out, regardless of the current strength of the market, “buyers are hesitant to take a strong buying position, even if they could, just in fear of the day that prices start to drop back to normal levels, if they can even be called that. This is completely uncharted territory, and nobody knows how to navigate it. As a result, everyone is at risk of running out of stock.”
He finishes by saying “I think we have to expect prices to remain high this year, and even to rise to new levels as the spring construction and renovation season generates even higher demand.”
