US authorities move to double tariffs on Canadian lumber despite a meteoric rise in prices and demand

British Columbia Lumber
  • The US Commerce Department recommended a doubling of tariffs on Canadian softwood lumber last Friday.
  • The move comes despite lumber prices being up more than 275% since April of last year.
  • “The White House does not care about the plight of American home buyers and renters,” National Association of Home Builders chairman Chuck Fowke said.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The US Commerce Department recommended a more than doubling of the tariffs on Canadian lumber last Friday despite a meteoric rise in prices and demand for the commodity.

Specifically, the department recommended the “all others” preliminary countervailing and anti-dumping rate move to 18.32% from 8.99%.

The proposed rates are subject to further review over the next six months before final duties are set sometime in November.

Former President Donald Trump’s administration imposed a similar 20% tariff on Canadian softwood in 2018, but lowered it to around 9% late last year after a decision favoring Canada by the World Trade Organization.

The move to increase tariffs on Canadian lumber suppliers comes as lumber prices have risen over 275% since last April alone. Canada’s share of the US lumber market sits at around 25% as well, according to the Wall Street Journal.

On May 22, National Association of Home Builders chairman Chuck Fowke released a statement criticizing the move to increase tariffs.

“At a time when soaring lumber prices have added nearly $36,000 to the price of a new home and priced millions of middle-class households out of the housing market, the Biden administration’s preliminary finding on Friday to double the tariffs on Canadian lumber shipments into the U.S. shows the White House does not care about the plight of American home buyers and renters who have been forced to pay much higher costs for housing,” Fowke wrote.

“The administration should be ashamed for casting its lot with special interest groups and abandoning the interests of the American people,” he added.

Canadian authorities also rebuked the newly proposed tariffs.

“US duties on Canadian softwood lumber products are a tax on the American people. They make housing less affordable for Americans and hinder economic recovery from the COVID-19 pandemic,” said Mary Ng, a Canadian MP and the minister of Small Business, Export Promotion, and International Trade.

“We will keep challenging these unwarranted and damaging duties through all available avenues. We remain confident that a negotiated solution to this long-standing trade issue is not only possible, but in the best interest of both our countries,” she added.

On the other hand, US timber producers applauded the new tariffs on Canadian companies. Jason Brochu, the US Lumber Coalition co-chair, said the Commerce Department’s decision represents a move to create a level playing field in the industry.

“A level playing field is a critical element for continued investment and growth for U.S. lumber manufacturing to meet strong building demand to build more American homes,” Brochu said in a statement.

“More lumber being manufactured in America to meet domestic demand is a direct result of the trade enforcement, and we strongly urge the Administration to continue this enforcement,” he added.

Insider spoke with Stinson Dean, the founder of Deacon Lumber Company, about differing perspectives from experts regarding the newly proposed tariffs.

Dean said he doesn’t know how the new tariffs will impact prices, but said that last time a tariff increase was announced, prices skyrocketed, although from much a lower base.

However, Dean also said the “tariff should be judged on its merits and not a kneejerk reaction to the current market,” noting that scarcity of supply is the main issue when increasing tariffs, not pricing.

“In my mind, any tax on Canadian lumber incentivizes them to look sell to other markets. The US needs all the supply it can get-and buyers will clearly pay for it-but if it doesn’t exist, it brings construction to a halt. Scarcity is the problem, not price,” Dean said.

Dean recommended a “ceasefire” from tariffs for the next 12 months to give both sides time to lock in a long-term agreement because the industry needs “all the supply in the world pointed at the US.”

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It might be the worst time to remodel your house. Experts say customers can expect months of delays.

home buying
  • Home-improvement projects are being set back by months due to shipping delays and shortages.
  • The home-buying and remodeling boom has companies struggling to keep up with demand.
  • Skyrocketing lumber prices are also making projects increasingly expensive.
  • See more stories on Insider’s business page.

The pandemic caused a surge in home-improvement projects at the worst possible time and many companies are still struggling to keep up with backlogs of projects.

Over 44% of home improvement plans in the US have been delayed due to supply shortages and skyrocketing material costs, according to data from market research firm, Cardify.ai, a company that uses transactional data to generate reports on consumer spending.

Steve Cunningham the CEO of Cunningham Contracting and the chair of the National Association of Home Builders’ (NAHB) Remodelers Council said his projects are being delayed by months due to the limited availability of materials, as well as laborers. Data from the NAHB Remodeling Market Index indicates that, on average, home improvement projects are facing 1-2 months of delays.

Home construction
A red-hot real estate market has kickstarted new home construction, but builders face a shortage in lumber.

“A lot of remodelers have more business in front of them than they can service,” NAHB Chief Economist Robert Dietz told Insider.

John Bitely, the president of Sable Homes, a home-building company based out of Rockford, Michigan, told Insider that in 30 years of business he’s never seen such demand.

“We usually build houses to sell them,” Bitely said. “We have virtually none of those available right now because all of our labor and production is fully absorbed with creating pre-sold homes. Every home we’re making is already sold because people are chomping at the bit for these new homes and we can’t build our way out of it.”

Not only are home-improvement projects lagging due to spikes in demand, new homes have also become an incredibly hot market. Last month, mortgage giant Freddie Mac reported that there is a shortage of nearly 4 million homes in the US.

Government agencies are backed up

Bitely said Sable Homes faces delays from the very beginning of a project, as government agencies have been slow to give out the necessary home-building permits, adding at least two weeks to the waiting process.

He attributes the delay to the sheer amount of permits government agencies are rushing to approve as home-building demand continues to increase.

Josh Wiener, the founder of home-improvement firm Silver Lining Inc, told Insider it’s been difficult to get projects approved due to the COVID-19 regulations in New York City.

Once a project starts it can get stuck midway through

Supply shortages have been unpredictable in recent months. Cunningham told Insider he’s had projects where a kitchen remodel has been held up by the availability of the dishwasher model or refrigerator. Contractors currently expect to wait an extra 3-4 weeks for appliances to be delivered due to shipping delays and the global computer chip shortage, Cunningham said.

There have been times when Sable Homes has been forced to pivot from one project to another, as contractors wait on vinyl siding or plumbing pipes. Bitely said the company tries to compensate by ordering products well ahead of schedule, but they never quite know what products will be in short supply.

“The biggest problem is the shortage is random so it’s very difficult to fix or nail down,” Bitely told Insider. “Because it’s impacting nearly every facet of the supply chain, it will be difficult to make it go away.”

GettyImages 1214261483

While kitchen appliances have been heavily impacted by the global semiconductor chip shortage, other products like paint and vinyl siding are also in short supply due to the Texas freeze. Though, Dietz says the skyrocketing lumber prices are one of the biggest hurdles home-building and improvement companies are struggling to overcome.

“Lumber is a big component of any home project,” Dietz said. “It’s adding about $36,000 to new single family homes and it’s driving remodeling prices higher.”

Home-improvement projects are sure to be more expensive

It’s difficult to predict how much a project will cost.

Cunningham told Insider that his company has an escalation clause in their contract that the material costs may be subject to change. Bitely said he sees prices fluctuate every few weeks.

“As a company, there’s nothing we can do but pass those prices through to the customer,” Bitely said. “We set up the expectation early on that prices are changing and the project may be subject to delays and for the most part customers are not deterred.”

lowe's remodeling
A Lowe’s employee stocks lumber inside the home improvement store in New York.

Other companies have been forced to eat the rising material costs without an escalation clause in their contracts. Wiener said his company has been forced to pay for 100% of costs that are outside of the initial budget. He said Silver Lining has been lucky in that as a bigger firm they have been able to overcome the cost hurdles, while smaller firms might be forced out of business.

Despite delays and rising costs, demand shows no signs of dampening

“Right now, most clients are still going through with buying because they’re desperate for house. They have no other choice,” Bitely said.

Home-building and improvement delays and price spikes are not expected to abate anytime soon. On Thursday, Kyle Little, chief operating officer of Sherwood Lumber, told CNBC he expects elevated lumber prices to continue into the “foreseeable future.”

“It’s really imperative that policymakers improve these supply chains,” Dietz told Insider. “Lumber affordability is key to housing affordability.”

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Lumber prices fall for an 8th straight day, deepening a roughly 30% pullback

lumber and building materials store

Lumber prices fell for an eighth straight day on Wednesday, deepening a roughly 30% pullback in the commodity.

Specifically, lumber futures fell roughly 5% to $1,201 per thousand board feet on the day.

Despite the pullback, lumber futures are still up 224% since May 19 of last year, and retailers like Home Depot have made it clear demand remains strong.

Home Depot’s chief financial officer Richard McPhail said in a Tuesday interview with Bloomberg that lumber sales are comparable to “a storm environment where literally as soon as you bring it in, it’s selling.”

“We’re really just focused on making sure we stay in stock and making sure we have the appropriate level of staff to serve our customers. The market will go where it goes,” McPhail added.

On Home Depot’s post-earnings conference call, Edward Decker, the executive vice president of merchandising, said the company had seen a “record-setting quarter for lumber prices.”

“At the end of the first quarter of last year, a sheet of 7/16 OSB [oriented strand board] was approximately $9.55. As we exited the first quarter this year, that same sheet of OSB more than quadrupled in price to $39.76,” Decker said.

Lumber prices have increased so much that CBS Denver reported thieves have taken to stealing the commodity from construction sites.

And KUTV Utah reported builders are looking for alternative materials to get around the rising costs of lumber, with some even turning to Bamboo.

US home construction also fell 9.5% in April, according to US Census Bureau data, as homebuilders struggled with rising commodity prices in lumber, copper, and steel.

Still, lumber prices are falling in the past week due to the end of a “de facto short squeeze” on the commodity, according to Stinson Dean, the owner of Deacon Lumber Company.

Brian Leonard, an analyst for RCM Alternatives in Chicago, also noted lumber futures are being driven down by “computerized trading and other platforms not related to the physical product, so it may end up going lower than the real market need to go,” per Bloomberg.

“The mills know there’s a lot more buying than needs to happen,” he added.

Lumber stocks like Weyerhauser and West Fraser Timber fell as much as 4.58% and 5.77%, respectively, on Wednesday in lock-step with declining lumber future prices.

Read more: ‘If lumber crashes, stocks might be next’: An award-winning portfolio manager who’s tracked lumber prices for years breaks down why futures hitting a record high of $1,600 is an ominous sign – and shares what investors can do ahead of the eventual crash

Read the original article on Business Insider

Lumber prices decline for a 6th straight day even as supply bottlenecks persist

Saw mill.

  • Lumber futures fell to $1,327 per thousand board feet on Monday.
  • Prices are still up more than 85% year-to-date and 280% in the past year.
  • The National Home Builders Association told NBC if lumber prices don’t continue to fall “you will see the homebuilding sector slow down and grind to a halt.”
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Lumber prices fell for the sixth straight day on Monday, even as supply bottlenecks at mills across the US and Canada persist.

Specifically, lumber futures fell to $1,327 per thousand board feet and are now down roughly 20% from May 7’s record high of more than $1,670.

Of course, despite the recent fall in prices, lumber futures are still up more than 85% year-to-date amid supply bottlenecks at mills and rising demand for home offices, renovations, and new homes.

Looking back a little further, lumber futures are up an incredible 283% over the last year alone.

Lumber’s rise has been so significant that NPR reported DIYers have begun to cut out the middlemen by creating their own sawmills to cut timber.

Typically, when demand increases, suppliers will increase the number of mills available to process timber. But Chad Hesters, a forest-product advisor and managing partner of the consulting firm Korn Ferry, told the Wall Street Journal that’s not an option for many suppliers these days because of how long it takes to create a modern mill and the significant capital investment involved.

“Trying to build capacity and make investments that have a lot of lead time at the top of a cycle is historically a good way to lose money,” Mr. Hesters said, per WSJ.

On top of that, semiconductor and rural labor shortages make it almost impossible for mill owners to build new operations profitably.

However, according to Stinson Dean, the owner of Deacon Lumber Company, there has been some reprieve for lumber pricing of late due to the end of a lumber short squeeze.

Dean told Bloomberg’s Joe Weisenthal and Tracy Alloway on the “Odd Lots” podcast at the end of April that lumber’s historic price run-up was a “de facto short squeeze.”

The squeeze was caused by commitments lumber yards made to homebuilders prior to a run-up in lumber prices and a tightening of the market, which forced them to buy at any price to meet obligations to customers.

Now, Dean says those conditions have abated, leading to some breathing room in the lumber market, according to a report from Bloomberg.

That’s good news considering Jerry Howard, the CEO of the National Home Builders Association, recently told NBC that if lumber prices continue to climb, “you will see the homebuilding sector slow down and grind to a halt.”

“This problem with lumber and other building material costs is sort of setting another potential perfect storm for housing to lead us into a recession,” Howard added.

Read more: ‘If lumber crashes, stocks might be next’: An award-winning portfolio manager who’s tracked lumber prices for years breaks down why futures hitting a record high of $1,600 is an ominous sign – and shares what investors can do ahead of the eventual crash

Read the original article on Business Insider

Your home improvement project just got a lot more expensive. From dishwashers to paint and fertilizer, here are the goods in short supply.

hammer nail home improvement
  • Supply-chain issues have made home-improvement projects more expensive.
  • Shipping delays, as well as the Texas freeze, have emptied shelves at stores like Home Depot and Lowe’s.
  • From refrigerators to cabinets and windows, here are some of the items that are getting pricier.
  • See more stories on Insider’s business page.

Many home-improvement goods including appliances, paint, and fertilizer are getting more expensive as companies continue to announce price hikes to combat shortages and rising shipping costs.

Price tags on consumer goods have risen over 10% from a year ago, The Wall Street Journal reported over the weekend, citing NielsenIQ. Demand for home improvement items caused by the work-from-home boom has pushed prices to new highs and these price hikes are not showing signs of slowing down anytime soon.

The computer-chip shortage has made home appliances difficult to find

loading dishwasher

The global semiconductor shortage has impacted most electronics, from dishwashers and refrigerators to washing machines. And panic buying of products like freezers during the pandemic has only made the problem worse.

Last month, Consumer Reports announced freezers had sold out across the country, citing data from top retailers like Home Depot and Lowe’s. The product is not expected to be available until mid-summer, according to the publication.

Freezers are just one of many home appliances in short supply. National Housing Board (NHAB) Chief Economist Robert Dietz told Insider about 90% of appliance-delivery dates have been delayed and prices have skyrocketed in recent months.

Prices for home appliances have been climbing every week, according to the Josh Wiener, founder of home-improvement firm Silver Lining Inc. He told Insider he’s seen delivery dates for refrigerators that have been pushed into October.

Steve Cunningham, the CEO of Cunningham Contracting and the chair of the NHAB’s Remodelers Council, said there’s been times when entire remodeling projects have been delayed weeks just for dishwasher deliveries.

In March, Jason Ai, the president of Whirlpool in China, told Reuters that the company was facing difficulty sourcing the processors that power more than half of its product lineup, including washing machines, microwaves, and refrigerators.

The shortage has been going on for months and is only getting worse. Executives from Swedish appliance giant Electrolux said on a conference call in October that it had entered the quarter with “unusually low inventory levels,” despite higher production levels.

“The increased time spent at home during the pandemic has resulted in more intensive use of appliances and higher share of household budgets allocated to home improvement,” executives said at the time.

Wiener told Insider that his company has been working to order the items well ahead of time, but they have also seen shortages of the tools needed to hook the appliances up.

The Texas freeze made paint, windows, and vinyl siding more expensive

Men painting a house home repairs paint
Men painting a house. (The house pictured is not the Curcuru’s.)

Anything that includes resin – vinyl windows, PVC boards, plumbing pipes, and electrical conduits – has become increasingly valuable since the Texas storms. The February deep freeze in the state shut down resin plants and has made windows and vinyl siding increasingly expensive.

The storm also led to a hike in prices of plumbing fixtures, as the storm caused a spike in the repair of burst pipes, Dietz said.

The Texas storm reduced the nation’s capacity to refine petroleum, which means a reduced ability to manufacture nearly all paints. It can be hard to predict which latex paint products will be out of stock and prices are continually fluctuating, Wiener told Insider.

“A lot of it is hit or miss,” he said. “Most of the places we would normally buy from are sold out. Lately we have been forced to pivot and find new vendors.”

Lumber prices have pushed flooring, cabinets, and deck prices higher

GettyImages 520950968

Lumber accounts for about 20% of a home, according to John Bitely, president of Sable Homes. He told Insider the record lumber prices have forced his company to raise their home-building prices.

Lumber prices are adding about $36,000 to new single-family homes, according to Dietz.

“As a company, there’s nothing we can do but pass those prices through to the customer,” Bitely said.

Any item that is made out of wood is facing significant price hikes and shortages, Dietz told Insider. From cabinets to flooring, decking, and doors, the products’ prices are skyrocketing along with lumber prices, which Dietz expects won’t slow down until well into 2022.

Price tags on outdoor gear are also spiking

Outer outdoor furniture

Increased interest in stay-at-home options, including staycations, has created a renewed interest in outdoor home improvement. Dietz told Insider that one unusual shortage is a lack of cushions for outdoor furniture.

Lawn and garden-care products have also had price hikes in recent months. Last week, Scotts Miracle-Gro announced during its quarterly earnings call it would increase prices by single-digit percentages, after record sales in 2020.

“I don’t think we have a choice here,” the company’s CEO Jim Hagedorn said. “Every raw material we’re buying right now is at a materially higher cost than we had planned.”

It has been difficult for companies to adapt.

“The biggest problem is the shortage is random so it’s very difficult to fix or nail down,” Bitely told Insider. “Because it’s impacting nearly every facet of the supply chain, it will be difficult to make it go away.”

Dietz told Insider he doesn’t see a clear end in sight for the supply-chain issues.

“The advice I give builders and remodelers is that at least for the duration of this year we are going to see an increase in the pricing for our materials,” Dietz said. “It’s an unsustainable trend and it’s imperative for policy makers to improve these supply chains.

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Lumber prices have soared 230% in the last year, pushing timber and homebuilding ETFs to record highs

Lumber
  • Lumber’s 230% 12-month rally has pushed timber and homebuilding ETFs to record highs.
  • The iShares Global Timber & Forestry ETF has climbed 89% in the last year, Bloomberg first reported.
  • While the triple-leveraged Direxion Daily Homebuilders & Supplies Bull 3X Shares fund has surged roughly 100% year-to-date.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Lumber has staged an incredible rally in the last year and is taking exchange-traded funds that track the commodity along for the ride.

The iShares Global Timber & Forestry ETF (WOOD) has climbed 89% in the last 12 months and now sits at a record high. The fund tracks global timber and forestry stocks and gained nearly 7% in premarket trading Tuesday but pulled back at the open. Bloomberg first reported on the funds record performance.

Meanwhile, the triple-leveraged Direxion Daily Homebuilders & Supplies Bull 3X Shares fund (NAIL) has surged roughly 100% year-to-date and is the second-best performing U.S. equity fund this year, according to Bloomberg data. NAIL seeks daily investment results of 300% of the performance of the Dow Jones US Select Home Construction Index.

Spot lumber prices hit a record high of $1,326 per 1,000 board feet on Monday, bringing the commodity’s 12-month gain to 231%. Soaring lumber prices are a sign of the pandemic-induced housing boom, fueled by record low mortgage rates and an exodus to the suburbs.

But the rising lumber costs have added more than $24,000 to the price of the average new single-family home, and timber companies are struggling to keep up with demand surge.

Read the original article on Business Insider

Lumber prices could climb another 12% this year after hitting a record high in April, Piper Sandler strategist says

Logging facility, Vermot
A logging facility in Bristol, Vermont.

Piper Sandler’s Craig W. Johnson, CFA, CMT said he believes Lumber prices could “very easily” move above $1,300 per thousand board feet this year even after notching a record high in April.

That figure represents a 12% increase from Tuesday’s closing price of $1,154 per thousand board feet. Lumber prices have soared more than 250% in the past year alone.

In an interview with Insider, Johnson, a technical research market strategist, said that lumber prices have broken out of a “huge consolidation” that occurred from 2018 through 2020 and are set to soar amid the economic reopening.

Based on technical analysis, Johnson sees lumber prices continuing to rise to at least $1,300 over the next six to nine months.

The strategist noted that there is an enormous demand for housing and renovations that’s pushing lumber prices higher.

Johnson said that with interest rates as low as they are, there’s an overall sense that this is the lowest mortgage rate many people are ever going to get.

As a result of these low mortgage rates, a new work-from-home trend, and young people moving out of cities, home buyers are lapping up properties at historic rates, and that’s putting pressure on lumber supply.

Johnson also said that timber companies are struggling to catch up with demand after shutting down some of their operations during the pandemic.

The technical research strategist added that, based on what he’s been reading, timber companies won’t be putting more sawmills in place to meet demand either because they lack the economic incentive to add capacity.

Creating more sawmills is a capital-intensive process that requires producers to get permits, and that can’t be done quickly.

Johnson also said the upcoming hurricane season could exacerbate the lumber price issue by adding to demand.

When asked what could stall rising lumber prices, Johnson said that only the slowing of economic activity would cause prices to fall, but noted that right now he believes that’s unlikely as we are in the “great wide open” for economic growth post-pandemic.

Lumber traded up 2.7%, at roughly $1,212, as of 12:04 p.m. ET on Wednesday.

Watch it trade live here.

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Surging lumber costs have increased the average cost of a new house by $24,000

lumber and building materials store
  • Lumber prices have skyrocketed since the pandemic began, adding $24,000 to the price of new homes.
  • Demand for materials soared during the pandemic as supply tightened with factories idle.
  • The National Association of Home Builders chair said vaccine rollout should help bring costs down.
  • See more stories on Insider’s business page.

While the pandemic hit the US, everyone seemed to want their own house. With mortgage rates at record lows and no need to commute to work in cities for at least 2020, prices soared everywhere. But they’re also soaring because there isn’t enough wood out there: lumber, to be exact.

Now it’s clear how much the lumber shortage is adding to the skyrocketing price of new homes: a whopping $24,000.

That stat is courtesy of the National Association of Home Builders (NAHB), which found the price of an average family home increased by $24,386 since April, with the market value of a multifamily home increasing by $8,998 over the same time period.

A report from the NAHB in February said the lumber supply chain impact came as factories shut down almost immediately last March for safety reasons, and then as demand spiked, supply couldn’t keep up. Lumber prices have jumped by almost 200% since April 2020.

“The elevated price of lumber is adding approximately $24,000 to the price of a new home,” NAHB Chairman Chuck Fowke told real estate news site HousingWire. “Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment this month. Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021.”

Zillow’s Producer Price Index found that February’s 2.8% annual increase in sales was the strongest it had been since October 2018, meaning that while more houses are being sold, supply for building materials, like lumber, remain low and costly.

On March 12, the NAHB, along with more than 35 other housing organizations, wrote a letter to Commerce Secretary Gina Raimondo asking her to examine the lumber supply chain and look into solutions for the high costs.

“Housing and construction can do their parts to create jobs, boost the economy to its pre-pandemic strength, and provide safe and affordable housing for all Americans, but in order to do so the federal government needs to address skyrocketing lumber prices and chronic shortages,” the letter said.

Building 1,000 average single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees, the letter said, emphasizing the economic benefits the government would reap in finding solutions to the expensive building materials.

Fowke told HousingWire that the continued rollout of COVID-19 vaccines will help decrease the costs of lumber since more mills will be able to safely reopen, and with more homes being built, home builder confidence should rise. (Homebuilder confidence fell by two points in March.)

The timeline on when material prices will decline is yet to be determined, but prices might start to come down with President Joe Biden on Monday promising 100 million COVID-19 shots in the next 10 days.

“Shots in arms and money in pockets – that’s important,” Biden said.

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