Updated: May 6
CHBA and OHBA have been working on this issue since it arose in Summer of 2020. CHBA provided an update on April 28th, 2021. Read on to find out more...
April 2021 Update
The current state of the lumber industry continues to impact residential construction adding costs for builders and renovators, delaying construction times and closings, and exacerbating housing affordability challenges for consumers. Despite the expected price decrease in October as mills caught up with the unexpected surge in demand, continued demand and a hot housing market north and south of the border, and no typical seasonal slowdown, pushed prices back up starting in November, with demand continuing to outstrip supply and record high prices still to this point. Both housing and lumber demand remain very high, with supply of both still short. Builders and renovators (and consumers) are currently incurring tens of thousands of dollars in cost increases for a typical single-family home, negatively affecting builders with contracts already in place, and consumers looking to buy new homes or renovate. Closing times on houses is now delayed across the country by an average of 6 weeks due to material shortages, according to a recent CHBA member survey. While the sector overall has been rebounding well, ongoing volatility could impact residential construction jobs, the sector’s contribution to economic activity and undermine Canada’s recovery. Lumber prices are expected to remain high through the first half of 2021, then start to recede, according to lumber experts. That said, it likely will not be until late 2022 for prices to return to anywhere near pre-pandemic levels. CHBA continues to be active on the North American and world-wide issue.
CHBA Actions to Date CHBA has been actively engaged on this issue since it began to surface in the summer, engaging with the wood industry and bringing it to the attention of government officials in various meetings and discussions (staff, Ministers, and members of the opposition) and through the House of Commons Standing Committee on Natural Resources, refer to CHBA’s formal submission. CHBA remains engaged with its counterparts in the lumber industry to access up to date information, urge action on supply and price, and continues to engage government to do all it can to support the lumber supply chain. CHBA hosted a webinar on January 28 (see replay above) with representatives across the lumber industry to help members get a better sense of the challenges that have caused the lumber issue and a look ahead at what to expect as 2021 unfolds. While there is little the federal government can do to directly lower lumber prices or increase supply, CHBA has been engaging regularly to ensure the government uses everything it does have at its disposal to help address the issue as best it can. To that end, CHBA has been advocating for the following:
Support for the lumber supply chain to maximize supply output and delivery (including through essential service designations, the wage subsidy, back to work incentives and training).
Avoidance and timely resolution to trade disputes.
Work with domestic lumber producers to ramp up production by working with other levels of government to ensure more responsive and certain access to raw material.
Collaborate with FPAC, the Western Lumber Retailers Association and others on key issues of securing certainty of sustainable, domestic supply of fibre and addressing persistent transportation issues.
Help offset escalating construction costs for housing to sustain activity and affordability through other measures.
CHBA continues to keep the challenge of lumber prices front and centre in the media, both to encourage action by politicians, and to inform consumers what to expect when it comes to pricing and timelines for their new home or renovation. Next Steps CHBA will continue to monitor the impact of lumber prices and shortages on the sector and will continue to engage with the federal government on possible avenues to address the effects of the issue. CHBA will also continue to engage with the lumber industry and other affected stakeholders to ensure members and the association have up to date information. CHBA is also ensuring all players are focused on ensuring that if there are further operational constraints put in place due to further waves of COVID, that the lumber industry (and the full residential construction materials and products supply chain) and related transportation industry remain safe and fully functional—while residential construction is an essential service, it cannot function if the supply chain is severely disrupted or prices are too high. KEY FACTS AND ADDITIONAL INFORMATION Housing industry outlook Residential construction is recovering at a decent pace, returning many jobs to the economy with both starts and building permits up nationally, and renovation returning to normal volume.
December 2020 seasonally adjusted starts: 239k, compared to 210k at the same time last year, and to a low of 165k in April 2020 (CHMC, 2021).
Total value of residential building permits in January edged down 0.9% to $6.4 billion after posting a record setting month in November (despite single-family permits rising 7.0% surpassing the previous record of $2.9 billion set in October 2016) (Statistics Canada, 2021).
Lumber industry outlook The current shortage, and subsequent price increases are a result of:
Early 2020 forecasts for low demand which led to production curtailment before the pandemic.
Efficiency and capacity limitations brought on by COVID-19.
Slow ramp up of economic activity due to labour shortages.
Transportation issues with mostly with rail, and increasingly with trucking, which is more expensive and less efficient. CN, who transports the majority of the lumber that moves across the country, experienced disruptions beginning prior to the pandemic.
Much stronger spring and summer demand, including from the DIY market, than anticipated.
Ongoing trade disruptions, disputes, and tariffs, creating price volatility and uncertainty around supply.
Shortages of wood fibre in some areas due to mountain pine beetle infestations and wildfires.
Strong housing demand through the fall of 2020 and into 2021
Lumber mills in most parts of the country were closed for as much as 6 weeks during the initial wave of the pandemic, in response to public health measures. Based on discussions with the lumber industry, it is our understanding that lumber mills in Canada have mostly now operating at 100 percent capacity since September. The same is not true in the US, which was slower to ramp up, contributing to supply shortages across the entire North American market. In Canada, mills are running about three months behind on orders, particularly on oriented strand board (OSB) and plywood, and with ongoing challenges securing raw materials and labour, it may be some time before they can effectively meet demand. Lumber Price Trends (As of April 28, 2021) The two charts from Natural Resources Canada below show the trends in lumber products for the past year for softwood and panels. Eastern spruce-pine-fir 2x4s, which are commonly used for framing, rose from $500 CAD/mBf in April to a 2020 peak of almost $1,300 CAD/mBf in late August receeding briefly in the fall. They started climbing again late in the year and are now at a record of over $1,400 CAD/mBf. Panel prices continue to be 3x higher than pre-COVID and are still tracking up. OSB, commonly used for sheathing, rose from $350 CAD/MSF in April to a peak of $975 in September before receding a bit late in 2021. As of January 2021, it has risen once again to a record high of over $1,000 CAD/MSF.
Recent World Trade Organization Ruling – Softwood Lumber Agreement
On August 24, 2020, the World Trade Organization ruled in Canada’s favour on the long-standing dispute with the US over softwood lumber, declaring that the U.S. Department of Commerce and the U.S. International Trade Commission were wrong in 2017 when they imposed countervailing duties on Canadian softwood lumber exports, having concluded that Canada's regulated forestry industry amounts to an unfair subsidy for Canadian producers. CHBA welcomed the ruling, but it has only driven up demand for Canadian lumber.
Past CHBA Actions
In December 2017 the U.S. finalized tariffs on Canadian lumber that it believed was dumped into the American market at artificially low prices, due to it being sourced from crown lands. Most Canadian producers then paid a combined countervailing and anti-dumping rate of 20.83 per cent, down from 26.75 per cent in preliminary determination from July 2017. CHBA facilitated talks between the National Association of Home Builders (NAHB) in the U.S. and the Parliamentary Secretary to the Minister of Foreign Affairs (Canada-U.S. Relations) on this issue, with the ultimate goal of accelerating a resolution of the dispute, and in so doing bringing down lumber prices for industry and increasing affordability for consumers on both sides of the border. CHBA strongly advocates that trade disputes regarding construction materials in the integrated Canada-U.S. market are detrimental to both countries and should be avoided, or at least resolved quickly when they arise.