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United States Of America – Lumber prices could escalate easily to $2400 per MBF this spring and late summer similarly mirroring last year. Builders, Developers, Program Managers and Project Managers should weigh risks now and prepare for the possibility. Currently risks seem to be leaning more towards increased demand, labor shortages, natural and geo-political risks.
The market is balancing currently un-naturally with tolerance to any events swaying the aggregated outcome with more reactionary forces. For example a extended snow season or bridge/rail collapse will exaggerate all price movement.
Supply again is beginning to tighten and the short term decrease from China is beginning to pick up steam again resulting in raw product price increases and shortages again as Chinese inventories are depleting. Southern United States is also reporting decreased inventories.
Real Estate & Development
While real estate developments and contractors are facing a surge in defaults, bankruptcies and abandonment in UK, Australia and China… it does not seem to be collapsing the economy as a leading indicator normally would in Europe, United States or Canada. Obviously we have been seeing a strong influx of stimulus which now we are beginning to see as investment keeping us only a sliver above UK and Australian issues while work must be completed regardless of who the current President is. Most work required is way behind and not started from the last Trump administration.
We all have been witnessing the events over the last year and Zillow’s most recent venture. An almost saving grace in sense to a large population of home buyers able to cash out of under water homes finally. Hair line cracks in the glue holding the fragile real estate economy together are showing fracture points and any wrong move will spell a disaster for multiple segments.
Industrial, Data Centers, Warehousing & Life Sciences are and will continue to see strong starts. Although they do not consume lumber on most projects it is a strong indicator, accessory item that has chain reaction implications. Multi-Family and Build to Rent’s are a growing compounding necessity with the amount of housing shortages ever lasting. Large corporations are sitting on vast properties including vacant office buildings that need to be developed and we are witnessing cities be reinvented rapidily.
Today the FHA announced it’s lift on restrictions of Multifamily Accelerated Processing (MAP) Guide policies going forward signaling more projects flowing through the pipeline at greater speed. We also have a tremendous multi-family backlog already and demand on all fronts that must be built, this will also weigh heavy on the market despite single family home reports and numbers.
Labor normally not an issue in a largely equipment operated and autonomous manufacturing process. The lumber industry tends not to be affected. Advancement over the last two years and investment in United States mills from domestic companies and Canadian has shown promising infrastructure improvements and in the pipeline. The government and civilian forest experts are also aligning. Although it will take years and new protocol we are seeing the start of promising forest sustainability programs and pre-wild fire prevention intervention.
Lumber price risk will more cling to local labor force and resources. Mostly small to medium size businesses already stressed from the last two years working around the clock bringing raw material to the mills and brokers. We should expect to see continued labor tightening here as the work is some of the most dangerous and strenuous. These labors, most of which carried us through the last wave, were bringing inventory from harder and harder to reach harvesting areas utilizing drag lines and other labor and time intensive setups through more and more difficult terrain.
Diesel will remain to be in demand as well as face scrutiny and increased regulation and taxes contributing to price risk but also fueling reinvestment into newer technology.
The Infrastructure Bill was passed. Unfortunately most work will take years to accomplish only as more issues are accumulating faster that fixing due to delay after delay. Case example the bridge collapse in Pennsylvania two weeks ago.
Other concerning issues are: recently we have just removed billions in alleged corrupted cellular infrastructure. Things are moving rapidly similar to war time. Wireless carriers now are asking for a total of $6 Billion to replace more Chinese equipment purchased, conveniently when they have to. – 6,7, & 8 G are already rolling out. A recent auction was also completed by the FCC for 5G spectrum. Details on this event and if there were bidders allowed and setaside for SBE, and private citizens access/use will be included in an additional bylt article.
Signs and analysis from our calculations last year showed that the funds allocated in the Infrastructure Bill would not be enough before inflation and new requirements. This is looking like more of a possibility now.
Interest rates most likely will not be able to solve this problem alone like every other time as most reactions hurt small business and residents only as corporations just layoff and sit on the cash stockpiles.
This time could be different. Momentum has seemed to shift for the first time giving laborers and workers a strong upper hand if regulatory action is done and followed through correctly we could see a very different America and quickly. We are seeing and witnessing possibly a necessary evil with inflation. Wages have been stagnant for nearly 40 years, real estate values nearly half that when compared to expenses and that is growing rapidly.
Strong indications show that just like a shift in climate care, manufacturing processes, fuels and more we will see a continued strong increase in wage rates, benefits and quality of life continue in 2022. Larger corporation oversight and profiteering monitoring, increased labor cost and quits etc. New business formations continued with strong numbers in January.