Yesler CEO weighs in on the market in 2021 and beyond
Build and Cultivate: Thoughts on 2021 and 2022
Without a doubt, the abrupt shutdown of 2020 started a chain of events. We feel that shutdown still, as 2021 moves into the rearview mirror and we look ahead in 2022.
Here’s my quick take on how we got to where we are today, in early 2022:
Weather in the winter of 2019/2020 was relatively mild, leading to higher than normal housing starts and lean supply chain inventory. Then, with the advent of the pandemic, the increase of time spent at home became a call for remodeling homes and an increase in demand for secondary residences. The ensuing high demand could not be quickly resolved and constraints became evident immediately. Lumber was a leading example of supply chain limitations, resulting in historic commodity lumber shortages and price volatility.
These challenges carried into 2021, with demand remaining high and another year of historic price volatility. The complexities of the supply chain for meeting a high level of home building demand are on full display. How does this bode for 2022? It is similar, but different. November and December 2021 were mild like 2019. Flooding in British Columbia impacted lumber transportation and production. The combination of high demand and supply constraints have combined to drive an increase in lumber prices heading into 2022, in a season where prices are not typically high.
In 2022, it is possible that there will be moderating influences on demand - interest rate increases could throttle back demand, the continuation of the pandemic may stifle optimism, and the arrival of snowy winter weather may put a crimp in construction. But with supply already constrained, one can reasonably predict that supply chains will remain tight unless these issues have rather dramatic impacts to reduce demand.
The onslaught of supply chain challenges across many industries beckons for innovation and enterprise. The LBM industry is no different. This effort must start with companies shifting from speculation to facts. The combination of innovation and enterprise starts with data. Commodity lumber markets have been volatile with commensurate risks, but most LBM industry information about markets is rhetorical, speculative, and opinion.