To anybody on the front lines of the construction industry the following information should come as no surprise: lumber (and other materials) increasingly seems to be worth more than gold. This has led to myriad problems on both sides of the border, mostly affecting the homebuilding industry. Home prices are correspondingly soaring, pushed higher by a combination of record-low mortgage rates, strong demand from buyers and a lingering lack of new construction. So, where is this driving the industry?
Downstream Effects of the Pandemic
Canada, one of the most forested countries on the planet, is running out of wood — much of it due to hot housing market — but that is not the only part of the story.
Mill shutdowns amid the COVID-19 pandemic have combined to squeeze supplies and send prices soaring. Further, much of the United States did not have the same pandemic restrictions Canada implemented (and continues to implement), meaning producers of lumber in Canada shipped more supply than usual to our southern neighbours. As demand has gradually picked back up in Canada, this has driven a supply shortage both here and in the United States, sending prices to the moon.
Softwood lumber prices were up almost 119 per cent in March from the same month a year earlier, when the pandemic began, the largest year-over-year price increase since Statistics Canada began tracking wood prices more than six decades ago. According to Natural Resources Canada, the average price of 1,000 board-feet of two-by-four eastern spruce, pine or fir in North America is now about $1,450, up from the previous 52-week average price of $987.
Plywood and oriented strand board are in shortest supply, and red-hot demand has forced builders to plan for construction delays. Given this, it is extremely important that contractors be prepared contractually – we fully expect delay claims to skyrocket with this new reality. As always, ensure you have open communication with the other parties involved in any construction build. The suppliers, Subs, GCs, and owners all need to be on the same page for this unique situation. Avoiding unnecessary litigation should be the main focus.
As always, please reach out to us if you need any assistance navigating this difficult situation.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.