In the first year of pandemic, prices of processed wood products (softwood lumber and plywood) nearly quadrupled. The wholesale price of plywood rose from $400 to $1,500 per thousand square feet.
But what are the causes of this disproportionate increase in wood prices?
A domino effect
The pandemic has created a labor shortage in many sectors, including the forest products industry, resulting in limited availability of wood products, such as softwood lumber and structural boards. The ripple effect continued with supply chains further disrupted by the lack of truckers to transport materials. At the end of the line were ‘customers’ who were homebound under travel restrictions, wanting to spend more money on home improvements.
The increase in wages
In North America, another outcome of worker absences and departures was an increase in average industry wages. But this solution didn’t provide sufficient additional workers to compensate for increased demand and limited supply.
Moreover, it’s important to consider how work in the wood products industry is becoming more mechanized; this means that the workforce now needs to be more technically competent and highly trained. And it takes time to develop these skills, therefore increasing production in a short time is not as easy as in the past.
Increasing employee compensation and the number of technically qualified employees could help raise production and lower prices. Expanding production capacity, perhaps through higher direct investment, can also contribute to a supply chain solution.