The US wood shortage can be traced to a decades-old beetle infestation in Canada

ANDY CLARK / REUTERSFire-clearance of mountain beetles in British Columbian pine forests

FROM OUR OBSESSION
The climate economy
Every industry can be part of the solution — or part of the ongoing problem.

By Samanth Subramanian

Looking into the Future of Capitalism
March 18, 2021

Lumber is in such short supply in the US that its prices have skyrocketed to an all-time high—so much so that the expense of building the average single-family home has risen by $24,000 since last April to reflect the cost of wood.

The reason, in significant part, is the changing climate—and how it enabled a beetle species to infest forests in the Canadian province of British Columbia years ago.

The steep rise in lumber prices illustrates the uncommon nature of the pandemic economy: a seizing-up of supply, but a constant simmer of demand that is now exploding as countries re-open. In the US, since the spring of 2020, the price of lumber has risen by more than 180%, according to the National Association of Home Builders (NAHB). Futures contracts in lumber now hover around $1,000 per thousand feet of board, nearly four times their April 2020 prices.

On Twitter, Robert Dietz, the chief economist of the NAHB, noted that around 81,000 new homes across the US are awaiting construction in part because of the rising cost of materials like lumber. The NAHB and other housing industry associations have written to the US government, seeking “immediate remedies.”

“I was alive for the last boom like this, but just barely,” says Paul Jannke, a principal at Forest Economic Advisors. “Adjusted for inflation, the last time we saw something like this was in the early 1970s. Since then, in the lifetime of pretty much anyone working in the industry, this hasn’t happened.”
Why there’s a shortage of wood

Lumber has one aspect of its story in common with other sectors of the pandemic economy, particularly manufacturing. Early in 2020, sawmills first ground to a halt, anticipating a crash in demand. Then it turned out that people still wanted wood—to repair or renovate their homes during lockdown, or to build new homes outside cities. Interest rates were, and continue to be, low; it was a good time to finance and construct new houses.

So the sawmills started up again around July. “But it was difficult to ramp up,” Jannke says. “You’re running your mill, someone tests positive, you have to shut down and test and so on. Maybe people have to quarantine, and you lose a portion of your workforce.”

But the shortfall in supply is also part of an older saga, involving Dendroctonus ponderosae: the mountain pine beetle, a quarter-inch insect with a shiny black exoskeleton. The beetle has been in Canadian forests for decades, but they’re usually kept in check by cold winters, said Kevin Mason, managing director of ERA Forest Products Research, a Montreal-based research company.

But in the late 1990s, the beetles started to live longer and reproduce quicker—an outcome, scientists believe, of a warming climate. They swarmed through the pines of British Columbia, attacking more than 44 million acres of forest, an area four times the size of Switzerland. “You could go up in an airplane above British Columbia and see the damage,” Mason said. “I’m a little color-blind, but others could see it better than me. The dead pines had a red tinge to them, so you could fly an hour and just see this red kill.”

Before the infestation, British Columbia used to provide 15-17% of the lumber going into US markets, making up half of Canada’s lumber exports across the border. After the infestation, those numbers dropped, Mason said: “There were points where, for British Columbia, the figure was below 10%, and Canada now is at around 25%.“

The after-effects of the infestation

Many pines killed by the beetle could still be harvested for a period of 5-10 years, and the government of British Columbia offered incentives to the industry to process these dead trees. Mason thinks roughly 800 million cubic meters of dead pine was harvested over a period of 15-odd years, until 2015 or thereabouts. But once that was done, forests had to regrow.”We’re talking about a diminished harvest in British Columbia for decades,” Mason says.

The supply of “fibre”—the lumber industry ‘s term for harvested wood—slowed so much that many sawmills shut down. In fact, Mason thinks that, for a normal year, there are still too many sawmills operating relative to demand. “There’s still another billion board feet of capacity that needs to come out of British Columbia.”

Through most of the last decade, the slowed supply of lumber from British Columbia matched a lethargy in demand in the US. In 2005, the US consumed nearly 65 billion board feet of wood, but after the recession hit, demand hit a trough in 2009: 33 billion board feet. Things recovered very slowly, Jannke said. “In 2019, it was barely back to 50 billion.”

Jannke suspects that, last year, demand for lumber in the US was between 52 and 55 billion board feet, still far below the peak of 2005. In an ordinary year, those needs would have been easily met. But the combination of the pandemic and the shrunken capacity of British Columbian production have muffled supply.

“I think prices will be volatile, but they’ll continue to be high for the next three or four or five years,” Mason says. “You can’t start up new sawmills overnight. And if you go to the equipment makers, there’s a waiting list for some pieces of equipment of two or three years.”

One of the US’s options is to import more lumber, particularly from Europe, which has stock in surplus. Over the past five years, Austria, Germany and the Czech Republic have had to harvest nearly 250 million cubic metres of spruce damaged by another bark beetle infestation, this too brought on by the warming climate. Ironically, if one beetle has depressed wood supplies to the US, another may yet elevate it.