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The Rising Cost of Lumber and the Shrinking Price of Steel

February 4, 2022

Stacks of Lumber

Since the earliest days of the COVID-19 pandemic, building materials have experienced immense amounts of price volatility. While steel has seen its fair share of high and low prices, the effects of the pandemic on the cost of lumber have been noted across North America. By the beginning of 2021, wood experienced an unprecedented surge in desirability and in cost. Today, wood is trending in that direction once more!

While the cost of lumber has risen and fallen a number of times over the last two years, in recent months it appears the price is once again moving upward. At the same time, the cost of steel has leveled off, and is even experiencing a period of downward price movement. Learn more about industry projections for the prices and availability of these building materials, so you can make a more informed decision on your next construction purchase.

Wood vs. Steel

We’ve looked at the differences between wooden and steel structures in detail in a past blog of ours, which you can read here. However, we’ll quickly review some of the benefits that steel structures have over wooden ones.

  1. Steel buildings offer greater structural strength and integrity and are customized to your local jurisdiction’s climate and weather patterns.
  2. Steel building are faster, easier, and less expensive to construct than wooden buildings because all of the components for metal buildings arrive pre-cut and ready to be assembled.
  3. Steel buildings are safer over the lifetime of the building and require less maintenance and repair than wooden structures.
  4. Steel construction allows for greater design flexibility because of its strength. Steel buildings require few, if any, internal structural supports, so you can have much larger open spaces within the building itself.
  5. Steel is 100% recyclable and far better for the environment than wood.

A Quick History of Wood and Steel Pricing

Price of Steel Over Time
Change in steel futures pricing from March 2020 to present.

The COVID-19 pandemic impacted not just the health of people around the globe, but also the buying power of individuals through disruptions in production, manufacturing, and global logistics. While initial government policies to curb the virus resulted in a short-term decline in price for most building materials, that quickly changed, and costs have been trending higher and higher ever since.

While all materials – including steel – have experienced some amount of price increase over the last few years, lumber has been far and away the most volatile. To better understand the current landscape, let’s look at how the prices for steel and lumber have changed since March 2020.

Just prior to the pandemic (February 2020), lumber futures were trading at around $460 USD per thousand board feet. By contrast, in the same month steel futures were trading at around $530 USD per tonne. When the first pandemic restrictions came into effect in March 2020, both materials fell in price; the economic picture looked uncertain at the time and demand for building materials fell in the short-term. However, from May 2020 onward, as lockdown restrictions became the new normal and the economy began a strong recovery, the prices of both commodities began to rise.

By September 2020, the price of steel had risen to a high of $605 USD per tonne; the price of steel had increased roughly 14% from February to September 2020. 14% is nothing to scoff at, that’s a fairly significant increase. However, over the same period of time the cost of lumber shot up over 100% to $984.50 USD per thousand board feet!

Price of Lumber Over Time
Change in lumber futures pricing from March 2020 to present.

Steel and lumber would continue to experience volatile prices over the next year, both hitting their highest price in May 2021: steel futures traded at a high of $939 USD (an increase of 77% from pre-pandemic prices), while lumber futures traded at a staggering $1,686 USD (an increase of 266% from pre-pandemic prices) in the same month. While prices for all building materials have experienced major variance over the last two years, it’s safe to say that the relative volatility of the price of lumber has far outstripped steel.

Projecting the Future Price of Wood and Steel

Steel and lumber prices are never stagnant, and both continue to experience changes. However, while market analysts are confident that lumber prices are on the rise once more, steel prices appear to be moving lower.

The Future Price of Steel

The price increases in steel over the last few years have largely been a result of increased demand for steel materials, coupled with a lack of supply from China (in particular). China has experienced year-over-year production declines in steel as a result of an energy crisis. Industrial capacity was purposely restricted in order to alleviate pressure on the Chinese power grid. However, the country has been hard at work upgrading its energy capacity over the last few years, and analysts now predict we will see Chinese production rates increase over the course of 2022.

By contrast, the U.S. steel industry hit the brakes at the outbreak of the pandemic and has been struggling to get back up to speed ever since. The industry is now finally approaching full capacity once more, which should increase the global supply of steel.

Between the steel contributions of these two countries, we expect there to be an influx in the supply of steel in the coming year. This is leading analysts to predict that the price of steel will continue to remain level and perhaps even fall in the coming months.

The Future Price of Lumber

Contrary to trends in the steel industry, the price of lumber is projected to continue to increase over the coming months and throughout the rest of 2022. Like steel, lumber has also experienced a supply shortage over the last few years. However, unlike steel, the supply shortage of lumber has no end in sight and, in fact, appears to be moving in the direction of even further shortages. Inevitably, this will continue to drive up cost.

Living in Canada, we can’t help but take note of the ballooning real estate market. Homes across the country are rising in price at an extreme pace. As a result, developers are scrambling to build more and more affordable homes for young first-time buyers who are reaching homebuying age. This phenomena is occurring across North America and is contributing to the increasing demand for lumber, while putting more and more pressure on supply.

Recent major flooding in British Columbia (which accounts for nearly 39% of all of Canada’s lumber production) has also put additional pressure on lumber supply. Transportation of industrial goods, including lumber, was temporarily halted or slowed during the flooding, and as a result an already backed up industry is faced with further delays.

As a result of these factors, analysts are predicting that the price of lumber will continue to climb over the course of the year.

Now is the Time to Act!

The last year and a half has taught us a lot about the predictability of building material pricing. Without fail, each time we have seen a cut in supply the price of that material has shot up, and each time there has been an injection of supply the price has fallen. As a result, we feel confident in predicting what is to come over the next few months.

The rising supply and declining price of steel presents a unique opportunity for buyers.

As the price of lumber continues to climb higher and higher over the next year, more builders will turn to steel to reduce their costs. As a result, this period of relatively low steel pricing and high steel supply will not last forever! Demand for steel will undoubtedly increase as the price of the material drops, which will put pressure on the supply of steel once again, which in turn will trigger a price increase. If the price of steel does not increase, it’s possible we might see supply shortages again like we did in 2021. In either case, the price and availability of steel is currently in an optimal position, but at some point in the coming year this will change.

The window of opportunity is here and now! If you are considering a steel building construction this year, you should reach out to us as soon as possible to begin the planning process. The sooner you engage us, the sooner our team can get to work on finding you the best price on materials for your next steel building. Take advantage of low pricing, and optimal delivery dates – the timing is perfect!

Contact Norsteel Buildings Today!

Click here and fill out the contact form or give us a call at 1.866.971.7575 to speak with a professional building consultant today. Even if you don’t plan on making a purchase right away, the sooner you engage us the sooner we can begin keeping an eye out for the best pricing for a building of your size, purpose, and location.

We look forward to working with you!

About the author 

Michelle Keenan

Michelle is one of two owner-operators of Norsteel Buildings, alongside her husband Sean. Michelle has more than two decades of experience in steel building design and construction, and has worked with thousands of customers over the years to make their building dreams come true. Under Michelle's leadership, Norsteel has been recognized as one of the Top 100 Builders in North America 5 years in a row.

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