fbpx

George (right) and Jose Romero plane a piece of 6x6 rough redwood for an exposed patio post at White Pine Lumber.

published on July 20, 2018 - 1:28 PM
Written by ,

While steel and aluminum tariffs have dominated news headlines, the lumber industry has been in its own crisis following trade disputes, wildfires and shipping disruptions, resulting in uncertainty surrounding pricing and availability.

In January, the U.S. Department of Commerce placed a duty of around 20 percent on Canadian mills exporting softwood mills, according to a report from the U.S. International Trade Administration. The origin of the contention comes from accusations from the U.S. International Trade Commission that the Canadian lumber industry was using government subsidies to keep prices low as well as dumping product below market value.

Softwood species like pine and fir are the types most consumers will find on the floor of lumber stores and holding up the walls of their homes. And while the construction industry in California largely sources lumber from Oregon, Washington and Idaho, a shift away from Canadian lumber comes at a time mills and stores are having trouble contracting shipping amidst a shortage of drivers willing to deliver the products into a state where the gas tax and environmental regulations reduce the incentive for drivers to make the 500-mile plus trek into the Central Valley.

“I’m at the mercy of the demand of trucking and the cost of the fuel,” said Jeff Perritte, owner of White Pine Lumber in Fresno, who said he has material waiting for him from the mill that awaits a truck to take it to his yard.

“The demand is so high that we’re not really buying on cost, we’re buying on what’s available,” said Perritte. “Price is secondary.”

The price of lumber has risen 15 percent since last fall, he said, and 20 percent year-over-year.

In June, the price for a thousand board feet of framing lumber was $564 whereas the same time last year, that price was $398, according to the Random Lengths trade publication, which compiles pricing averages among mills in the Southern and Western U.S. and Canada.

Through the first four months of the year, U.S. lumber output increased 5.5 percent from a year ago to 11.579 billion board feet, according to a report released on Monday from Random Lengths. The West saw the biggest rise in production — up 10 percent from last year while the lumber industry in the South only increased 2.1 percent. In Canada, production actually dropped 1.2 percent.

Explaining why cost is climbing while production is also up involves several factors, including wildfires last year.

“The duties are only a small part of the impact on prices,” said Steve Swanson in a statement. Swanson is president and CEO of the Swanson Group, a lumber company in central Oregon. “The fires in Canada and the U.S. West last year put everyone behind on log acquisitions. We all went into winter with very little on hand and could not react to the slightly increased demand.

“Recently, logs are more available and reported production in the West is up. The result is lower mill prices now than two months ago,” Swanson continued.

In the Central Valley, one reason cost has risen could be demand created by the limited supply coming into the area.

Big buyers like homebuilders want to pick up supplies at certain prices, so there have been runs on materials, said Perritte.

The runs come at a time when shipments that used to come in two or three weeks are now taking five or six, and at the end of June, he was already planning August orders.

“This game of how to buy has become guesswork,” Perritte said.

Along with the extended delivery times, big purchases are creating a feedback loop of supply and demand.

“Nobody can get anything on time and it’s creating a buying frenzy,” said Jack Holt, president of Holt Lumber, who attributed his difficulties in keeping shelves stocked to regulations on trucking.

Holt Lumber has yards in Fresno and Hanford.

“The trucking companies pick and choose what loads they want to haul,” Holt said. “It affects the ability to control inventory.”

Driving loads the 500-miles from Grants Pass in central Oregon to the Central Valley needs to be worthwhile for drivers to take a contract and sometimes the rates don’t justify the cost, according to Ron Faulkner at Faulkner Trucking in Tulare, who is also the vice president of the California Trucking Association.

For Faulkner, rates from central Oregon run around $900 for a one-way trip, and with regulations from the California Air Resources Board regarding emissions, the federal hour-service rules and the e-log rule, among others, it is costing Faulkner $2.20 a mile to break even, whereas it used to be $1.75 in the middle of 2016.

Nationwide, the shipping industry is facing a combination of driver shortages and increased regulations, according to Faulkner.

With the record-low unemployment rates across the country, people interviewing for driving jobs expect to be able to come in at 8 a.m. and leave by 5 p.m., he said.

Faulkner estimates that about 10 percent of trucks in fleets across the country are sitting idle due to the labor shortage. Of his 50 trucks, about five don’t have drivers.

“When Walmart advertises needing drivers on Craigslist, there’s something wrong,” said Faulkner.

Routes into the Central Valley also face their own unique challenges for both out-of-state drivers and domestic drivers.

 

While Southern California enjoys the ability to barge their lumber in, according to Perritte, in the Central Valley, lumber shipments rely on trucking and rail, and coming into California means complying with emissions standards set by the California Air Resources Board, which mandated trucks entering the state either retrofit trucks with engines built before 2007 or buy new trucks in 2008. All of this on this on top of the gas tax, which has fuel prices 67 cents higher than the national average, according to Faulkner.

“Some guys don’t want to come into California because of our rules and regulations,” Faulkner said.


e-Newsletter Signup

Our weekly poll

How would you describe the temperature control in your office?

Loading ... Loading ...

Central Valley Biz Blogs

shares