SuperTalk Mississippi
Featured News Latest News News Trending News

Imbalance between lumber supply and demand. What’s the solution?

The American Wood Council (AWC) has outlined a variety of issues that have spurred an imbalance between lumber supply and demand, and more importantly, what can be done about it.

SUPPLY CHAIN IMPACTS

According to the AWC, wood product manufacturers were operating under the same uncertainty as the rest of the country at the beginning of the pandemic. Many mills curtailed production in anticipation of worker shortages and reduced demand. At the same time, many wholesale and retail lumber customers significantly reduced their inventory levels. Additionally, the housing market crash of the Great Recession resulted in the permanent closure of many mills. Between 2007-2017, mill closures in the southern U.S. resulted in a loss of capacity between 1.7 – 2 billion board feet and closures in the Pacific Northwest represented 10% of the area’s mills.

Image courtesy of the American Wood Council

INCREASED DEMAND

While the demand for wood products dipped as expected, it quickly rebounded. The National Association of Home Builders reported that the pandemic drove increased demand for remodeling projects as people stayed home and tackled DIY projects. Restaurants rushed to build outdoor accommodations. Low interest mortgage rates and demographics supporting household formation pushed a rush of home buying. Homes are going under contract at a faster rate than they are listed for sale, even though new home listings are up 19.1 percent over last year. Permits for single and multi-family projects were up 25.3 percent and 20.4 percent, respectively.

EXPANDING CAPACITY

North American softwood sawmill capacity increased by 1.4 billion board feet in the last year. Most of that increased capacity, 1.1 billion board feet, was from manufacturing in the U.S. South. In fact, the entire wood products manufacturing sector continues to produce at the highest levels since before the Great Recession. Importantly, these positive trends of high production and increased expansion come despite the wood products industry’s sustained constraints due to severe weather and wildfire events, labor shortages, and transportation constraints.

In addition, lead times to receive and install the equipment for additional capacity remains long. In some cases, machinery is backordered up to 24 months, potentially extending the usual 12 to 24 months it would take to complete these types of projects. Manufacturing expansion projects are a long-term solution that will support increased capacity, but not until 2022 at best. Additionally, the USDA’s Climate-Smart Agriculture and Forestry Strategy has recognized a need to increase the scale of thinning and other activities to reduce the risk of high-intensity wildfire on federal forests. Such activities could result in increased manufacturing capacity over the long-term in regions with federal forests.

OPPORTUNITIES TO ADDRESS SUPPLY CHAIN CHALLENGES

The American Wood Council says the most meaningful opportunity to address constraints to lumber supply is to focus on transportation and workforce limitations. These challenges were present before the pandemic and have exacerbated the current situation. Support for technical and vocation schools, and apprenticeship efforts, is paramount to addressing the workforce challenges, not only in the forest products sector but across the U.S. economy. One other prominent labor concern is the nationwide shortage of qualified truck drivers, as well as overall transportation system inefficiencies caused by outdated federal regulations, which are stressing America’s current wood supply system.

There are a number of important government policies the AWC believes should be revisited to open up broader opportunities for new workforce and facilitate more efficient transportation. For example, proposed bipartisan legislation such as the DRIVE Safe Act provides a framework from which young drivers can safely enter the transportation industry.

Mississippi Congressman Michael Guest, who cosponsored the DRIVE Safe Act said, “I cosponsored the DRIVE Safe Act again this Congress to support expanding Commercial Driver’s Licenses to individuals between the ages of 18-20. The Trump Administration began the process to create a pilot program modeled on this legislation and I hope the Biden Administration continues to look to implement these needed changes in the commercial trucking industry. Not only would this provide new opportunities for young people to enter the labor force, but it would also help address the supply chain issues we are seeing in today’s markets. Industries and businesses across Mississippi’s Third Congressional District have voiced their support for the expansion of CDL to young workers. It’s time for the Biden Administration to finish its review and implement this program in order to create new jobs and transport products across state lines.”

The AWC also highlights other important legislation which addresses the supply chain issue such as the bipartisan Safe Routes Act provisions that provide for a safer and more efficient transportation of logs, pulpwood, wood chips and biomass. There is also the bipartisan bill Promoting Women in Trucking Workforce Act which would require the FMCSA to establish an advisory board charged with identifying barriers to entry for women in the trucking industry and help identify and establish training and mentorship programs for women.

Related posts

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More