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Economic, Resource

Western Canadian construction facing perfect storm brewing in building material costs

Jean Sorensen
Western Canadian construction facing perfect storm brewing in building material costs

The perfect COVID-19 storm is brewing, driving up the price of mainstay construction materials by up to 300 per cent with no real end in sight.

The pandemic is being blamed for much of the supply chain and delivery problems while demand is being driven by home-bound individuals spending vacation dollars on home construction over-heating the low-interest general construction market in both the U.S. and Canada. 

At the same time, governments have been pumping billions into infrastructure recovery programs.

Flying high are wood product values with Western spruce-pine-fir (SPF) dimensional lumber prices tripling, cedar landscaping product prices doubling, and plywood per sheet prices tripling in three months.

Steel has also been slammed.

During the first quarter of 2021, rebar prices have almost doubled, said Anoop Khosla, managing director of Midvalley Rebar, as rebar shot up from $500 to $900.

“It is ridiculous,” said Khosla.

Structural steel has risen from US$550 per ton to close to US$1,000 per ton. Khosla said the steel prices are hitting Western Canada’s construction industry hard because Western Canada has only one mill able to supply 20 per cent of what is required. Shipping by rail from Eastern Canada mills is cost prohibitive while importing is subject to federal tariff duties.  

Currently, Khosla said, suppliers are on allocation from U.S. steel producers.


We have an all-time record high benchmark…and this more than three times the 20-year average,

— Joel Neuheimer

Forest Products Association of Canada


Khosla said the demand for rebar and structural steel is also coming from the U.S. which is going through a building boom.  

Adding fuel to the hot market is government infrastructure spending as a COVID economic recovery plan and new projects are further squeezing supply. 

The high steel prices are expected to trickle down into pricing of new construction equipment and parts. “We have not had any increases yet,” said Hayco Industries owner Brian Butzelaar, who handles long-reach equipment sales, but it is expected.

Butzelaar, who has worked in the industry for 30 years, said what is being seen are delays in shipping. “We have ordered some parts from Korea,” he said, adding the estimated time of arrival is double normal delivery.  

President of the Electrical Contractors Association of British Columbia (ECABC) Deborah Cahill said via email, “ECABC’s membership is ­­experiencing both increased prices and a supply shortage. Cost increases vary depending on the material or equipment, but they are happening regularly and are reportedly more than 30 per cent cumulatively. “

Cahill said the supply chain appears to be severely disrupted by a number of factors such as COVID-19, the Texas winter storms and shipping container delays.

“Members are varying degrees of optimistic whether or not the unpredictable pricing and availability of materials will end in the near future. Some warn that if there isn’t more stability soon, B.C.’s construction market could be adversely impacted, and we could potentially see projects delayed.”

Canada is seeing all-time price records for lumber.

“As of April 20, we have an all-time record high benchmark in Western spruce-pine-fir lumber of $1,285 per thousand board feet and this more than three times the 20-year average,” said Forest Products Association of Canada vice-president of international trade Joel Neuheimer. 

Southern yellow pine 2x4s also reached a record high of $1,080 per thousand board feet.

Neuheimer said the combined circumstances leading to the soaring prices was not predicted as big box stores actually cancelled orders last year anticipating a downturn in construction.

But instead employees at home with unspent vacation dollars began to renovate or expand their homes not just in Canada but the U.S.

Another factor was the mild winter that saw the construction season extended later in the U.S. and Canada starting earlier. 

As well, the latest 2016 lumber tariff dispute with the U.S. has also cased Canadian mills to close in past years, crimping production abilities while large forest fires and the mountain pine beetle have impacted the supply side.

Neuheimer does not see an end in sight but suggests prices could ease up this summer but much will depend upon how soon COVID is conquered and employees return to offices.  

CIBC forest products researcher and executive director Hamir Patel issued an update on engineered wood products based on figures from Random Lengths, a trade publication that tracks lumber prices. Oriented strand board rose to new heights in Western Canada to an all-time record of $1,355 per thousand square feet while in other regions it ranged from $960 to $1,090 per thousand square feet.

CIBC, which tracks U.S. and Canadian housing starts, both of which are surging, doesn’t see an end in sight soon.

“The industry seems incapable of bringing on additional capacity to rebuild inventories given long equipment vendor lead times for kilns, air permit constraints and challenges maintaining (let alone growing) staffing levels in mill towns. We do not anticipate a meaningful capacity response until 2022,” a CIBC issued investment report said.

Cedar product used in landscaping and decking also jumped.

Ron Tu, in marketing with Cedarline Industries, said a cedar fence panel that commonly sold for $100 are now retailing for $200, if they can be found. The company has seen a 70 per cent increase in pricing as is reflected by the scarcity of needed fibre from primary break-down mills.

Tu said the scarcity relates to the eight-month strike in 2020 of employees at Western Forest Products, which harvests the bulk of the cedar in B.C.

“We are always working on the previous year’s log supply,” he said.

With the lengthy strike there was no industry replenishing of that log deck. Cedarline has had to broaden its product line, looking for alternative products and species in order to keep product on retail shelves stocked, Tu said.   

Mark Omelaniec, chairman of the Canadian Concrete Pipe and Precast Association and president of the Langley Concrete Group, said his industry is being hit by the higher prices of steel reflected in beam prices. Concrete and aggregate have registered only normal increases and can be sourced locally, he said, but his product is heavy and needs to be trucked to markets.

Gas prices have jumped from $1.10 a litre four months ago to $1.49.

“We have seen significant increases in our shipping rates and we can’t afford that cost,” he said, adding for the first time in the company’s three generation history he is looking at the largest percentage price increase of eight per cent or higher.  

Omelaniec said the uncertainty around prices in an inflationary situation makes it hard for companies to bid large projects. 

Steel companies and the resin pipe industry, which receives resin from overseas, are putting out weekly quotes on materials, he said.

“How do you bid on a project that is going to happen in two years?” he said.

The lack of manpower, infrastructure dollars, increased lumber and other prices are all combining to create an uncertain economy.

The rise in costs has had little impact on the masonry industry, said Alain Seguin, executive director of the B.C. branch Canadian Mason Contractors Association and Masonry Institute of B.C.

“We have no problems with supply,” said Seguin, adding many of the products such as brick, blocks and stone can be sourced locally.

The higher prices in competing materials will open new doors for masonry projects, he believes.

But, it’s not all rosy. 

Labour is the problem, Seguin said.

“There is a shortage in qualified bricklayers. We are 35 bodies short in the Lower Mainland alone.”  

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