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Builder Larry Jones was in a jam. He needed a dozen sheets of plywood.
When he dropped by a Belfast-area lumberyard last week, he came up empty.
“I had to scramble around,” he said. He found some down the road, and “I took all they had.”
Indeed, as summer winds up, plywood has become a precious commodity in parts of Maine and around the nation.
It’s a hugely popular construction material made of thin layers of wood glued and pressed together. The U.S. industry produces some 1.25 billion sheets, or 40 billion square feet, of plywood each year.
In midcoast Maine, a sheet of plywood could be had for $16.50 three weeks ago, but is now selling for $20.50. In some areas, the price is closer to $30.
And, as Jones discovered, the immediate problem for many is not just price, but availability.
In the post-9-11 world, the government is cited early and often as a reason for the availability problem.
Making the rounds last week was the report that a shortage was caused because the U.S. government supposedly commandeered trainloads of plywood to help rebuild Iraq.
The real reasons for the crunch, according to those in the industry, are bad weather, forest fires and market price swings.
According to Random Lengths, a lumber and plywood industry newsletter based in Eugene, Ore., the Defense Supply Center two months ago ordered 766,498 sheets of plywood for Iraq. The materials will be used to rebuild schools, hospitals and offices. The supply center also ordered 320 carloads of 2-by-4, 2-by-6 and 2-by-8 boards for shipment to Iraq. A railroad carload is approximately 132,000 square feet of lumber.
To an industry that produces 40 billion square feet of plywood annually, the carloads heading to Iraq mean little.
“That’s just a drop in the bucket compared to the overall market,” said David Flanagan, president of Viking Lumber Co., last week. “That percentage of impact based on what is produced every day is negligible.”
Matt Masse, purchasing director for Hammond Lumber Co., with seven stores in Maine, sees the availability and resulting price problems caused by a number of factors. Masse said demand hit the market at time when production had slowed. That slowdown was caused partly by fires out West and partly by the weather.
Masse said plywood mills don’t maintain large inventories. Most people order in advance, and when demand suddenly increases, the supply slows. He said “a crescendo of events” was to blame for the tight market.
“It’s a delicate industry,” Masse said Friday from Belgrade. “They don’t make it for inventory. They make it for demand. You order it, they make it and ship it. The pipeline is moving continuously and there is no back stock.”
That’s true at Louisiana-Pacific Corp.’s mill in Baileyville, which produces a type of plywood sheathing called oriented strand board.
Clint Shilts, plant manager, said last week the operation produces 20 million square feet, or 625,000 sheets of plywood, per week during its 24-hour, seven-day-a-week schedule. He said the major pressure on the mill is to meet its delivery schedule, and in the current market LP has been skipping rail shipments to move OSB by truck.
A truck of plywood can reach the Boston market overnight, while delivery by rail can take up to a week, he said.
“We produce about the same volume regardless of what the market is doing,” Shilts said Wednesday.
Hammond’s Masse said most dealers have significant amounts of wood arriving and leaving their lumberyards daily. When supply tightens, that movement is interrupted. When their customers begin to look elsewhere, the pressure rises on the other dealers who do have product – as Jones, the midcoast builder, discovered last week.
Jones, of Whitecap Builders of Belfast, already has made adjustments. He suspects builders likely will have to absorb the recent high prices because most of their contracts were signed before the recent spike. He estimated the increased cost of plywood would add $1 per square foot to the cost of building a house.
One of the leading producers of wood products is Atlanta-based Georgia-Pacific Corp., and spokesman James Malone said Tuesday “there are a lot of reasons” for the spike and shortage.
“But primarily the supply crunch is being caused by the weather. The harsh winter and wet summer compressed the building season, and loggers couldn’t get into the woods to get the logs,” Malone said.
Finished product is dependent on a steady supply of logs to mills. When the weather keeps loggers from working the woods, the supply dries up.
Malone also noted that the shortage has occurred as interest rates have remained low enough to enable plenty of people to obtain mortgages and the housing industry to continue its robust activity. Once the weather improved, builders went at it full force. He said the supply line should adjust itself once winter sets in.
Along with poor weather, recent forest fires in British Columbia have been a factor, according to some. Viking’s Flanagan said the decline in production in western Canada caused the market to reach a more typical balance. He said that until the recent shortages, plywood and lumber had been selling at the same prices they were a dozen years ago.
“When production goes out of the marketplace, it makes it seem like an alarming situation,” Flanagan said.
“I don’t know if I’ve seen prices come up this quickly, but I’ve seen it at this level before,” he said. “Everybody’s getting all steamed up about it, but this is just a temporary thing and it should adjust backward. I think November, December, it should be back the way we want it to be.”
Meantime, builder Jones said he doesn’t want to keep scrambling. “We’ll just have to order ahead of time,” he said.
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