JONESBORO, AR (KAIT) – The cost of lumber has skyrocketed since last January. "The mills have cut production so severely, that what product is available out there, they are getting the premium for it because everyone needs inventory," says Ted Mitchell, with the Builder Materials Company. He says that building market was so low last year that many Mills minimized their inventory. The last time he has seen the prices this high was Hurricane Katrina, "We saw numbers we've never seen before and hadn't seen since. Now we're starting to sniff around those numbers, if this situation continues we may see that type of number again."
The Real challenge for the material companies is knowing when to buy. Most of the lumber is sent in rail car quantities, and transit time can be three to four weeks, "You're guessing what the market is going to do in the next three to four weeks. If your having one of the undulating markets you surely don't want buy high you want to buy low so by the time the car does get here the market is back up high and you can make some money.
When the cost of lumber increasing so does the cost for building, and with spring being the prime time to build, Mitchell says he does not expect to see any relief soon. "As quickly as they've gone up, I don't see that, only because of the time of year. We are in what they call the building season. I don't see any reason why those numbers would come off significantly." He says he does not expect to see a decrease until the fall, when the building season comes to a close.
The results, in turn hurts, contractors looking for new business. "It will eventually choke the industry. It's not easy getting loans and when you are on the edge of qualifying for a loan, and you know a 100% increase or a 50% increase raw material cost. That is going to push some people out of the market."