The same supply, demand, surface transportation and trade policy challenges impacting multi-industry supply chains have contributed to a current ongoing shortage of construction lumber across North America. Once more, President Trump’s proposed steep tariff on imported steel and aluminum could have a potential similar impact.
The Wall Street Journal reports (Paid subscription required) that the current lumber shortage has elevated prices to record highs before what is expected to be one of the busiest construction and home building seasons in years.
The run-up to this situation has been an ongoing NAFTA-related trade dispute between Canada and the United States which led to the Trump Administration imposing 20 percent tariffs on Canadian sawmills. One chart indicates that prices of lumber futures have more than doubled from 2016 levels.
A subsequent combination of supply disruptions brought about by wildfires in Western Canada and severe storms in the U.S. Southeast, compounded by shortages of railcar and flat bed truck capacity have combined to create the current situation. Distributors and lumber retailers are now dealing with what is described as weeks of delays and frustrated contractors and customers, not only from the shock of higher prices, but delayed availability as-well. As many know all too-well, the construction industry runs on tight coordinated scheduling of needed labor and materials, often daily. Delays equate to added costs and compounding scheduling delays.
Supply Chain Matters is highlighting such a development to provide our readers an example of the critical linkage of trade agreements to specific industries such as lumber and construction materials. Adding the notions of an inbound capacity shortage among suppliers, and the situation can quickly compound itself across other tiers and other services that make-up the extended supply chain.
With the threat of the U.S. imposing stiff tariffs on steel and aluminum tariffs in the current U.S. production boom period, added to the probability that U.S. domestic steel and aluminum suppliers may not be able to quickly ramp-up to unplanned added production output, and the same price and availability scenario could ripple across far broader product areas including consumer and capital goods areas whose material composition is concentrated in metals. Think autos, trucks, appliances, material handling and other forms of equipment.
That is why multi-industry procurement, supply chain and sales and operations teams need to be able to analyze, simulate and contrast various scenarios of supply and demand market changes and dynamics.
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