Page 8 - BusinessWest May 26, 2020
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high speed. Unfortunately, in some cases, supply chains have been slow to respond to growing con- sumer demand.
For example, American steel manufacturers all but shut down production last spring as the pandemic took hold and the economy imploded. But as the recovery ramped up, mills were slow to resume full production, creating a massive steel shortage, one that has severely impacted building costs.
Meanwhile, sawmills also shut down lumber production last spring to brace for a housing slump that never arrived — and now, with the housing market on fire, both in new construction and home improvement, lumber shortages have sent consumer prices soaring. In fact, the median sale price of existing homes nationwide surged by 17.2% in March to a record $329,100.
Anna Nagurney, the Eugene M. Isenberg chair in Integrative Studies at the Isenberg School
of Management at UMass Amherst, said soar- ing prices in construction are a natural result of home-improvement activity increasing during the pandemic, while home buying never really slowed.
“People haven’t been traveling or anything, so they’ve been improving their homes, building decks, and so on,” she said. “Now we’ve seen the price of lumber has escalated dramatically in the last couple of months.”
The pandemic messed with supply and demand in unexpected ways, but now that the economy is reopening and consumers want to
go out and spend (and, in many cases, have been saving those stimulus checks for that purpose), supply has run into a number of roadblocks, from the slow ramp-up of the lumber and steel indus-
tries to serious delays in freight shipping (more on that later) to a shortage of workers putting additional strain on businesses.
“People want bigger homes, better homes, they have more money, the federal government has been pretty good to people ... there’s just much more demand for products,” Nagurney said.
She noted that the Trump administration was more overt about
pursuing trade wars,
and while back-and-
exacerbated by existing tariffs. In the spring
of 2017, the Trump administration hit Canada with tariffs of up to 24% on lumber. During the final months of his presidency, those tariffs were slashed to 9%, but the National Assoc. of Home Builders is calling on the Biden administration to temporarily remove the 9% tariff on Canadian lumber to help ease price volatility.
 forth tariffs haven’t been as much of an issue lately, the U.S. is still not on great terms with China, which significantly impacts the cost of steel, aluminum, and rare-earth met- als. “The geopolitics is scary.”
“
Supply-chain issues aren’t helping, from the
People haven’t been traveling or anything,
so they’ve been improving their homes, building decks, and so on. Now we’ve seen the price of lumber has escalated dramatically in the last couple of months.”
six-day Suez Canal shutdown in March to clear the container ship Ever Given to the cyberattack that shut down the Colonial Pipeline earlier this month, to a critical shortage of shipping contain- ers worldwide, particularly in Asia. Companies are waiting weeks for containers to become available and paying premium rates to secure them, caus- ing shipping costs to skyrocket.
“The containers are not where they’re sup- posed to be,” Nagurney said. “It’s like a puzzle. We need to move them. That’s one of the reasons we can’t get some of the goods from China, like furni- ture. The prices of shipping containers have gone up as a result because they’re not where they
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8 MAY 26, 2021
FEATURE
Gas prices are on the rise as well, which impacts every sector of the economy, said Peter Picknelly, chairman and CEO of Peter Pan Bus Lines.
“Rising fuel has an effect on everyone — peo- ple have to ship things, produce things ... it’s not just gas, but everything we buy,” he said. “Chicken and beef and produce, they all need machinery
to harvest; that’s all fuel. You have to transport it; that’s all fuel. Rising fuel costs are a significant hit to the average consumer.”
Easing the Burden
In the case of lumber, the shortage has been
ANNA NAGURNEY
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