In a normal year, Van Culberson would be ramping up production at his saw mill after a mostly fallow winter. Instead, Siler City’s Carolina Wood Enterprises has operated at full bore for the better …
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In a normal year, Van Culberson would be ramping up production at his saw mill after a mostly fallow winter. Instead, Siler City’s Carolina Wood Enterprises has operated at full bore for the better part of the pandemic.
“There’s not much to the decision, because anything sells,” he told me. “Demand soared last year.”
Culberson considers his a modest operation. He employs 54 workers who process raw logs — mostly pine — on about as many acres. His production capacity sits around 500,000 feet of board per week. His clients, lumber yards around the country, purchase timber in 1,000-board-feet increments.
“Prices have just kept going up,” he said — that is, the prices at which he can sell lumber. “Probably right after the first of the year, it’s probably gone up $300 to $400 per 1,000-board-feet.”
The inflation constitutes about a 25% increase just in the last few months, and it’s ubiquitous in the lumber industry. Since the start of 2020, wood prices have nearly tripled across the market, according to a New York Times report. More people than ever before, it would seem, are pining (sorry, pun intended) for building material. The pandemic inspired a glut of DIY-ers trying their hand at home improvement, and professional home builders have not seen such rapacious throngs of buyers since before 2008.
“Absent a significant increase in mortgage rates or a COVID resurgence, it is hard to imagine what could cause lumber demand to drop and prices to moderate in the foreseeable future,” said Eric Cremers, CEO of PotlatchDeltic Corp., in an interview with the Wall Street Journal. His company owns and operates larges swaths of timberland in the Midwest, as well as several mills.
“Builders are reporting record home sales, and they’re going to need that wood to build those homes,” he added.
Culberson concurs. Builders are working furiously to make up for pandemic slumps, and so far consumers are willing to pay whatever the market dictates. The boom has made raw materials scant, though, further empowering suppliers to name their price.
“What I’m hearing is the wood just isn’t out there,” Culberson said.
Pine is the biggest industry commodity, and the most prolific raw material. It’s used in everything from basic framing material to finish work: roof trusses, beams, stringers, joists, plywood, trim and more. Culberson’s mill is not the most advanced (“This mill is great for us,” he said, “but not loaded with technology”) but still it can pretty much produce the gamut of pine products. Last week, when I visited, the mill was cranking out one-by-eight boards to be used in a variety of woodworking projects.
About a mile from his primary site, Culberson owns a second mill to process hardwoods: mahogany, maple, oak, beech, hickory, teak and walnut, for example. Through most of the pandemic, demand has been stagnant for hardwoods, which are used in flooring, cabinetry and furniture. But sales are picking up.
“Hardwoods were flat until maybe six weeks ago,” Culberson said. “But now they’re climbing, too.”
Mounting materials costs portend serious future shortages, but Culberson is just glad for the pay day.
Regulators, too, seem inordinately relaxed. The Fed doubled down on its commitment to low interest rates, a decision that may benefit most sectors, but could eventually cripple a housing industry that is quickly outpacing its capacity to meet demand. Although Biden’s White House has suggested it’s monitoring the situation and will take action to forestall a bust, the administration is calling for a multi-trillion dollar infrastructure investment package that will only further drive up the price of basic commodities.
Barring intervention, the housing market is trending toward disaster, and the larger economy would almost certainly suffer.
“I think pine will be here for a while,” Culberson said, “but hardwood will be tough to find ... If all this continues it would really put a halt to house building.”
Still, he’s not too worried about it. As the post-pandemic economy settles, and the buying frenzy subsides, Culberson expects lumber prices to dip before any real damage has been done.
“I think it’ll level out, although I don’t think it’ll go all the way back down to where it was,” he said. “But that’s just my opinion.”
And he takes his own opinion with a grain of salt.
“It’s hard to say, I mean, who knows?” he said. “It’s just like trying to play the stock market.”
Have an idea for what Chatham business topics I should write about? Send me a note at firstname.lastname@example.org or on Twitter @dldolder.