April Industry and Market Updates
Residential Housing
The regional housing market is still strong even with all the pricing volatility we've seen throughout the last few years. It seems housing shortages are prevalent in both urban and rural areas. How the Federal Reserve raising interest rates to combat inflation will affect the market remains to be seen.
Commercial & Agricultural Construction
The last six months have seen increased interest in the agricultural industry. The ongoing war in Ukraine is causing significant volatility to wheat markets in particular. Ukraine and Russia are both major wheat exporters, and the ongoing conflict will limit available wheat from both countries.There are two sides to the coin with the rising commodities. Dairy and poultry farmers' input costs are skyrocketing while their milk and egg markets are not rising at the same rates. On the other hand, the crop farmers are looking forward to a good crop and selling their crops at rates significantly higher than in previous years. This should create a tailwind for the industry as a whole that should allow them to make some updates to the infrastructure on their farms. Year-to-date, total non-residential building starts were 26% higher nationally in the first three months of 2022 than in the same period of 2021. Nonresidential construction has benefited from the growing confidence that the worst of the pandemic is in the rear-view window. However, higher prices and a shortage of skilled labor will slow the progress of those projects through the design and bidding stages, resulting in moderate growth in the near future.
Lumber & Metal Markets
The US lumber market remains highly volatile, but the supply chain continues to ramp up production to meet demand,which may serve to smooth out some of the peaks and valleys we’ve seen over the last several months. The Canadian market, on the other hand, is experiencing extreme challenges. One of North America’s biggest lumber producers said last week that it would shift to a four-day workweek at most of its 11 mills in British Columbia and Alberta starting April 4; not because of inadequate demand but because it’s run out of room to pile the boards that customers are ordering at a startling rate. The main issue appears to be a shortage of rail cars in Western Canada, where railways are struggling to keep up with the post-pandemic surge in demand for virtually every commodity that Canada exports in bulk. Another issue adding to the problem is the severe flooding and wildfires throughout the interior of British Columbia over the last two years, which has resulted in washed-out bridges and roads. Other lumber producers in the region are facing similar problems and have reduced production at their mills as well. These factors have contributed to extreme price volatility for lumber during recent years, which has always been a volatile market. The hope is that the drop-off in production from B.C. can be offset by new production from the U.S. South, resulting in market stabilization. North American lumber prices fell 22% in March. Brokers are unsure if this will hold due to rising demand as the weather turns warmer. The national metal market will most likely be under pressure for an extended period of time. Over the next ten years, the federal government will invest $1.2 trillion in infrastructure as a result of the Infrastructure Investment and Jobs Act (IIJA) that was signed into law last October. All iron, steel, manufactured products, and construction materials for projects that receive funding from the bill must be produced in the United States. If a company wants to build an equipment warehouse and uses funding from the IIJA, the steel for that metal building systems must be produced in this country. In summary, we feel comfortable with where the market is right now, and the rest of the summer looks really good. From what we are hearing from other local contractors everyone seems to be busy and have significant backlogs built up.
