As economies slowly begin reopening all over the world, the speed at which large market players adapt to renewed demand can have profound effects on the dynamics of industries as a whole. In the US, the economy is reopening at such speed that it is causing all kinds of shortages, from chicken wings to computer chips. But few people expected it of the lumber industry.

The US appears to be engulfed in a lumber frenzy that isn’t abating anytime soon. Though prices fell for six consecutive days this month, overall, they have still been up more than 85% year-to-date and 280% in the last 12 months.

As a result, the lumber industry is struggling to ramp up supply as exploding demand is clashing with limited production, resulting in high price tags and an overall shortage. This is having a dramatic knock on effect on the housing industry.

As builders moved to increase supply, expensive lumber is added to the price. The National Association of Realtors in the US reported in February that rising lumber costs added $24,000 to the cost of new homes since the start of the pandemic. As of April, that number had increased to nearly $36,000. Home prices have been on the incline for years, but they reached a boiling point during the pandemic. In April, the median home sales price rose to an all-time high of $375,000, according to Realtor.com.

The US is a larger producer of lumber but still imports. As such this represents a huge opportunity for European lumber firms. The question is are they taking full advantage of it? About 3.3 million cubic meters were estimated to have come from Europe to help make up the difference, but a bigger factor is southern US production.

A gap in supply that was exposed during the peak of the pandemic’s first wave may become a longer-term issue that could keep upward pressure on lumber prices. Canadian lumber shipments to the US — which make up a significant chunk of US supply — were down by nearly 20% in April 2020, and production levels are unlikely to return due to a combination of factors.

Firstly, because many Canadian forests have undergone significant changes over the last decade due to infestation from the Mountain Pine Beetle (MPB), which has killed millions of acres of trees. Secondly, A reduction in British Columbia’s Annual Allowable Cut (AAC) has significantly reduced production volumes in that region.

The limited lumber supply from Canada – as well as log supply issues in the US Pacific Northwest – will mean European lumber producers will have an opportunity to play an increasingly important role as suppliers to the US construction industry. Who is well positioned to take advantage?

One strong candidate is Sweden. Swedish sawmills are quite flexible and are accustomed to trading with countries where there is sufficient demand. Since the COVID-19 pandemic gripped the second quarter of last year, Swedish sawmills have nearly doubled their lumber exports to the US — a total volume that is roughly 5% of all Swedish lumber production.

Another is Austria, where long-established companies like Peter Kaindl’s Kronospan already have a presence in the US. Kronospan is also the world’s largest manufacturer of wood-panels, a key component to the housing boom on the other side of the Atlantic.

Other strong candidates include the Baltic States. The construction and lumber markets in Estonia, Latvia, and Lithuania have been unusually active over the course of the pandemic. Since August 2020, global markets have been driving the demand. Like Sweden, Baltic exporters have increased their lumber exports to the US to meet the strong demand and take advantage of historically high prices.

Demand has also increased radically in Britain following its exit from the EU, which has driven a strong increase in lumber demand from all four countries of the United Kingdom. British importers placed tremendous orders at the end of 2020 in order to beat trade rule changes that took effect in January 2021. Log prices in Estonia and Latvia have increased about 5%.

Pent-up US housing demand could continue outstripping available supply in the near term, which will keep upward pressure on lumber prices. The figures suggest there is momentum behind the trend in the US, and conditions suggest that European firms could be perfectly poised to capitalise on them.

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