The uptick in pricing that began early in the year shows no signs of slowing down. All commodities that we examined are more expensive than at this point last year.
Part of this rise can be attributed to the dramatic decline in prices as the second wave of the pandemic set in, but prices are still well above pre-pandemic levels. The most dramatic increases have been among the lumber, copper, and steel markets, which continue to be beset by supply chain issues. The booming residential market has seen surges in demand for these commodities, while extreme weather has stretched supply lines incredibly thin. It is important to note that a 58.6% increase in the price of lumber does not translate to a 58.6% increase in the cost to procure and install lumber, but it is nevertheless significant.
Looking ahead, we believe that the key factor in commodities prices will be the logistics industry — particularly its ability to move goods across international borders. Copper can only be produced where it is physically present in the ground, lumber can only be produced where there are forests, and plastics can only be made where people build expensive factories. This means that commodities must be shipped to where they will be used — regardless of distance. Delivery schedules remain longer than normal, as the pandemic has thrown the logistics industry into disarray. We expect this to carry into next year, as eased pressure from the construction market will coincide with an uptick in activity ahead of the holiday season.