Plywood Prices Soar Ahead of Isabel

As residents of the Southeast warily eye Hurricane Isabel (search) churning in the Atlantic, they may be thinking of boarding up parts of their homes. If they do, they'll find the price of plywood has skyrocketed to a near all-time high.

Some lumber companies are paying double what they were for plywood earlier this summer, but the reason is supply and demand, not gouging. People looking for plywood may also have a hard time finding it in some places. The shortage, and subsequent price spike, are the result primarily of the home building boom this summer and of wet weather that's made it hard to harvest logs.

The price hike is also being blamed in part on anticipation of large military purchases of wood for construction in Iraq, although industry experts say Defense Department (search) buys are only a tiny factor.

The shortage isn't acute at most outlets of the nation's biggest home retailers, Home Depot and Lowe's, because they buy so much wood on long-term contracts. Still, if hurricane watchers show up this weekend at those stores, they definitely will pay more than they would have earlier this summer.

"There probably is going to be sticker shock for a few people," said Ron Jarvis, vice president for lumber for Atlanta-based Home Depot.

Jarvis said the company is paying about double what it paid for plywood in May.

While Home Depot has been increasing its stock in anticipation of Isabel, some people trying to stock up this week as the storm approaches may find empty shelves at smaller lumber suppliers.

With the jump in price, Causeway Lumber's outlets in Fort Lauderdale, Bonita Springs and Stuart have bought less plywood than they normally would in hurricane season, said the company's owner, Scott Whiddon.

"If a hurricane comes, we will have to limit what we sell," said Whiddon, who is paying 65 percent more for plywood than he was a month ago.

A rainy year in the South has cut into southern pine harvests, making it hard for timber companies to get trees out of the forests, so supply was already short before the summer housing boom. Add the fires out west and some mills had to cut back production considerably.

Lumber supply was already tightening in late spring because of the weather. And because the economy hadn't picked up, retailers cut inventory. Then mortgage rates went to 40-year lows in June and July, creating a record number of housing starts in July. That's when prices really shot up.

A year ago, half-inch plywood was selling at $268 per thousand square feet. Last week it was $510 for the same amount, said Sam Sherrill, an editor at Crow Publications, a Portland, Ore., trade publication that tracks the lumber industry.

"It's a supply and demand-type issue," said Jennifer Stanberry, a spokeswoman for Wilkesboro, N.C.-based Lowe's Cos. She emphasized: "The hurricane is not going to affect the prices."

The shortage and high prices are being felt nationwide, not just in the Southeast.

"Everybody is begging" for plywood, Ed McDermid, president of Frontier Lumber in Buffalo, N.Y., told The Buffalo News earlier this month. "You basically have to have a friend to get it."

Many suppliers are blaming military purchases for taking so much plywood out of the market.

But industry experts say the purchase by the Defense Logistics Agency of $50 million worth is a tiny fraction of the amount bought in the multibillion industry each year.