Construction materials

Shortage of building materials and climate change: trade at daggers drawn in wood supply

It’s no secret that construction activity resumes in 2021 (home improvement projects have jumped during containment in the UK and abroad) resulted in a shortage of building materials and an increase in prices. Earlier this year global logistics issues and widespread demand particularly affected lumber supplies.

The continuing shortage of wood is indicative not only of nearly two years of significant upheaval due to Covid-19, but also of the importance of decarbonizing the construction industry. The timber supply chain is particularly threatened by climate change, as we explore in more detail below. Developers and entrepreneurs should consider supply chain vulnerabilities and potential foreign policy changes in upcoming projects.

The big picture

It was reported in June that companies are unable to build stocks of timber – it happens in the UK pre-sold, having already been allocated to customers. The effects of this shortage are confirmed in the latest government figures, which show a drop in production in construction for three consecutive months – for example, in June 2021, we saw a drop in monthly construction production of 1 , 3%. Private housing has been particularly affected. These numbers are attributed the shortage of materials, including wood.

While the wood supply has been disrupted by the Covid-19 pandemic and a sharp increase in demand for building materials, the effects of climate change are aggravating the vulnerability of the industry. Timber yields are increasingly threatened by an increase in pests and forest fires due to climate change. As extreme weather events multiply, calls for overhaul of the timber industry and forest management only increase.

Yet wood can offer a lower carbon alternative to materials such as steel and concrete, and therefore it is a critical material in the construction industry’s decarbonization efforts. Competing environmental and sustainability goals affecting the timber industry were highlighted this summer as the extent of weaknesses in the timber supply chain emerged.

The UK depends on imports for the vast majority of its timber supply (80%) and on Sweden for almost half of the timber used here. As a result, the UK construction industry is vulnerable to any knock-on effects caused by fluctuations in timber supply and forest policy in overseas markets.

Potential change in forest policy in Sweden

Sweden is the world’s third-largest exporter of sawnwood, paper and pulp, and finds itself at a crossroads between the competing interests of a booming low-carbon construction industry and competing sustainability goals. The lesson debate in Sweden was triggered by the EU’s publication of its forestry strategy, which aims to prevent logging in old-growth forests and improve biodiversity. Supporters of the strategy emphasize the role forests can play in reducing flood risk and CO2 levels. After a summer of extreme weather events in Europe and North America, there is a strong incentive to ensure the sustainability of the timber industry.

The growing calls for an overhaul of forest policy in this way are being countered by Swedish logging companies. Other affected countries also strongly oppose the new strategy (read more here). The SCA group (the largest private forest owner in Europe) argued that managing forests “actively” is essential. The company points out that wood is often a more sustainable alternative to other products such as steel, and that their trees sequester CO2 as they grow. Forest policy is expected to be a hotly debated topic in the Swedish elections scheduled for next year.

The impact of climate change on wood supply and prices

The effects of climate change on wood supply and prices are clearly visible in British Columbia, Canada (BC). British Columbia is a major supplier of lumber to the United States in particular and has declared a state of emergency following recent wildfires in the region. This had a major impact on the price of lumber in the US market.

Next Steps – UK Government Response and Contract Mitigation

In response to the current shortage of timber architects emphasize the importance of strengthening national supply and supply chains. This makes the UK government’s commitment to supporting the use of wood in construction by tripling tree planting rates by 2024 extremely important.[1] The 25-year environmental plan also spells out government support for the use of English-grown wood in construction.[2] However, the government has come under intense scrutiny in recent weeks as tree planting rates for 2021-2022 in England are expected to hit an all-time high. lowest for three years. Officials maintain that tree planting targets will be met.

As the government seeks to strengthen the national wood supply in the years to come, developers and contractors can think about how they can alleviate supply chain problems now. We have previously written on the contractual mechanisms included in most construction contracts that are designed to handle such volatility, and what specific project risks need to be taken into account.

While the shortage of wood and other building materials can last the rest of the year, forest policy and the use of wood in construction are a key part of the UK government’s environmental goals, informing the long-term outlook for the UK timber supply chain.


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