Lumber prices, demand swell in wake of storm.

Byline: Scott Maben The Register-Guard

Think housing costs are rising too fast? The fallout from Hurricane Katrina probably won't ease the pain.

The Gulf Coast disaster has pushed up the price of building materials, and housing and commercial construction costs are expected to follow.

In the time since the nation learned how extensive the destruction is in Louisiana, Mississippi and Alabama, the price tag on some wood products has shot up 30 percent or more.

It's a "CNN-driven market," said Pete O'Neil, co-owner of Value Lumber Yards of Eugene. Constant news coverage of the devastation fuels fears of shortages, O'Neil said.

"There's no primary reason for this other than just panic buying," he said.

Value Lumber is selling waferboard and plywood, used in roofing and siding, for about $14 and $18.25 a sheet, respectively - about $3.50 to $4 higher than before Katrina struck two weeks ago, O'Neil said.

Markets for structural panels, such as plywood and oriented strand board, have set a "scorching post-hurricane pace," according to Random Lengths, a Eugene trade publication that surveys wood products markets.

The panel market typically is more volatile than lumber. In the wake of Katrina, buyers seem more concerned about availability than prices, which have shot up 32 percent in the past two weeks, Random Lengths said.

Emotion appears to be playing a large role in the market frenzy, publisher Jon Anderson said. But the response also is practical as distributors, retailers and builders worry about disruptions in the distribution of everything from lumber to diesel fuel to resin for plywood, Anderson said.

Builders who have locked in bids on new homes are scrambling to purchase the materials they will need this fall and beyond, before prices shoot up even higher.

"They're trying to make sure they've covered themselves," O'Neil said. "They're trying to pre-buy everything to make sure they don't get caught."

Mills are raising prices in response to the surge in demand, he said.

The cost of roofing materials jumped between 5 percent and 7 percent in the week after Katrina struck, said Steve Davey, owner of River Roofing in Springfield. That nearly matches the increase in all of the past four or five months, Davey said.

The materials are getting more expensive primarily because the escalation in gasoline prices, which spiked again after the hurricane, is driving up shipping costs, he said. In addition, most roofing materials are made from petroleum products, so rising oil prices have a direct manufacturing cost as well.

"It's kind of a double whammy," Davey said. "And we really have not been able to figure out a way to protect ourselves. When we put a bid out, how do you hold it for the next four to six months and not know what will happen with your materials?"

There are reports of suppliers or builders hoarding materials around the nation, but Davey said he hasn't seen it locally.

"Distributors won't take purchase orders for that much material," he said. "It's a little nerve-racking not knowing what's going to happen."

Even before the hurricane, supplies of building materials were limited due to the lively construction scene. Ron Bour, manager of Scharpf's Building Specialties in Eugene, said there has been a shortage of drywall all summer.

"I think this is just going to do nothing but prolong this shortage," Bour said of the hurricane's aftermath.

United States Gypsum, one of Scharpf's main suppliers, has a drywall plant in New Orleans, he noted. It's not yet known how heavily the plant was damaged.

Katrina is driving up steel prices as well, affecting products such as steel studs used to frame commercial buildings. Bour said the two steel plants he buys from plan to raise prices 10 percent on Oct. 1.

Davey, who also operates a steel scaffolding business, said he is being charged an extra $5,000 in freight surcharges for each shipment of scaffolding from the East Coast. "We're kind of at their mercy," he said.

In addition to triggering short-term market jitters, the hurricane could lead to long-term consequences for the construction market, both nationally and in the Northwest, as large-scale rebuilding begins in the coming months.

Ken Simonson, chief economist of the Associated General Contractors of America, estimates that construction costs will jump 10 percent through 2006, rather than 8 percent as he had expected.

Katrina probably will further inflate the cost of cement, steel, copper, gypsum and petroleum-based products, Simonson said. Also, contractors use a lot of diesel fuel for off-road equipment, their own trucks and deliveries of materials and equipment, he said.

The disruption to ocean, barge and rail transport from Katrina, and the loss of power to cement plants in the storm's path, will cut deeper into cement supplies. At the same time, the urgent need to stabilize and rebuild roads and buildings will multiply demand for cement and other materials, Simonson said.

Normally it's not feasible to ship Northwest wood products across the country, but if the national construction pace continues through the rebuilding of New Orleans and other hard-hit areas, that could create a much higher demand for local wood products, O'Neil said.

Builders are concerned not just about supplies, but also about available labor.

In the mid-1990s, the state bolstered its construction work force by recruiting electricians, plumbers, pipe fitters, machinists and other skilled laborers from Texas and other Southern states.

"That was how we filled the gap and ramped up," said Cindy Catto, public affairs director with the Wilsonville-based Columbia chapter of Associated General Contractors.

But those workers probably will be in high demand for the next several years.

The disaster in the Gulf states, Catto said, highlights a looming crisis in Oregon as the most experienced laborers and supervisors - part of the baby boom generation - begin retiring, and too few young people replace them.

"I don't think Katrina is a short-term problem. But because of the massive long-term rebuilding, if we don't solve our work force issues in Oregon, we won't be able to borrow from other places. The South will be borrowing," she said.

As most public schools have cut industrial arts classes, Associated General Contractors has tried to work with teachers who can steer students into jobs in the construction industry.

The organization put more than 300 Oregon teachers through summer workshops to emphasize the application of math and science to careers in construction. It also has developed educational kits for elementary and junior high school students, is starting a Portland charter school focused on construction and plans to open a college of construction near Portland International Airport.

"We're working really hard to create the opportunity to get in front of kids and show them they can earn great money and have good benefits," Catto said. "We have a crisis on our hands, and we will not be able to import enough workers from other parts of the U.S.'