Contractor Advantage January / February 2023

Castle Building Centres Group Ltd. is a Canadian member-owned, Lumber, Building Materials and Hardware buying group representing over 300 member locations across Canada.

Contractor Advantage Magazine is the exclusive publication of Castle Building Centres Group Ltd. featuring quality Castle vendor brands available at Castle Building Centres locations.

Visit castle.ca to find a Castle location in your area.

Editorial Director Castle

Castle Building Centres Group Ltd.

Jennifer Mercieca

Art Direction and Design Espress Labs Inc.

Contributors

Danila Di Croce

Jennifer Mercieca

Director of Communications

Castle Building Centres Group Ltd. 905-564-3307 jmercieca@castle.ca

Material Contact

Karen Dougherty

Marketing Administrative Assistant

Castle Building Centres Group Ltd. 905-564-3307 kdougherty@castle.ca

Published and designed exclusively for Castle Building Centres Group Ltd. by Espress Labs Inc.

CONTRIBUTORS CONTRIBUTORS

DANILA DI CROCE

Danila Di Croce is a Toronto-based writer with over 10 years of experience in the fields of media and education, including a Masters in Media Production from Ryerson University. Throughout her experience, Danila has worked in the areas of public relations, marketing, radio and television broadcast, and has contributed to various national publications on a wide range of topics including entrepreneurship, building construction, workplace health and safety and hospitality.

LAWRENCE CUMMER

Lawrence (“Law”) Cummer is a freelance writer and editor and has been a frequent contributor to Contractor Advantage, Ideas and Rough Construction for nearly a decade. Over his more than 20-year career, Law has written about contracting and construction, general business, information technology, health and safety, personal finance and almost every topic in between. He has a passion for storytelling and sharing how people can work better, easier — and “smarter” — from contractors to technologists to business executives.

JILL J. JOHNSON, MBA

Jill J. Johnson is the President and Founder of Johnson Consulting Services, a highly accomplished speaker, an award-winning management consultant, and author of the bestselling book Compounding Your Confidence. Jill helps her clients make critical business decisions and develop market-based strategic plans for turnarounds or growth. Her consulting work has impacted more than $4 billion worth of decisions. She has a proven track record of dealing with complex business issues and getting results. For more information on Jill J. Johnson, please visit www.jcs-usa.com.

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WHAT’S IN STORE IN LUMBER FOR 2023?

While not the record highs of 2021, lumber prices still saw huge highs and lows in 2022. Will the trend continue?

Written by Lawrence Cummer

The lumber market continued to see interesting times through 2022. The year saw huge ongoing spikes and dips in pricing, production curtailments, and a downturn in demand as the year closed.

How much these trends will continue into 2023 remains to be seen, but Contractor Advantage spoke with four expert industry watchers to review the past year and — as best as one can — predict what the year ahead might hold.

“The lumber markets indeed have seen meteoric highs and subsequent price corrections over the past couple of years,” says Mike Park, Vice President of National Commodities for Gillfor Distribution. “Fundamentally, the increased costs were driven by higher than normal demand, lower than expected production levels, and bottlenecks in the supply chain, namely transportation, resulting in a lack of supply.”

While he says that while inflationary pressures have corrected — or perhaps over-corrected — lumber costs, “the inflation in today’s economy, be it food, transportation or durable goods has yet to subside.”

2022 pleasantly surprised many in the LBM industry, suggests Kelvin Johnston, Senior

Photo courtesy of Taiga Building Products

Buyer for Commodity Lumber and Panels at Castle Building Centres. He says 2022 proved as strong as 2021, and Castle finished the year with higher overall sales, although he does attribute some of that to rising inflation.

“The issue will be, next year, can we maintain that? I think in the first six months, even on lumber, treated lumber, I think most are confident that we have a good year ahead of us,” Johnston says.

One possible reason for the continued high demand may be that contractors have continued to be difficult to find, leading to more and more jobs being pushed into the coming months.

THE HIGHS AND LOWS OF 2022

While lumber prices in 2022 didn’t see the highs of the previous year, they remained higher than preCovid. “If not for 2020 and 2021, 2022 would have been record pricing,” Johnston says.

Photo courtesy of CanWel

“We still have historical volatility. Will that happen in 2023? No one really knows.” Still, with a war in Europe, high inflation, and countless factors that can affect wood harvest, some continued volatility seems likely. “Any time we have unknowns, that sets up for volatility,” he adds.

Brendon Hiller, Lumber Supply Manager at Taiga Building Products, is expecting the market to be less unpredictable in 2023 or at least to see a narrower trading range.

“We expected less volatility in 2022 in a pretty major way, and that’s no different in 2023; we expect less volatility as well,” Hiller says. “But we had some interesting tailwinds at the end of [2021], such as the flooding in BC and the substantial rally that created a shortage of rail into the US market.”

He continues, “That created a very healthy market run, exceeding the $1,000 threshold we didn’t think we’d hit again [in 2022]. It had a sudden drop-off, but I think the initial run of 2022 surprised everybody.”

Hiller notes that the supply-and-demand balance remains “fragile,” and it doesn’t take much to “shift the scale.”

The price volatility of recent years has driven many dealers to take different approaches to lumber and panel buying toward just-intime (JIT) inventory.

“The extreme volatility, and especially the dramatic price drops, has moved lumber buyers to take a more cautious approach in their buying habits, reducing overall lumber and panel

Photo courtesy of CanWel

inventory levels, buying more day-to-day for immediate needs, and just in time,” says Steve Marshall, Vice-President of CanWel Treated Division. “This pushes price risk back down to the sawmills as dealers carry less lumber and panels.

INFLATIONARY IMPACT AND RISING MORTGAGE RATES

Consumers are experiencing the highest inflation rate in the past 30 to 40 years, and the steps to mitigate it are impacting the lumber market. To

combat out-of-control inflation, most central banks raised policy interest rates in 2022, restricting credit and reducing value creation. In Canada, the Bank of Canada raised its policy interest rate to 4.25 percent in December, the seventh interest rate hike of the year.

Experts have suggested attempts to cool real estate market using interest rates are resulting in fewer builds and, relatedly, reduced lumber demand.

Photo courtesy of Taiga Building Products

Park says that inflation and interest rates are dulling the demand for lumber and panel products. He expects less pricing volatility in the year ahead until demand recovers. “On an optimistic note, underlying demand for housing and renovations remains strong, which will bode well as interest rates retreat,” he adds.

Hiller adds, “It’s doing what [central banks] hoped, which is cooling the market down. We’ve seen housing starts slow down; completions are still on the rise in the U.S.” He predicts housing starts will average out to around the 1.4 million range. “But we’ve also found inflation is having a big effect on people’s disposable income and that in many cases is affecting the R&R market.”

“The big argument is with higher mortgage rates, more people will stay in their houses and put money into their houses, but our concern is that disposable income throughout North America is going to be at risk, and that affects the R&R market in a big way.”

Park says the measures to cool down inflation have caused a pullback on new home construction and home renovations, resulting in lower overall consumption of lumber and panel products. While mills have adjusted output, “at this point, current lumber prices are trending at or near production costs suggesting the market may require further adjustment,” he notes.

Photo courtesy of Taiga Building Products

Photo courtesy of Taiga Building Products

These economic policies, increased production of southern yellow pine (SYP), higher home prices and the ongoing shortage of skilled trades have all contributed to fewer housing starts in the US, reducing demand for wood products, says Marshall. “This environment has tipped the balance to an oversupply of lumber of put downward pressure on prices.”

That said, Marshall notes, “Canada’s new home demand is still solid, the current stock of homes is still aging on average, which bodes well for R&R, interest rates are higher versus the recent past, but are still relatively low versus the longer term.”

“Inflation is still an issue,” he continues. “I believe 2023 can be a modestly solid year, although unlikely to be record-setting.”

Photo courtesy of CanWel

CAUTION AND COMMUNICATIONS

Johnston cautions against being too conservative with their lumber buys. “If everybody is too conservative when people do go back to buying — and we’re seeing it already, with inventory pipelines being very low — in the spring, let’s say, the inventory won’t be there. You could find yourself short on supply because people are being so conservative; that could drive another spike in pricing in the spring.”

The best practice is the same as it’s been in recent years: communicate your needs early with your vendors. Solid communication is the balm for any volatility ahead.

“Expect the consumer to be less tolerant of the crazy price increases the industry experienced in the last two or three years. As an industry, if we price ourselves too high, the consumer will slow their buying,” Marshall says. He says 2023 will see greater consumer price shopping due to inflation and quick price raises during unexpected upticks in demand due to low supply inventory. “Volatility is likely to be the new norm.”

Park suggests: “A combination of proper inventory management and listening to customer needs ultimately will guide everyone through times of uncertainty at all levels of the supply chain. 2022 was no different.” —

Photo courtesy of Taiga Building Products

LOOK BOTH WAYS BEFORE HIRING

Internal, External and Other Solutions to Staffing Shortages

Written by Jill J. Johnson, MBA

It’s no secret that today’s staffing shortages are extremely challenging for most businesses. It is also highly unlikely that these challenges are going to resolve in the near term. So, what do you do now when you cannot find the needed talent? It is time to rethink all of your staffing options. The key is to make the most of your staff and augment them with outside resources and technology.

PRIORITIZE THOSE WHO INTERFACES WITH YOUR CUSTOMER

The foundation of business success is based on your revenue and the stability of your revenue streams. Customer loyalty and retention depend on their satisfaction. Prospects rely on their ability to access the information they need to make informed decisions and gain comfort with their options. Organizations with a history of

sales success often rely on operational delivery to keep them going when short-staffed. Yet your customer-facing staff is the most valuable to sustaining enterprise revenue.

Identify staff who interact with your customers along the entire range of their customer journey. Their success in meeting customer needs, satisfaction, and prospect demands determines if you can satisfy and keep them. They can keep your customers and expand your prospect pool if they have the bandwidth to provide exceptional service.

Today’s consumers are looking for faster information. Many prefer to get information via video or audio. Adjust to how they want to consume information. Streamline your team’s workload by creating tools and resources to get them the answers they want and need quickly. Ensure they have the tools and resources they need to be more efficient. Clarify what can help them deliver a better customer experience. Remove the roadblocks to their success.

1. OUTSOURCE WHEN NECESSARY

The gig economy is here to stay. Leveraging external relationships with outsourced resources can help you flex your staffing and be a valuable way to get the work done. While not as optimal as building your team, the pressure relief you experience when critical work is being completed can give you the breathing room needed to determine if this role requires a full-time hire or can be permanently outsourced.

For small projects, online resources like Fiverr and Upwork provide you with worldwide access to Gig Workers with specific skills that are needed for short-duration work. Most of these online sites have filters allowing you to clarify your service needs, information ahead of time on the potential cost, and control over where your talent comes from and what languages they speak.

Staffing Agencies can bring talent to your organization for a project that will take a bit longer. While it will be more expensive, keep in mind that you are not paying any benefits and will not get hit with an unemployment claim

when you no longer need them. Agencies vet the staff who work with you and will help you find the talent required.

Trusted Outside Vendors can provide critical services for you and do bookkeeping, administrative work, sales support, social media, website management, etc. Long-term vendors have deep insight about your history, your team, and your culture. They know your preferred

communication methods and how you like to work. Outside vendors are an exceptionally valuable safety valve when you cannot find the right permanent talent.

Do not try to manage too many different outside resources. Focus on the most critical work they can provide for you and engage in shortduration tests to see if you have chemistry and if they give you value.

2. CONSIDER THE POTENTIAL OF TECHNOLOGY

Technology and automation use is exploding as companies seek opportunities to invest in devices and software to provide options to leverage the already existing staff and enhance their productivity. Autonomous devices include robots, drones, vehicles, floor cleaners, and more. These devices can sense the environment around them

and operate without human involvement. Other devices, such as exoskeletons, can support a worker’s body and provide augmented biological capabilities, such as safely lifting heavy objects.

While robotics is advancing, they are not genuinely autonomous of human interaction. They still need people involved in the process to

use them. This includes programming, monitoring them, and changing batteries as they perform their service. At best, this is now “co-botics,” and people will never be fully eliminated from the equation, and they will work in tandem. As these options expand, you can take advantage of them too, even if you are a small business.

There is growing interest in how data and analytics can be used to manage staff productivity and service delivery. Most technology devices are already collecting data. When combined in the future with artificial intelligence, the possibilities for data analytics appear to be endless. When the data is combined with AI interpretation, this can provide valuable insight to help streamline your processes and maximize staff efficiency.

Evaluate how you are using the software and technology currently deployed in your business to see how you can maximize their value. The Return On Investment (ROI) should be very carefully

evaluated to identify any efficiencies achieved or productivity enhancements. Get your team any needed training to effectively work with advanced technologies. You might need a different skillset to work with the technology, which may expand your workforce to pull from a broader pool of potential talent.

FINAL THOUGHTS

It is clear that the staffing shortages are not going away. We have to find opportunities to gain increased productivity from our existing workforce and alternatives for completing the work we need to be done. Focusing on the needs of our customer-facing team members, making clever use of outside resources, and maximizing technology use provide viable options for addressing the issue. When you expand your potential to get the job done, you are more likely to find the needed resources. —

INSULATIONTHE HIDDEN STAR

Written by Danila Di Croce

When choosing a new home or office, all eyes are on the beautiful finishes featured in the space. Very rarely will the question come up of what exactly is behind the walls. Yet, an important component that is in between the walls, insulation, is one of the greatest factors that will affect how

comfortable one will be in that setting. What’s more, insulation affects the energy efficiency of a home, therefore, impacting not only a homeowner’s wallet, but the sustainability of the environment as well.

Consequently, insulation companies play a large role in the commitment to reach the expectations outlined in the Paris Agreement, which was presented at the UN Climate Change Conference in 2015. This agreement declares that to keep global warming to no more than 1.5°C, there must be a reduction in emissions by 45% by 2030, and emissions must reach net zero by 2050.

As a result, companies are making efforts to offer better solutions for insulation products. For example, Alan Hubbell, NA, Resident Marketing Manager and Linda Jeng-Lew, NA, Commercial Marketing Manager at DuPont Performance Building Solutions, explain that “DuPont’s

reduced-GWP Styrofoam™ has achieved a significant reduction in embodied carbon relative to the previous generation of DuPont products, as demonstrated in published product Environmental Product Declarations (EPDs) listed through UL Environmental.”

Hubbell and Jeng-Lew explain that the company is doing even more through their “Acting on Climate” goal, which aligns with the Paris Agreement timelines. “In addition to reformulating products across its Styrofoam™ Brand XPS Insulation portfolio,” they continue, “DuPont’s Performance Building Solutions business has committed to an aggressive 75 percent reduction in GHG emissions

Photo courtesy of Johns Manville Canada

from operations by 2030, compared to 2019 figures. The commitment includes the introduction of reduced embodied carbon products through product innovation. In support of its commitment to reducing greenhouse gas (GHG) emissions while delivering sustainable innovation, DuPont developed a new standard for two-component polyurethane foams with the launch of the HFCfree Froth-Pak™ Spray Foam. This spray foam offers customers an innovative solution with a significant global warming potential (GWP) reduction, and also delivers GHG reductions in support of the Paris Climate Agreement.

Froth-Pak™ contains no ozone-depleting chemicals or HFCs while elevating the performance attributes professional contractors expect from the market-leading, lowpressure spray foam brand.”

In regards to product innovation, Johns Manville’s recycled glass initiatives have yielded beneficial results with an estimated savings of 13, 100 tons of CO2 emissions, as well as 7,800 megawatt hours of electricity. Gino Allegro, Canadian Director of Sales, explains further, “Recycled glass takes less energy to melt; it takes an estimated 40% more energy to melt virgin raw materials than it takes to melt cullet.” The company celebrated additional sustainability milestones as Allegro states, “Johns Manville set a goal to reduce solid waste shipped to landfills by 10%; we actually hit 11% reduction, which converted to 13 million pounds of materials eliminated from landfill sites, saving 69000 cubic yards of space.”

Aside from environmentally-friendly materials, the application of insulation is another important element to consider when adhering to the new

Photo courtesy of Johns Manville Canada

energy code standards. As such, the process of Continuous Insulation has been on the rise. As Allegro explains, “As part of meeting those net zero requirements, there’s more of a demand for Continuous Insulation. It’s not going to be just the conventional way of insulating a home, for example in between studs, now there’s the option to use exterior sheathing, such as our AP

Foil-Faced Polyiso Foam Sheathing, which is placed over the plywood on the outside of the home, so to help prevent thermal bridging.”

Matthieu Danis, Wood Fibre Product Manager at Building Products of Canada Corporation, explains another environmentally beneficial option in addition to the continuous installation

Photo courtesy of Building Products of Canada

Photo courtesy of Building Products of Canada

Photos courtesy of Rockwool

that can be done as well; “Since carbon footprint is also becoming a concern, one way to lower a building’s carbon footprint is to reduce the amount of concrete used in the foundation pour by using a thinner wall structure. For example, we are able to provide an R-5 panel for continuous insulation, which is thin enough to allow for an 8’’ poured foundation wall with brick siding. Furthermore, since our panels are manufactured from wood by-products, we are able to offer a truly ecological product.”

While there are a variety of options for insulation, the main point regarding this material remains the same across the industry - the demand for insulation is only going to continue to increase in

the future. “Codes and regulations are increasing the amount of insulation required in and on buildings for better efficiency as well as fire prevention and acoustic results,” explains Mike Goyette, National Sales Director at Rockwool, a company that considers the environmental impacts at all facets of their business.

The increase in insulation is not only a factor when looking at new builds. In fact, older homes, for example, are in dire need of an insulation update. “Under-insulated attics are prevalent in housing types across Canada built prior to the 2000’s,” explains Mackenzie Adkin, Key Accounts Manager at Owens Corning, a global leader in sustainability. “This represents a huge opportunity to reduce energy consumption and increase occupant comfort and be on par with homes built today, which have up to R-60 insulation in attics. Bottom line, one should consider adding insulation to all areas being retrofitted as a simple, costeffective way to reduce energy consumption and maximize occupant comfort.”

However, while it is important to add extra insulation where needed, it is imperative to screen for any additional issues in the home to ensure that they don’t interfere with the effectiveness of the insulation. “The insulation itself is key to building energy-efficient homes. However, insulation materials can have their efficiencies significantly reduced if homes are not properly air-tight or have excess moisture trapped in their roofs and walls,” explains Clement Devroux,

Product Manager of Insulation and Exterior Solutions at St. Gobain. “Coincidentally, with more air-tight homes, we see an increased risk of moisture accumulation in the walls. This is why we offer Membrain™ Smart Vapour retarders that prevent moisture accumulation (and ultimately the formation of mould) by sensing and adapting its permeance to varying humidity throughout the year, to keep the wall cavity dry.”

Photos courtesy of Owens Corning

Photos courtesy of CertainTeed

Lastly, another crucial element regarding insulation is ensuring it is put into place properly. “Prescribing how the insulation should be installed will help to deliver a more effective performance as well,” assures Goyette. “Proper fit leads to not only better performance but also safety.” —