Surging demand for steel in data center and semiconductor plant construction, coupled with rising costs and extended lead times, is prompting developers to consider mass timber as an alternative building material. As steel prices have climbed by 25% over the past year, and lead times have more than doubled to 55 weeks, companies like Skanska are exploring timber to mitigate these challenges.
What Happened
Data centers and semiconductor plants are driving a significant increase in steel demand, exacerbated by the rollout of artificial intelligence technologies. According to Tom Park, Vice President of Strategic Supply Chain at Skanska, both steel mills and fabricators are operating at full capacity, further stressed by tariffs impacting the supply chain. During a webinar on September 10, 2026, Park highlighted these supply chain constraints and their impact on construction timelines and costs.
In response, some developers are turning to mass timber, despite its higher initial costs. Dean Lewis, Director of Mass Timber and Prefabrication at Skanska, noted a growing interest in timber from data center clients seeking alternatives due to the overall strain on material supplies. While mass timber can be more expensive than steel upfront, potential savings may arise during the construction process, from reduced foundation and lateral system costs to accelerated schedules due to its prefabricated nature.
Lumber prices have remained relatively stable, with escalation rates between 0% and 3%, despite tariff pressures on Canadian softwood lumber. François Robichaud, a partner at Forest Economic Advisors, emphasized that North American producers have expanded their capacity for cross-laminated timber and glued-laminated timber, although production levels remain below total capacity, suggesting readiness to meet future demand.
What This Means for Your Business
For businesses operating in construction and engineering, the shift towards mass timber could offer new opportunities to mitigate the risks associated with steel supply chain disruptions. Companies considering this transition must weigh the higher upfront costs of timber against potential savings in construction schedules and foundation work. Additionally, businesses should remain informed about insurance implications, as builders’ risk insurance costs are currently higher for mass timber than for steel.
Proactively engaging with industry studies, such as Skanska's collaboration with the Department of Agriculture, could provide insights into reducing insurance premiums, further enhancing the financial viability of timber projects. As federal and state governments increasingly prioritize sustainable construction practices, mass timber may also align with broader policy goals, potentially unlocking funding opportunities.
What US Operators Should Watch
Decision-makers should closely monitor developments in steel and timber markets, along with any changes in tariffs that could impact material costs. Staying informed about advancements in timber manufacturing capacity and insurance market trends will be critical. Additionally, keeping an eye on government initiatives supporting sustainable construction could provide competitive advantages in securing contracts and funding.
Source: https://www.constructiondive.com/news/data-centers-steel-developers-mass-timber-lumber/830432/
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