It looks like we hit bottom last Friday as far as Euro lumber market pricing. In the last few days there has been quite a bit of activity but this morning all of the European mills and sales agents with wood on the ground at the ports have reported a buying frenzy! Look for prices across the board to get pushed up tomorrow in the world of European dimension lumber!!
Thank you @David_Stallcop this is likely due to the 35% duty imposed on Russian lumber imports that went into effect in July. @David_Bagdy are you seeing this dynamic as well of euro lumber buying frenzy in the US? Keeping you busy?
@Andrey_Tikhomirov what’s the situation back home? Russian producers were able to find new markets or are they reducing prices, or getting govt subsidies?
All this was well analyzed in a prior article by @David_Bagdy here last month. We are now witnessing how it all plays out!
@Nadia most reloads and inventory yards across the country went all the way down to the asphalt as people were waiting for the bottom of the market. That bottom hit last Friday and Monday Tuesday Wednesday of this week lumber futures are up big time. Activity was strong Monday and Tuesday for most mills but this morning everybody stepped in and some mills called it a buying frenzy. Nobody wanted to wait for a couple more days to see where the market was going. They all stepped in at the same time and are wiping out any prompt shipment inventory.
I did not hear about the inventory yards going down to the asphalt. Is this calling hedging? Waiting it out?!
Yes, lumber futures increase ~12%. Question is whether this the recovery from the bottom or a local blip? …
@Nadia Definitely “waiting it out”. Those who jumped in last Friday or this Monday are benefiting as everyone is jacking their prices up!
Hedging is a technique used for lumber price protection mostly by using lumber futures.
Most lumber is stored on gravel, concrete or asphalt so when they refer to running the inventory to the asphalt that means they don’t have much inventory in stock that’s unsold .
Hope that helps to clarify some terminology
Inventories “underbought”, the Autumn “season” approaching, and less wood available = the perfect storm? As September approaches the market is starting to feel the effects of less imported wood available. It’s all been laid out in previous posts and David Stallcop’s recent assessment of the market is spot on. There is less European and Russian product on the market and this trend will continue.
The 35% tariff on Russian wood went into effect July, 27th. It’s interesting to note that importers scrambled since then to avoid paying the tariffs by having the mills reinvoice the wood as “low grade” ( #3 ) which would greatly lower the assessed tariff. Some Gulf Port ( Houston and New Orleans ) destinations from St Petersburg, Russia have been routed through Mexico, avoiding the tariff completely. Buyers beware as US Customs begins to claw back the tariffs. As a manufacturer in Russia, we rely on the government subsidies that exist. Russia’s export revenues ( in rubles ) are currently the salvation of the Russian economy. Look for the subsidies to remain. Wood from Russia is flowing but volumes are well below levels we’ve seen in the past.
Yes, got it @Michael_Haas thank you! I was referring to exactly the lumber futures hedging since you can do it in both directions, protection up or down. And with the new lumber futures, there seems to be more interesting changes and volume ramping up there as well … Buying volume typically tends to increase prices in the futures market.
OMG @David_Bagdy lumber traders are ingenious! All these techniques you listed to avoid or lower the 35% tariff!
Since you state:
“There is less European and Russian product on the market and this trend will continue.”
this means that euro lumber prices will keep going up correct? Because demand is not going anywhere, it’s still there?
Oh yes, ingenious!! I’m sure US Customs have never encountered such well-thought-out schemes.
Euro lumber will continue to firm in price amid tighter supply. Demand is good and getting better as we approach September.
This is one of the many factors that created this current buying frenzy this week.
August 9, 2022
West Fraser Timber Co. Ltd.
West Fraser announces production curtailment in BC
West Fraser announces production curtailment in BC. West Fraser Timber announced that it is permanently curtailing approximately 170 mmfbm of combined production at its Fraser Lake and Williams Lake sawmills, and approximately 85 mmsf of production at its Quesnel plywood mill, through the elimination of one shift at each facility. The capacity reductions will occur over the course of Q422. As context, an annualized production impact of 170 mmfbm equates to ~2.8% of the 6,000 mmfbm of combined SPF and SYP shipments embedded in West Fraser’s guidance for 2022 (at the mid-point of each guidance range).
Timber and transportation shortage challenges led to curtailment decision. The company mentioned that access to available timber is becoming increasingly challenging in BC, and ongoing transportation constraints have negatively impacted West Fraser’s ability to reliably access markets. As such, the company is moving to better align the company’s operating capacity with available timber and transportation. We highlight that during its Q222 earnings call on July 28, the company stated that it continued to face transportation issues that could cause the company to revise its operating schedules lower. We expect a small rise in W. SPF lumber prices as a result of this announcement.
Neiman’s mills in the Black Hills have recently curtailed production by 50% due to log shortages. It all adds up!!
@Jordan_Kirk As someone who’s been tracking the timber access in BC, have you seen any similar developments here?
@Matt_Layman do these BC curtailments and euro wood price increases fit into your lumber market shuffle?
Does action in the European market have an effect on the prices of euro wood at the ports?
The delivered price is up 100 mbf 2x4x16 were trading under 700 delivered end of last week and beginning of the week. Now 780-850 delivered now
Yes, @David_Stallcop great insight on this front. There is a Pakira forum article reporting on this today WEST FRASER AMENDS ITS BRITISH COLUMBIA OPERATING PLAN
but it’s phrased a little softer: “amends its BC plan” “announces production curtailment in BC” …
14% bump @justin_smith in the euro price you mentioned is a bit ahead of the lumber futures bump, but the futures are getting there! large bump in less than 1 week!
Lumber only goes up and down and occasionally sideways over and over again.