The lumber and panel markets started the week with a renewed sense of energy and urgency. Buyers started the final month, of this extraordinary year, hoping to be as risk averse as possible. With month, quarter, and year-end inventory goals set now was not the time, or so they hoped, to go charging back into the markets. However, steady jobsite activity, particularly in the Southeast and Texas, a spike in prices, late shipments, and limited amounts of prompt shipping product from mills and secondaries had them quickly reengaging with the markets. Mills started the week quoting a majority of items above last week’s levels and prices continued to trek higher from there. Many mills, thanks to preplanned holiday shutdown time and transportation issues, ended the week quoting production available for shipment the week 1/3+/.
On Wednesday (12-1-21) The U.S. Census Bureau reported that total construction spending during October 2021 was estimated at a seasonally adjusted annual rate (SAAR) of $1,598.0 billion, 0.2% above the revised September estimate of $1,594.8billion. The October figure is 8.6% above the October 2020 estimate of $1,471.1 billion. During the first 10-months of this year, construction spending amounted to $1,323.1 billion, 7.5% above the $1,230.8 billion for the same period in 2020. Private construction spending was at a SAAR of $1,245.0 billion, -0.2% below the revised September estimate of $1,247.9 billion. Residential construction was at a SAAR of $774.7 billion in October, -0.5% below the revised September estimate of $778.6 billion. Nonresidential construction was at a SAAR of $470.3 billion in October, 0.2% above the revised September estimate of $469.4 billion. In October, the estimated SAAR of public construction spending was $353.1 billion which is 1.8% above the revised September estimate of $346.8 billion. Educational construction was at SAAR of $82.2 billion, 0.2% above the revised September estimate. Highway construction was at a SAAR of $102.5 billion, -2.4% below the September estimate. The National Association of Realtors® (NAR) reported on Monday (11-29-21) their Pending Homes Sales Index (PHSI), which is based on signed real estate contracts, not actual closings, for existing single-family homes, condominiums, and co-ops, increased 7.5% in October 2021, from September, to a reading of 125.2. An index of 100 is equal to the level of contract activity in 2001. Year-over-year contract signings have also declined -1.40%.
Spruce & Stud Markets -: The inquiry and sales pace of Western and Eastern Canadian SPF Std., & Btr., and No. 2 & Btr., started the week with even greater energy. Four out of five days of advances in the CME Lumber Futures markets gave buyers additional confidence in the markets’ sustainability. With the Antidumping and Countervailing Duties officially announced, several producers started the week incorporating those higher fees into their quotes. Another atmospheric river flowing above B.C. this week, led to additional heavy rain and snow at higher elevations. This in turn, caused mill production issues, while forcing the province to close some recently reopened roads and rail traffic has also been slowed or halted. B.C. mills also started the week, once again, wondering how the recently announced reduction in log harvesting in old-growth timber was going to impact their ability to sustain current production levels. Eastern mills dealt with limited product availability amidst increasing demand. Mills started the week quoting double-digits above last week’s levels and prices moved higher from there; for production available for shipment the week of 12/27+/. Buyers focused on the narrow widths in low-grade. Mills started the week quoting low-grade above last week’s levels and prices pushed higher from there; for production available for shipment the week of 12/20+/-. Increasing demand for stud trims led to another week of double-digit price appreciation. Mills are quoting stud trim production available for shipment the week of 12/20+/-. Transportation issues continue unabated.
CME Lumber Futures –: The CME Lumber Future Contract for January will expire on Friday, January 14th, 2022, at 12:00 Noon CST. For the past 5- days (11/26 – 12/2), CME Futures were up 4- days and down 1-day CME Lumber futures have gained $123.00 and are trading above midweek Cash Market of $695 by $219.50 CME at $914.50. One Year Ago, today (12-2-20) CME Futures closed at $649.00.
Hem\ White Fir -: The inquiry and sales pace of Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem-Fir, gained additional energy and urgency during the week. Transportation and production issues in B.C. due to another round of rain and snow on top of the previous flooding, mudslides etc. has many traditional WSPF buyers seeking coverage in the Coastal and Inland markets. Mills started the week quoting above last week’s levels and prices bumped higher from there; for production available for shipment the week of 12/20+/-. Demand for low-grade remains steady to strong. Mills started the week quoting low-grade above last week’s levels and prices pressed higher from there; for production available for shipment the week of 12/20+/-. Stud trim sales started the week building on last week’s increased market activity. Mills started the week quoting stud trims double-digits above last week’s levels and prices pushed higher from there, for production available for shipment the week of 12/20+/-.
Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir (GDF) Std. & Btr., & No. 2 & Btr., continues to build on the renewed activity in the marketplace. Mills started the week quoting double-digits above last week’s levels, and prices climbed higher from there; for production available for shipment the week of 12/13+/-. Mills noted that while sales to their traditional accounts were ‘ok,’ sales to the nontraditional segment were back at levels seen in the previous market uptick, as KD prices continue to climb higher. It was another week where long lengths (22’ +) experienced solid demand and with-it higher prices. Demand for low-grade has also been rejuvenated. Mills started the week quoting low-grade above last week’s levels and prices pushed higher from there; for production available for shipment the week of 12/13+/-. Stud trim sales are also back on track. Mills started the week quoting studs above last week’s levels and prices trekked higher from there; for production available for shipment the week of 12/13+/-.
Cedar Lumber -: The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, siding, pattern stock continues to trade at an accelerated pace. Producers reacted unfavorably to the increase in the Antidumping and Countervailing duties, going to 17.9%, almost double of what they were paying. They also reacted to the waves of rain that have been plaguing B.C. since Saturday afternoon, which has led to the reclosing of several roads and once again interrupted rail service from Vancouver to the interior. The reduction in old-growth logging and how that could impact their ability to produce WRC products was also a frequent conversation between traders. Pricing on boards, dimensional lumber, fencing, pattern stock, radius edge decking, siding and timbers were a mixed bag. With some mills quickly adding the additional duties, while others deciding to sell Price Time of Shipment, allowing them time to wait and see how the multiple ongoing issues impact the marketplace.
Shake & Shingles -: The inquiry and sales pace of Western Red Cedar (WRC) Shake, and Shingles continues to reflect a product that has solid consumer demand. However, limited raw materials, which are about to get even tighter as B.C. takes additional old-growth forests out of the logging cycle, is making it difficult for many mills, particularly the smaller producers, to commit to the sale of additional finished products. This while many of these same mills still owe buyers’ product that was sold months ago and has not yet been manufactured. While not subject to the increased Antidumping and Countervailing duty increases, Shake and Shingle manufactures were not immune to this week’s waves of inclement weather which once again closed roads and slowed or halted rail service in B.C. Anything sold this week, was sold Priced Time of Shipment. Nonetheless, mills started the week, as a price guide only, quoting above last Friday’s levels.
Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimensional lumber continued to build on last week’s markets reversals. Many traders felt that production and transportation issues in Western Canada were having a direct impact on Southern Pine dimensional lumber markets. Mills started the week quoting at or above last week’s levels and prices moved higher from there; for production available for shipment the week of 12/20+/-. High-grade buyers continue to report limited availability in their product grouping. As a result, high-grade prices continue to be quoted firm to higher and mill production schedules have moved into the week of 12/20+/. Low-grade demand continues to outpace production, with narrow widths the focus of many buyers. Mills started the week quoting low-grade at or above last week’s levels and prices traded at or moved higher from there; for production available for shipment the week of 12/20+/-. Stud trim sales remain steady. Mills started the week quoting stud trim modestly above last week’s levels and prices traded in a similar pattern from there; for production available for shipment the week of 12/13+/-. Small squares and timber sales remain sluggish. Mills quotes on 4x4 – 4x6 – 6x6 varied from Westside to Eastside, and from product to product. However, the price spread between zones remains tight, and buyers typically traded in their own zone. Demand for 5/4 x 6 Standard and Premium Radius Edge Decking remain at seasonal norms. The price spread between Westside and Eastside mills remains intact and continues to benefit the Eastside producers. Mills started the week quoting at or above last week’s levels and prices traded flat to higher from there; for production available the week of 12/13+/-.
Pressure Treated -: The inquiry and sales pace of pressure treated lumber, panels and specialty items continues to seasonally slow, but remain more active than typical for early December. Pro dealer buyers continue to rein in their purchase as weather and the holidays are starting to take their toll on jobsite activity. Those same buyers, however, find themselves in a quandary. With price on brite feedstock having stabilized and on many items moving higher, could this be the best prices they will see prior to spring? At the same time they are wrestling with the question of how to justify purchasing merchandise, that depending on location, might not be needed until late February \ early March at best. If they are in a state that assess a year-end inventory tax, that made the issue even more complicated. DIY sales slowed further, as their focus has switched to holiday décor. Transportation problems remain a constant. Continuing to delay inbound brite feedstock shipment and delaying outbound finished product as well.
OSB & Veneer Panels Overview –: The OSB and plywood panel markets easily built on last week’s uptick in inquiry and sales. Southern Pine plywood, again, led the markets higher, but Western Fir and OSB were not far behind. Mills have successfully moved production schedules into the latter half of December, with several mills opening the week of 1/3 – 1/10 for sales late in the week. Local distribution continues to report inventory outages on the key items buyers are searching for. Transportation problems remain a North American nightmare. A lack of trucks and empty railcars, coupled with inclement weather is further delaying already late shipments. For their part buyers want to remain cautious and many continue to rein in their replenishment. However, between late shipments, rising prices, and extended production schedules, remaining out of the market for a prolonged period of time and relying on Just in Time or Just Past Time purchasing habits is currently not a viable option.
OSB -: The inquiry and sales pace of OSB remains on firm footing, building on last week’s unusually busy, for a holiday shortened, week of sales. While U.S. traders enjoyed Thanksgiving, Canadian buyers were active in the marketplace. Improving sales have allowed mills to hold prices at a minimum firm and moving them higher in selected production zones and delivered cities. Mills started the week quoting at or above last week’s levels and prices traded higher from there; for production available for the week of 12/20+/-. Transportation issues continue to wreak havoc on timely shipments across North America. Issues in B.C. and along the I-5 corridor are particularly acute due to flooding rains, mud and rockslides closing and, in some instances, reclosing roads and rail lines. Secondaries with contract ownership are selling that ownership above mill replacement costs, especially if it was guaranteed to ship prior to anything available from a mill.
Southern Pine Panels -: The inquiry and sales pace of Southern Pine Rated Sheathing remains robust. Continuing late shipments, the result of limited truck and empty railcar availability, 2-step distributors with inventory outages similar to what buyers are searching for, and mills reporting limited to no open market panel availability continues to fuel buyers’ need for additional replenishment inventory. Mills started the week quoting double-digits above last week’s levels and prices trended higher from there; for production available for shipment (and this includes holiday closures) the week of 1/3+/-. Mill Cert. sales were also able to build on last week’s renewed interest. Producers started the week quoting Mill Cert at or above last week’s levels and prices traded at or moved modestly higher from there; for production available for shipment the week of 12/13+/-. The inquiry and sales pace of underlayment, siding, concrete form, and other specialty panels continued to build on last week’s uptick in activity. Mills started the week quoting specialty panels above last week’s levels and prices traded at or pressed higher from there; for production available for shipment the week of 12/13+/-.
Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing continued to gain additional momentum during the week. Mills started the week quoting Rated Sheathing double-digits above last week’s levels and prices traded steadily higher from there; for production available from the week of 1/3+/-. Southern Pine and Canadian plywood buyers were active in the Western Fir marketplace again this week. Activity in the CC, CC Plugged & Touch Sanded, Struct I, and Mill Cert. markets also enjoyed improving activity. Mills started the week quoting these items at or above last week’s levels and prices moved higher from there; for production available for shipment the week of 12/20+/-. The inquiry and sales pace of value-added panels, underlayment, sanded, siding, concrete form, and other specialty panels experienced additional interest during the week. Mills started the week quoting at or on either side of last week’s levels and prices edged higher from there; for production available for shipment the week of 12/13+/-.
Food for Thought-: I had the chance to catch up with an old friend just before Thanksgiving break. We are contemporaries and while I have been on the buy and write side of the industry, and currently only the write side; he has always been on the buy \ sell side. After exchanging pleasantries, the health and well-being of our brides, our children, and grandchildren. He asked me a question for which I was unprepared for. After all, we both have over 50-years of lumber and panel market experience. He asked me, ‘considering the volatility in the marketplace and myriad of outside influences on markets, what should I, or better yet what would you do, right now regarding purchasing?’
I laughed and asked if this was some sort of a Jeopardy question? He responded it could be. My answer then, ‘what is how much can you afford to lose?’ Don’t get me wrong, I clearly understand the premise of risk and reward. And I have been fortunate enough during my buying days to be on right side of the equation more than I was wrong. However, it is not fun being on risk and lose side of the equation and having to explain with clarity the why and wherefores of purchases that had been executed and failed to be a profitable venture.
I could not help but point out, and he surely already knew, that 2020 and 2021 are both years that no one in this industry has ever seen before. I cannot imagine the amount of pain there must have been for buyers and their companies, who were purchasing needed replenishment in late April, May, and early June of this year, at near all-time high prices, and then encountering production and transportation hiccups and receiving high prices inventory in June, July and August as the market retraced from their all-time highs to near where the entire mishigas started in March of 2020. As I said to him, I am not sure how many companies could manage another blow like that in such a brief period of time. That of course is based on a big “if”, if the markets were to suddenly begin to retrace. As it is, the markets are currently in the process of repeating the patterns, déjà vu all over again if you will, they were in during late November and December of 2020. Perhaps, with not as much gusto, but it is still early in December and there is lots of time left for buyers, especially if they are concerned about availability when the calendar rolls into 2022.
No two years are ever the same. Weather, a new variant of COVID, inflation, mortgage rates, stock market prices etc. all can and will impact the lumber and panel markets. If I were buying, I would want to be in close touch with those I am buying for and solicit their input on upcoming projects for the remainder of this year and Q1 of 2022. I would go back to my old mantra “30 – 45-days on the ground or coming at me.”
You see the lumber and panel markets and the game show Jeopardy actually do have a lot in common. And this is just some food for thought.