Ladies and Gentlemen:
With national holidays celebrated on Monday in Canada and the U.S.; Tuesday started quieter than many traders had anticipated. Limited availability, extended production schedules, some reaching mid to late March or beyond, and a plethora of late shipments kept upward pricing pressure in the lumber and panel markets intact. However, the upward pricing trajectory was far more reserved than in previous weeks. The very same issues were contributing to buyers’ hesitancy to purchase and their growing concerns about the potential for downside risk. However, with jobsite activity stirring or already ramping up in some areas, buyers with lite field inventories spent most of the week chasing down late shipments and trying to secure extra replenishment. With demand outpacing mill production capacity, many producers have resorted to allocating what little production is available to a select group of buyers. Other mills and secondaries just auctioned off that production to the highest bidder. Eliminating the need for favorites.
On Thursday (2-24-22) The U.S. Census Bureau and the Dept. of Housing and Urban Development jointly announced that new residential single-family home sales for January 2022 were at a SAAR of 801,000, according to estimates. This is -4.5% below the revised December rate of 839,000 and is -19.3% below the January 2021 estimate of 993,000. The seasonally adjusted estimates of new houses for sales at the end of January was 406,000. This represents a 6.1 months’ supply based on the current rate of sales. The median sales price of new houses sold in January 2022 was $423,300. The average sales price was $496,900. On Tuesday (2-22-22), the Federal Housing Finance Agency released the Home Price Index (HPI) for December 2021. The HPI increased 1.2% month-over-month in December and was 17.5% higher year-over-year.
Spruce & Stud Markets -: On this holiday shortened week, limited mill offerings, continuing steady to strong field demand, and late shipments all helped to fuel upward price pressure in the Eastern and Western Canadian SPF Std. & No.2 & Btr., markets. Buyers are again concerned about, what they believe, is the growing potential for downside risk. Nevertheless, most buyers are reporting that they do not have sufficient inventory on hand, or on order (albeit much of it late in shipping) to meet current and anticipated jobsite needs for March and early April. As a result, buying continued, and anything available for close to prompt shipment easily sold at significant premium. Mills started the week quoting above last Friday’s levels and prices moved modestly higher from there; for production available for shipment the week of 3/14+/-. Low-grade sales continue to trend higher. Mills started the week quoting low-grade above last Friday’s levels and prices edged higher from there; for production available for shipment the week of 3/7+/-. Stud trim sales continue to accelerate as steady to strong demand continues to overwhelm limited supply. Mills started the week quoting stud trims above last Friday’s double- and triple-digit gains, and prices trekked higher from there; for production available for shipment the week of 3/14+/-. Mills continue to advise buyers that they need to add 2 – 5 weeks onto product shipment dates to allow time for the seller to source available trucks and empty railcars.
CME Lumber Futures –: The CME Lumber Future Contract will expire at 12:00 Noon CDT on Tuesday March 15th, 2022. For the past 4- days (2/18/22 – 2/24/22), there was no trading on Monday 2-21 in observance of Presidents Day, CME Futures were up 2-days and down 2-days. CME Lumber futures have gained $21.60 for the week but are trading below the Midweek Cash Market of $1340 by $28.00 CME Futures at $1312.00. One Year Ago, today (2-24-21), CME Futures closed at $1010.80.
Hem\ White Fir -: Continuing steady to strong sales, limited availability of open market product, including anything that could ship close to prompt, and a plethora of late shipments were all highlight of this week’s Hem \White Fir dimensional lumber markets. Buyers seemed particularly interested in the narrow widths and all widths of the longer lengths (22+) during the week. Producers started the week quoting construction grade dimensional lumber above last Friday’s levels and prices pushed modestly higher from there; for production available for shipment the week of 3/14+/-. Low-grade sales continue to hold steady. Mills started the week quoting low-grade at or above last Friday’s levels and prices traded at or edged higher from there; for production available for shipment the week of 3/7+/-. Demand for stud trims remains stout. Mills started the week quoting above last Friday’s gains and prices climbed higher from there; for production available for shipment the week of 3/7+/-. Transportation issues seemed to deteriorate even further during the week. Mills advised buyers to add at least 2 to as much as 4-5 weeks onto product available for shipment dates, to allow them to secure a flatbed or curtain van truck or empty railcar.
Green Doug Fir -: Limited supplies and rising prices in the K.D. markets put Green Doug Fir (GDF) Std. & Btr., & No.2 & Btr., and their value-based pricing proposition back at the top of non-traditional buyers’ sourcing lists. Traditional buyers were equally as active in the market, which led to an even further tightening of product availability during the week. Mills started the week, some more aggressively than others, quoting above last Friday’s price gains, and prices climbed higher from there; for production available for shipment the week of 3/14+/-. Long length (22’+) sales continue to accelerate. Mills started the week quoting long lengths above last Friday’s triple-digit increases and prices trekked higher from there; for production available for shipment the week of 3/21+/-. Low-grade sales are steady but not nearly as strong as those in the construction or stud trim sector. Mills started the week quoting low-grade at or above last Friday’s levels and prices traded close to those levels from there; for product available for shipment the week of 3/7+/-. Stud trim sales remain strong, and demand is continuing to outpace limited supply. Mills started the week quoting stud trims above last Friday’s levels and led by 9’ trims, the market moved higher from there; for production available for shipment the week of 3/14+/-.
Cedar Lumber -: Little has changed in the Western Red Cedar (WRC) lumber market over the past several weeks. Tight availability, steady demand, and anticipated shipment delays had buyers actively searching for replenishment that would help bring their on-ground inventories into better alignment with springtime needs. One of the two curtailed mills restarted production on Wednesday, but the 3-weeks of lost production will not be easily made up. Mills started the week, once again, quoting (as a price guide only) above last Friday’s levels and prices traded at or edged higher from there. However, almost every transaction this week was PTS or PTS +, and again with no firm date of shipment associated with the order. While decking sales seemed to have cooled, demand for timbers, boards, dimensional lumber, fencing, pattern stock and siding continued to accelerate and availability on these items continued to tighten. Transportation issues continue unabated and were impacting contract and non-contract customers equally.
Shake & Shingles -: Trader frustration levels with the Western Red Cedar (WRC) Shake & Shingle market reached a boiling point during the week. Buyers openly challenged the mills on their non-stop weekly prices increases. While at the same time questioning why they have only limited to no new production available for sale. Buyers also asked why what little was available is only being offered to a select group of buyers, and why they were not included in that group. A lack of trucks to ship already finished product added to the buyers’ elevated anxiety levels. For producers, the challenges remain finding raw materials, the necessary labor, and properly functioning equipment to produce more product. Mills have been quick to point out to buyers that these problems have not improved, in fact have continued to deteriorate further over the past several weeks.
Southern Pine Lumber -: Several days of rain in the South and snow and blustery weather conditions in the North could not reduce buyers need for springtime replenishment of Southern Pine No.1 & No.2-dimensional lumber products. Treaters, pallet and truss manufactures, stocking distributors, pro dealers, and even box store buyers were all active participants during the week and that contributed to the upward trend in the SYP markets. Mills started the week quoting above last Friday’s price gains, and prices trended higher from there; for production available for shipment the week of 3/14+/- A dearth of high-grade products helped to propel prices higher and pushed lead times into the later weeks of March. Demand for low-grade remains steady to ‘sneaky’ strong. Mills started the week quoting low-grade at or above last Friday’s levels and prices edged higher from there; for production available for shipment the week of 3/7+/-. Stud trim sales have regained their groove. Mills started the week quoting stud trims at or above last Friday’s levels and prices traded in a similar pattern from there; for production available for shipment the week of 3/7+/-. Small squares and timbers experienced another week of steady sales. Mills started the week quoting 4x4 – 4x6 – 6x6 above last Friday’s levels and prices edged higher from there; for production available for shipment the week of 3/14+/-. Demand for 5/4 x 6 Standard and Premium Radius Edge Decking continues to well exceed current mill production levels. Mills continue to produce just enough R.E.D. to meet current contract volumes, while diverting what could be processed into R.E.D. into 2x6 production, which provides a higher return on the mill’s log investment. As a result, R.E.D prices continue to climb higher with Westside zone producers more aggressive in pricing than their Eastside counterparts. Transportation issues continue to deteriorate.
Pressure Treated -: Back-to-back winter storms that brought copious amounts of rain to the South, and high winds and snow squalls to the North, coupled with continually rising brite feedstock prices had treated buyers carefully monitoring their inventories and replenishment needs during the week. While buyers showed some hesitancy in purchasing, they clearly understood that for every day of lost jobsite activity there would be another day of pent-up demand being added onto. Treaters are reporting that late shipments are continuing to create bottlenecks in their production schedules, as well as pinch-points in shipment of finished materials. Treaters that rely on common carriers for shipment of finished products are reporting a huge spike in their per mile cost and that some drivers are refusing loads to certain destinations due to a lack of backhauls from the area.
OSB & Veneer Panels Overview –: It was another frustrating week for buyers in the OSB and Southern Pine and Western Fir plywood markets. Even buyers with contracts were in the marketplace searching for additional open market panels to meet previously sold and anticipated March through early to mid-April needs. While logistics problems took center stage, it was hard for buyers to overlook the lack of available open market panels and steadily increase in pricing as well as the fact that some producers and even secondaries were limiting what little they had available to a ‘select’ group of buyers. With shipments being delayed by a lack of trucks and drivers, or empty railcars and train crews, chasing down late shipments has become a major focus for many buyers. Of course, while checking on late shipments, it never hurt to ask about being able to purchase more. Prompt shipments, albeit few and far between, were being sold well above mill replacement values, or simply auctioned off to the highest bidder.
OSB -: The OSB markets have changed little over the past 6 – 7 weeks. Mills continued to report this week that they had limited to no open market panels available and what they did have was being offered to a very finite list of ‘super’ mill customers. Secondaries also have limited availability as many of their contracts have been reduced by the mills. A dearth of available trucks and empty railcars further added to the market’s tightness and lack of field inventory. Mills started the week quoting above last Friday’s gains and prices continued to climb higher from there; for production available for shipment the week of 3/21+/-. Any seller with prompt shipping OSB was able to name their price, while others held auctions on that ownership.
Southern Pine Panels -: Higher prices, limited open market panel availability, late shipments and the potential for downside risk were all on buyers’ minds during the week. Buyers unable to secure straight thickness loadings, hoped that buying mixed thickness on a truck or carload would improve their odds of getting coverage. At best, they had limited success. Mills started the week quoting Rated Sheathing above last Friday’s gains and prices moved higher from there; for production available for shipment the week of 3/21+/-. Anything that could ship close to prompt came with a significantly higher price tag. Demand for Mill Cert. continues to hold steady. Mills started the week quoting Mill Cert. at or above last Friday’s levels and prices traded in a similar pattern from there; for production available for shipment the week of 3/14+/-. The inquiry and sales pace of value-added panels, underlayment, sanded, siding, concrete form, and other specialty panels remains upbeat. Mills started the week quoting at or above last Friday’s levels and prices traded at or moved higher from there; for production available for shipment the week of 3/14+/-.
Western Fir Panels -: Limited to no open markets panel availability in the OSB, Canadian and Southern Pine plywood markets, had those buyers searching through the Western Fir Rated Sheathing market in the hopes of finding replenishment relief. Mills continue to report that veneer prices are on the rise, while their availability tightens. Mills started the week quoting, some more aggressively than others, Rated Sheathing above last Friday’s gains, and prices pushed higher from there; for production available for shipment the week of 3/21+/-. Demand for CD Struct I, CC, CC PTS and Mill Cert panels continued to grow. Mills started the week quoting all the items in this sector at or above last Friday’s levels and prices pushed higher from there; for production available for shipment the week of 3/7+/-. The inquiry and sales pace of underlayment, siding, concrete form, and other specialty panels continues to hold steady. Mills started the week quoting the entire complex at or above last Friday’s levels and prices held at or edged higher from there; for shipment available the week of 3/7+/-. Transportation issues continue unabated.
Food for Thought-: How about a change of pace? These are true stories. Sourced from local newspapers or T.V. outlets.
It is just past sundown. An elderly gentleman is driving through a residential neighborhood. He fails to stop at a 4-way stop sign intersection and proceeds to make a left turn without using his turn signal and on top of that he is driving without his headlights being on. A police office observes all of this and pulls him over. The gentleman says good evening to officer, and the office asks for his driver’s license, vehicle registration and proof of insurance. As the gentlemen searches for the requested documents, he volunteers that he has been driving for many decades and he cannot remember the last time he was stopped. The officer say that he will back with him in a few minutes.
Upon returning, the officer tells the driver that he is issuing him 3 moving citations. The elderly gentlemen seem puzzled. “What for?” The officer explains. Ticket No.1 is for failing to stop at the 4-way stop sign. The gentleman replies “Do you know how many darn stop signs there are in this neighborhood? Why, if I came to a full stop at each one, I would have to replace my brakes twice a year, and that’s expensive. Ticket No.2 is for failing to use a turn signal. The gentleman replies, “I don’t use turn signals. If you use them, you wear out the bulbs and bulbs are expensive. Besides, once I start turning everyone know which direction I am going.” Ticket No.3 is for driving after sundown without headlights. The gentleman replies, “I don’t need my headlights. I know exactly where I am going and besides if you use them too much you need to replace them and on this darn car you need to take the whole front bumper off.” The officer tells him he is giving him a warning on the expired license plate tags, and before the gentleman can say another word the officer tells him “I know they are expensive, but you need to have them on the car if you are going to operate it.”
Can you handle one more? The State of Tennessee has not changed its standard license plate design since 2000. People were asked to summit designs and the top 3 were selected and citizens were asked (I did not) to vote for their favorite. One is chosen and put into production. The new plates started being issued in January and it isn’t long before the state, local municipalities, and county governments, all who rely on red light and speed cameras, notice a sudden and sharp drop in those camera revenues. The cameras are privately owned, and the various governments split the revenue collected with the company. Get this … the new design dark blue with gray symbols and the state seal cannot be clearly viewed by the cameras. Without a clear picture the company cannot issue a ticket. The State has stopped production of the plates, but several tens of thousands have already been distributed and are on cars. The state is still not sure how they are going to address the issue. Last we heard … they are working on it. The camera company has said their cameras and their resolutions are as up to date as possible, and there is nothing they can do improve the imaging on their side.
Just some strange reality and Food for Thought . . .