Ladies and Gentlemen:
Lumber and panel prices continued to firm and move higher during the week, and mill production schedules have quickly pushed into the later weeks of May. As the week progressed, buyers became more conservative, cautious, and selective in their replenishment purchases. Many buyers unable to forget and unwilling to repeat the rapid rise in prices, from the start of the year, and subsequent and precipitous market declines, which lasted 4 – 8+ weeks, and finally ended less than 10-days ago. Trucking is continuing to show signs of improving in various pockets around North America. Rail traffic, on the other hand, particularly in all of Canada, and West of Mississippi River remains difficult to navigate. With frustrated carload buyers asking, ‘what exactly does prompt mean?’ Pointing to cars purchased 10 – 14 days for prompt shipment that still have not loaded nor shipped.
The National Association of Realtors® (NAR) reported. on Wednesday (4-27-22). 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, declined -1.2%, in March 2021, from February, to a reading of 103.7. An index of 100 is equal to the level of contract activity in 2001. Year-over-year contract signings have also declined -8.2%. The U.S. Census Bureau and the Dept. of Housing and Urban Development jointly announced on Tuesday (4-26-22), that new residential single-family home sales for March 2022 were at a seasonally adjusted annual rated (SAAR) of 763,000, according to estimates. This is -8.6% below the revised February rate of 835,000 and is -12.6% below the March 2021 estimate of 873,000. The median sales price of new houses sold in March was $436,700. The average sales price was $523,900. The SAAR estimate of new houses for sale at the end of March was 407,000. This represents a supply of 6.4 months at the current sales rate.
Spruce Markets -: The firming trend in the Eastern and Western SPF Std. & Btr., and No.2 & Btr., accelerated during the week. Thanks to last week’s increase in sales activity, mills started the week with less on ground inventory. Western mills were more aggressive with their pricing. Eastern mills were focused on extending their production schedules further into May and did so by trying to limit price increases. Both Eastern and Western producers are quoting production available for shipment the week of 5/16+/-. Low-grade sales also showed signs of stabilizing during the week. Mills started the week quoting low-grade at or on either side of last Friday’s levels and prices traded in a similar pattern from there; for production available for shipment the week of 5/9+/-. Renewed interest in stud trims allowed mills to firm prices throughout the week and reject any counteroffer out of hand. Mills are quoting stud trim production for shipment, depending on the specific tally, the week of 5/16+/-. Logistics issues, particularly with destinations within Canada, continue to create bottlenecks and continue to limit the free flow of finished product to buyers.
CME Lumber Futures –: The CME Lumber Future Contract for May will expire on Friday, May 13th, 2022, at 12:000 Noon CDT. For the past 5- trading days (4/22- 4/28) CME Lumber Futures were up 3-days, and down 2-days. For the past 5-days CME Futures have gained $19.800 but is trading below the Midweek Cash Market of $1070 by $25.20, CME Futures at $1044.80 One Year Ago, today (4-21-21), CME Futures closed at $1422.30.
Hem\ White Fir -: Last week’s increase in activity and firmer to higher pricing in the Hem \ White Fir Std. & Btr., and No.2 & Btr., gained additional momentum during this week. With a round of replenishment long overdue, buyers returned to the market, now trying to get ahead of the upward price movement. Mills started the week quoting construction grade, in varying degrees, above last Friday’s levels and prices traded higher from there; for production available for shipment the week of 5/16+/-. Low-grade sales followed a similar pattern to those in the construction grade markets. Buyers’ interest in low-grade has improved and mill production schedules have pushed into the week of 5/16. Stud trim sales have also recovered from their 4-week precipitous drop. Mills started the week quoting above last Fridays price gains, and prices traded higher from there; for production available for shipment the week of 5/16+/-. Transportation problems varied from mill to mill, and sometimes even within the same state.
Green Doug Fir -: The increased activity in the Green Doug Fir (GDF) Std. & Btr., and No.2 & Btr., easily carried over into this week. Last week, buyers’ interest was focused on the narrow widths, this week the entire complex was their focal point. The lack of available trucks and drivers as well as empty railcars and train crews continues to create shipment issues for buyers in need of quick shipments to fill pressing inventory holes. Mills started the week quoting construction GDF above last Friday’s levels and prices traded higher from there; for production available, for shipment the week of 5/16+/-. Sales of low-grade were able to build on last week’s increased activity. Mills started the week quoting low-grade at or on modestly above last Friday’s levels and prices hovered close to those levels from there; for production available for shipment the week of 5/9+/-. A sudden spike in KD stud trim pricing has allowed GDF stud trims to recapture KD buyers’ interest. Mills started the week quoting above last Friday’s levels and prices pressed higher from there; for production available for shipment the week of 5/9/±.
Cedar Lumber -: Traders’ opinions on the activity level in the Western Red Cedar (WRC) lumber market, varied from one to another. Some reported an uptick in sale, while others felt it was as lackluster as it has been for the past 3+ weeks. All thought that the several rounds of late winter weather was holding buyers back from replenishing more frequently and anticipated that the market would remain subdued until a clear path to retail sales was established. Mills started the week quoting WRC boards, dimensional lumber, fencing, siding and timbers at last Friday’s levels and prices traded at or on either side of those levels from there. Decking remains the odd product out. Mills again lowered prices on decking and sought buyer feedback and encouraged counteroffers to help them move their excess inventory off. Logistics remains a pinch point on almost every order ready to ship.
Shake & Shingles -: With little hope for improvement insight, due to increasing restrictions on the logging of old growth timber in B.C., Canadian Western Red Cedar (WRC) Shake & Shingle manufacturers suffered through another week of limited raw material availability. The freshet on the Fraser River is underway and water levels are expected to be particularly high this year, which will further limit log availability and increase their cost as well as the cost of transportation. Buyers spent the week searching for much needed coverage, and many have turned their attention to domestic (Washington State) producers, who this week were able to offer limited relief. Mills started the week quoting above last Friday’s levels and anything offered to a buyer was immediately purchased, even if it was PTS+ and without a firm shipment date.
Southern Pine -: Pro dealer and construction sector buyers returned to the Southern Pine No.1 and No.2 dimensional markets mid-last week after a nearly 6-week hiatus, and that activity carried over, in varying degrees, into this week. Buyers remain focused on the narrow widths, while wider widths sales remained bogged down. Noticeably missing were pressure treated buyers, who are still experiencing limited interest from large box retailers. Mills started the week quoting narrow widths above last Friday’s levels, and prices traded at those levels or lifted higher. While the size of counteroffers on the wider widths faded during the week. Mills are quoting shipment for the week of 5/16+/-, allowing them some ‘wiggle room’ in finding an available truck or empty railcar to load. High-grade sales remain steady to strong. Limited product availability and extended production schedules had high-grade buyers scouring the markets for product to meet increasing demands from their manufacturing facilities. Late last week, 2x6 and 2x8 low-grade had successfully found a trading level, and prices traded at or moved modestly higher from there. 2x4, 2x10 and 2x12, low-grade, started the week priced flat to lower, and in search of a trading floor. All items in the low-grade complex are available for shipment the week of 5/9+/-. Stud trim sales continue to hold steady. Mills started the week quoting stud trims at last Friday’s levels and prices hovered close to those levels from there; for shipment available for production scheduled for the week of 5/9+/-. A lack of demand from large box retailers and treaters continues to contribute to the downward spiral in the pricing of small squares and timbers, and 5/4 x 6 Standard and Premium Radius Edge Decking. While mills turned away the steepest counteroffers, many accepted smaller counteroffers, that would help them eliminate excess inventory on those items.
Pressure Treated -: Treated buyers continue to conservatively replenishment their inventory needs, as many recall the brite feedstock markets gyrations of this year, as well as the past 2-years. The fact that trucking remains difficult to source, in several areas of North America, has made that limited purchasing strategy particularly difficult for some buyers. Sales of pressure treated lumber, panels and accessories were led again this week by the pro dealers, particularly in the South that service large multifamily and tract single-family home builders. Large box store buyers did take some additional dimensional lumber from their VMI programs, as prices in the dimensional lumber markets continue to show signs of firming and moving higher. A lack of demand for treated small square and timber, as well as 5/4 x 6 Radius Edge Decking, had both pro dealer and large box store buyers limiting their purchases to must have fill ins and little else.
OSB & Veneer Panels Overview –: The OSB and plywood panel markets started the week on firmer footing. Last week’s activity in all 3 of the commodity panel markets helped producers and secondaries eliminate large portions of their excess on-ground inventory, which led the way to a trading level being established and production schedules pushing into mid-May and on some items beyond. With buyers unsure as to how long this rally will extend, and clearly unable to forget the markets surge that started the year and its recent collapse, buyers remain conservative and cautious in their replenishment. With many saying that they did not want to extend their inventory beyond 30 days. Transportation remains a crucial component in buyers’ approach to the markets and purchasing. While trucking and rail traffic continues to improve in pockets around North America, there are still locations that are suffering from an acute shortage of empty railcars and train crews, as well as trucks and drivers. With buyers once again saying they do not want to purchase what they cannot get shipped in a reasonable 7 – 10-day period.
OSB -: The OSB markets started the week on firmer footing. While producers and secondaries were willing to listen to and accept counteroffers mid to late last week, by Monday morning, those counteroffers had evaporated, as had much of the producers and secondaries available on-ground inventory. Mills started the week quoting above last Friday’s levels and prices trended higher from there; for production available for shipment the week of 5/16+/-. Transportation issues, particularly a lack of available empty railcars, made shipment between production zones, for example from the Southwest into the West difficult to accomplish.
Southern Pine Panels -: Even while conceding that their field inventories remain lite, a trading level has been established, and that limited truck and driver availability made it difficult for them to continue to maintain their ‘Just in Time’ purchasing practices, buyers continue to limit their purchases of Southern Pine Rated Sheathing. Mills started the week with little to no excess inventory on the ground and quoting sheathing at or modestly above last Friday’s levels and prices traded at or moved slightly higher from there; for production available for shipment the week of 5/16+/-. Mill Cert., sales remain ‘sneaky strong.’ Mills started the week quoting Mill Cert. at previously established levels and prices traded at or inched higher from there; for production available for shipment the week of 5/9+/-. The inquiry and sales pace of value-added panels, underlayment, sanded, siding, concrete form, and other specialty panels remains active. Mills started the week quoting the entire complex at or a few dollars above last Friday’s levels and prices traded in a similar pattern from there; for production available for shipment the week of 5/16+/-.
Western Fir Panels -: Last week’s uptick in sales activity in the Western Fir Rated Sheathing market allowed producers to clean up a large portion of their excess inventory. Mills have extended their production schedules into mid-May and counteroffers are off the table. Buyers who had remained on the sidelines last week seeking assurance that this was not just a market head fake, started the week searching for much needed coverage, but found limited availability at either the mill or secondary level. Mills started the week quoting modestly above last Friday’s levels and prices traded higher from there; for production available for shipment the week of 5/16+/-. The pricing and sales pattern in the CD Struct I, CC, CC PTS and Mill Cert panel markets, also showed signs of improvement. As a result, mills started the week quoting the entire complex at or on either side of last Friday’s levels and prices traded in a similar pattern from there; for production available for shipment the week of 5/9+/-. The inquiry and sales pace of underlayment, siding, concrete form, and other specialty panels have also perked up. Mills started the week quoting the entire complex at or a few dollars above last week’s levels and prices held or moved modestly higher from there, with production available to ship the week of 5/9-+/-.
Food for Thought-: Although I write under the name of Joe in the Forest and even own the domain name jglitman@joeintheforest.com, I am not a forester. I have spent the better part of my life, as I like to say, on the other side of the log – purchasing finished lumber, panels and building materials. The moniker Joe in the Forest was given to me by Jim Bambule when I went to work for CECO (Concrete Engineering Corporation) in the 1980’s. CECO was a nationwide concrete formwork company, and Jim wanted the folks in the field and bidding on projects to have a simple way to remember who purchased the materials they needed. It was also the birthplace of Notes from the Forest.
Over the past 18 – 24 months there has been a growing list of lumber mills, in the South, either being updated to increase their production capacity or are going to be greenfield, shovel in the ground, projects. Many of these projects are originating from Canadian or European firms, but some are USA born and raised. Just last week, Canfor Corp. announced it is spending $130 million to update their Urbana, Arkansas facility, and the next day they had a groundbreaking ceremony for their new $160 million state-of-the-art sawmill in DeRider, Beauregard Parish, Louisiana. A few days before John A. Biewer Lumber Company announced they had shipped their first loads of lumber from their new Winnona, Mississippi mill. In all of these and other announcements the companies doing the updates or building noted the vast amount of timber available in the ‘timber basket’ of the U.S. South.
Again, I am not a forester, but I do have some questions and thoughts about that. My first thought is that the timber basket is not endless. Whether in Canada, Europe, Australia, New Zealand or the U.S., Mother Nature plays a huge role in the success of any forest. From drought, to hurricanes, tornadoes, and flooding, to insect infestation, to wildfires, to governments and companies banding together to use trees for carbon sink to meet carbon neutral status, our forests timberland, and that applies worldwide, are not endless. Even in areas where plantation grown (on a 35 –45- year rotation) timber or natural growth is occurring, it is my belief that if we start harvesting trees faster than they can grow, we will eventually have the same problems being experienced elsewhere. And your thoughts? This is just some food for thought.