Notes from the Forest 01-03-20 Edition
Ladies and Gentlemen:
Trading this New Year’s holiday shortened week was more active than many had expected. Lumber and panel buyers returned from their Christmas holiday on Monday and immediately got down to work. Trying to bring their inventory back to a more manageable level. By Tuesday afternoon the tempo was noticeably slower, but Thursday morning’s activity was back to a steady pace. Mill production schedules are currently into the weeks of 1/13 – 1/20, or beyond. Resulting in additional pressure being placed on buyers to get coverage, especially those in areas where the weather remains conducive to outdoor activity and where year-end inventory taxes were assessed. Elsewhere, the urgency was not quite as strong, but considering current price levels and buyers’ optimism for the start of 2020, it was hard for buyers to resist covering, at least conservatively, inventory shortfalls.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.3% annual gain in October, up from 3.2% in the previous month. The 10-City Composite annual increase came in at 1.7%, up from 1.5% in the previous month. The 20-City Composite posted a 2.2% year-over-year gain, up from 2.1% in the previous month. Earlier, the National Association of Realtors? (NAR) had reported that pending home sales increased in Novembre, rebounding from Octobre’s decline. The West region reported the highest growth in Novembre, while the 3 remaining major U.S. regions saw only marginal variances. The NAR Pending Home Sales Index, which is a forward-looking indicator based on contract signings, not actual closings, rose 1.2% to 108.5 in Novembre. Year-over-year contract signings jumped 7.4%.
Spruce & Stud Markets -: The inquiry and sales pace of Western and Eastern Canadian SPF Std., & Btr., and No. 2 & Btr., was a bit more active than many traders had anticipated for this holiday shortened week. Buyers returning from their Christmas holiday and started Monday morning immediately working on getting their depleted inventories back to a more manageable level. The weather, of course, tempered their purchasing plans. Buyers in winter \ snow prone areas were being reminded by H.Q. that there is a finite limit to credit lines and that money has to last to cover payroll, taxes, insurance etc., until the weather permitted jobsite activity to reopen. Producers are quoting production scheduled for the weeks of 1/13 – 1/20, with very little wood available, at the mill level, for prompt shipment. Again, this week, buyer’s attention seemed to be focused on the narrow widths. Mills started the week quoting at, or modestly above last Friday’s reported levels and most counter offers were being dismissed out of hand. Sales of low-grade stock remain slow but steady and prices were being quoted at, or modestly below last week’s established levels. Stud trim sales are in close proximity with production and mills quoted at, or modestly above last week’s reported levels.
CME Lumber Futures – The CME Lumber Contract for January 2020 will expire at Noon CST, Wednesday 15th January 2020. Over the holidays many traders rolled out of their January contracts and have moved them into the March 2020 contract. For the past 4-days of trading, there was no trading on New Year’s Day, (12/27 – 1/2) CME Futures were Up 3-days and down 1-day. For the past 4-days CME Futures have gained $0.50 and are trading above the cash market, ($395.00 MBM) by $11.70 (CME $406.70).
Hem\ White Fir -: The inquiry and sales pace of Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem-Fir remained steady this New Year’s holiday shortened week. Buyers were in communications with producers and office wholesalers early on Monday morning, checking on the shipment of previous purchases, some of which are scheduled to ship by the end of this week. Mills are quoting production scheduled for the weeks of 1/13 – 1/20, and beyond on selected key items. Continuing tight mill supplies have kept buyers active in the marketplace throughout the holidays. Producers started the week quoting at, or modestly above last Friday’s reported levels and counter offers were dismissed out of hand. Demand for low-grade stock and stud trims remains steady to strong and prices are trading at, or modestly above last Friday’s reported levels.
Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., remained slow but steady on this holiday shortened week. Producers continue to quote production for the weeks of 1/13 – 1/20, or beyond. Buyers who had been concerned about meeting year-end inventory goals, have quickly turned their attention to the weather and finding and purchasing conservative volumes that will help bring their inventory levels closer to their comfort zone. Warm and dry weather in Southern California had those buyers actively seeking to replenish from the start of the week. Carload volume buyers in the Northeast, in spite of winterlike weather, were also making their presence known, as they checked on price and availability and late in the week started to cover late February needs. Sales of low-grade stock and stud trims remain in close proximity of mill production and prices traded at, or on a thin line on either side of last week’s reported levels.
Cedar Lumber -: The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, bevel siding, timbers and pattern stock ended and started the new year more active than many buyers had expected. A labor dispute, which is entering its 26th week with no resolution insight, continues to have a negative impact on logging, as well as the availability of wider width dimensional lumber and small squares and timbers. The remaining producers, who are in operation, cannot keep up with their current customer base, let alone take on the needs of additional new customers. Further complicating the situation is the rumor that a large box retailer had finally entered the marketplace looking for coverage for their entire systems WRC 2020 needs. If true, this has the potential of even further tightening the limited supply. Prices continue to trade at previously established levels on most products. The exceptions remain fence pickets, along with wide dimension lumber and small square and timbers. On these items production schedules are extended into late January through late February and prices remain firm to higher. The availability of 5/4 x 6 Radius Edge Decking continues to tighten and with-it prices are also edging higher.
Shake & Shingles -: The inquiry and sales pace in the Western Red Cedar (WRC) Shake and Shingles and Eastern White Shingles (EWS) markets remain on the quiet side. The end of the year holidays certainly contributed to the lack of buyers’ interest. Most Canadian producers have ceased production for the holidays and have not yet provided a specific week, in which they plan on resuming production. Most producers ended the year with depleted log decks and winter weather is slowing, or has stopped log harvesting efforts. Mill sales offices are scheduled to reopen on 1/6, but they will only have what has been previously produced and is on the ground for immediate sales. Producers have been advising buyers, since late Octobre, that sourcing of Shake and Shingle in the early months of 2020 could be \ would be challenging.
Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber remained energized over this holiday shortened week. As buyers work to bring their inventory levels closer to their comfort zone. The activity of the previous 2-weeks has easily carried over into the new year. Producers have been able to extend their production schedules into the weeks of 1/13 – 1/20, and beyond on several key items. Again, this week 2x6s seemed to be the focus of buyers, but 2x4s were not that far behind. Prices across the entire complex moved modestly \ moderately higher. The inquiry and sales pace of high-grade stock – D.S.S., S.S. and MSR, remain as active as those in the construction grade markets. Expecting a strong start to 2020, the truss and modular home industry buyers have started to rebuild their inventories in anticipation of increased sales. The sale of No.3 & No. 4 low-grade stock remain slow but steady. Producers are quoting production for the week 1/13 – 1/20 and prices continue to trade at, or on a thin line on either side of last Friday’s reported levels. Stud trim sales remain in close proximity with production and mills are quoting production for the week of 1/13 and prices continue to hold at a level established 7 weeks ago. The inquiry and sales pace of small squares and timbers remains steady to strong. In the Westside Zone, sales of 4x4 and 4x6, continues to outpace production. Resulting in prices that are, modestly to moderately higher again this week. 6x6 sales continue to improve with prices being quoted at, or modestly above last Friday’s reported levels. In the Eastside Zone, the sales of 4x4s, 4x6s, 6x6s continue to remain just about in sync with production, with prices trading at, or modestly above last Friday’s reported levels. Demand for 5/4 x 6 Radius Edge Decking continue at typical seasonal pace. Westside Zone producers are reporting that demand for Standard Decking remains steady to strong and prices moved modestly higher again this week. Premium sales are in close proximity with production and prices continue to trade at previously established levels. Eastside Zone producers are continuing to report that their sales of both Standard and Premium Decking remain in close proximity with production and prices continue to trade at, or on a narrow line on either side of last week’s reported levels.
Pressure Treated -: The inquiry and sales pace of pressure treated lumber, plywood and accessories ended and started the new year on the quiet side. Weather will be the dominating factor for pressure treated buyers during the early months of 2020. Many buyers have already placed their winter buy orders and are waiting for those deliveries to begin, as negotiated. Of course, where the weather is conducive to outdoor work, buyers will be purchasing fill-ins as needed. In places like Florida and southern Texas they will be working towards bringing their inventory levels back to efficient and manageable levels. Elsewhere, unless there is an immediate spike in prices, most treated buyers will stay close to the sidelines and hope for an early spring and the start of the building season. Export treaters are reporting steady sales into the Caribbean, Mexico and southwestern Asia.
OSB & Veneer Panels Overview –: The inquiry and sales of OSB and plywood remains upbeat. There were more traders in their offices on Monday and again on Thursday than many had expected. Mill production schedules are quickly eclipsing the weeks of 1/13 – 1/20. Buyers on ground inventories are still lite and their need to replenish, at some level, is obvious. However, now it’s weather and its impact on jobsite activity, which is holding back replenishment. Buyers looking for a truckload, or 2 were being quoted at, or modestly above last Friday’s reported levels. Buyers looking for volume, real volume, were still finding some producers interested in negotiating a better price. Office wholesalers, with contract ownership were selling panels for the weeks of 1/6 – 1/13 and buyers in need, did not hesitate to turn to them for coverage. Local 2-step distributors continue to report slow but steady sales, especially in areas where dealers are dealing with winter weather.
OSB -: The inquiry and sales pace of OSB gained some much-needed momentum over the course of the week. Buyers returning from their Christmas holiday quickly got down to work on Monday, as they anticipated additional time off on Tuesday afternoon and Wednesday. Producers have successfully moved their production schedules into the weeks of 1/13 – 1/20, with a few producers opening the week of 1/27 for sales late in the week. Mills started the week quoting at, or modestly above last Friday’s reported levels and unless significant volume was part of the equation, producers dismissed counter offers out of hand. Buyers are noticing that prices, in all production zones, from the start of 2019 until its end, varied from as little as $ 2, to as much as $ 20 MSF. Office wholesalers with contract ownership and the potential of shipping that ownership a week prior to anything from available from a mill, quoted at, or modestly above mill replacement levels.
Southern Pine Panels -: The inquiry and sales pace in Southern Pine Rated Sheathing remained slow but steady throughout this holiday shortened week. Producers are quoting production for the weeks of 1/13 – 1/20 and as a result they felt little need to listen to, or accept buyer counter offers. Mills started the week quoting Rated Sheathing at, or a few dollars above last Friday’s reported levels. The Eastside zone remains the exception, especially in the Florida markets, where another wave of lower priced imported panels from Brazil and Chile have just, or are scheduled to arrive within 7 – 10 days. Eastside producers offered modest discounts to stay competitive, while they continue to talk about the quality of their product, when compared to the imports. On the other hand, producers are continuing to struggle with the sale of Mill Certified products. To help alleviate the buildup they started the week offering an additional modest discount off of last Friday’s reported levels. As the year comes to an end, buyers are noticing that prices are lower than where we started 2019. With 15/32” 3 & 4 ply $ 20 – $ 35 MSF lower and 23/32” $ 60 - $75 MSF lower than the start of 2019. The sales of underlayment, siding, concrete form, and other specialty panels remain slow and prices continue to trade at, or on a thin line on either side of previously established levels. Producers, are quoting production scheduled for the week of 1/13.
Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing remained on the quiet side this New Year’s holiday shortened week. Having sold production into the weeks of 1/6 – 1/13 and with no production scheduled for this week, several mills were actually closed for the entire week. The producers that were open reported lite sales, but noted that activity did modestly picked up Tuesday morning and again on Thursday, as buyers started to work on bringing their inventory levels back to an efficient and workable level. Overall, prices held at, or close to last Friday’s reported levels. For the most part counter offers were rejected out of hand. When comparing the start of 2019 to its end, buyers noted that ?” 3-ply was $20 MSF lower, ?” 4-ply was $31 MSF lower and ?” 4-ply was $109 MSF lower. Carload volume buyers started to discuss February needs with their supplier late in the week. The sales of value-added panels – underlayment, siding, concrete form, and other specialty panels remain seasonally slow and prices continue to trade on a narrow line on either side of previously established levels, for production scheduled for the week of 1/6, or sooner.
Food for Thought: During my holiday hibernation I had the opportunity to catch up on some of my industry reading. I found 3 articles that were interesting and in my opinion in direct conflict with the other 2. What do you think?
One article bemoaned one particular retail lumber and building materials dealer’s frustration and difficulty in hiring and retaining qualified people. The writer mentioned that whether it was salespeople, dispatchers, truck drivers, forklift operators or just yardbirds, he just couldn’t keep employees. He noted that even poorer performers were leaving. He asked if anyone else was experiencing similar issues and how they were resolving them.
The second article was written by an HR expert. In the writer’s opinion, any employee who has been with a company for more than 7 years has diminished \ limited value to the company. He goes on to say that if you hired a person directly out of college and it’s now 7 years later, they really have no new ideas to share. If you hired someone from a competitor, or other related industry they really have no additional customers, they can bring to you. They should be working hard to cultivate new clients, but few, the author says, actually do. They have become set in their ways, have too much non-productive vacation time and should be, in his words, “let go.”
The third article was written by a retailer who had 2 long time employees, both in sales. Both continue to meet their annual sales goals thanks to loyal customers, but do little to above that. “They’ve lost the fire in their bellies” he says. How can he bring in a younger group of sales people, and at the same time retain the long-time employees and not upset them as he brings in the new ‘fireballs?’
Just some food for thought . . .