Notes from the Forest-01-15-21 Edition

Ladies and Gentlemen:

Price fatigue, extended production schedules, gyrations in the CME Lumber Futures and inclement weather all caught up with the dimension lumber markets this week; causing some to slow and others to stall. Buyers went from active participants to onlookers from the sidelines. Prices started the week in the lumber markets anywhere from modestly \ moderately higher, to flat, to lower and price continued to correct, in varying degrees, up and down through the remainder of the week. The panel markets on the other hand, with production schedules already into mid to late February and in many cases beyond and a dearth of open market panels for sale moved forward again this week, albeit at a more reserved and cautious pace. The COVID-19 pandemic continues to take its toll on retail and local 2-step dealers, jobsites, logging operations, mill production and shipping.

The U.S. Bureau of Labor Statistics (BLS) has posted its Job Opening and Labor Turnover Survey (JOLTS) for November 2020. According to the JOLTS report, as of the last day in Novembre, the number of job openings dropped from 6.7 in October to 6.5 million, a rate of -4.4%. Hires were at 6.0 million while separations increased to 5.4 million. Within separations, the quits rate was little changed at 2.2%, while the layoffs and discharges rate increase to 1.4%. Year-over-year the number of job openings in November (not seasonally adjusted) was little changed from Novembre 2019. Job openings decreased in November in a number of industries with the largest decreases in accommodation and food services, transportation, warehousing, utilities and informational services. The job openings levels did increase in nondurable goods manufacturing and in other services. Over the 12 months ending in November, hires totaled 70.7 million and separations totaled 75.9 million, yielding a net employment loss of -5.2 million. These totals include workers who may have been hired and separated more than once during the year.

Spruce & Stud Markets -: The inquiry and sales pace of Western and Eastern Canadian SPF Std., & Btr., and No. 2 & Btr., continued at the pedestrian pace established last week. Mills started the week quoting production for the weeks of 1/25 – 2/1+, little changed from last week. Mills approached the market slowdown by either holding prices steady and hoping their production schedules would out last the slowdown, or by modestly lowering prices in the hopes that would be enough to keep buyers interested in the marketplace. Secondaries with ownership either ready to ship from a mill or already on the ground in strategic locations immediately went into seller mode, offering that ownership below mill replacement level. Buyers pressed mills and secondaries for shipment information on recently placed and late shipments and were surprised when they were given names of a trucking company or an assigned railcar number but knew that did not mean the truck was on the highway or the car was moving along the rails. Gyrations in the CME Lumber Futures market and lower prices at both the mill and secondary level only made buyers more apprehensive and conservative in their replenishment strategies. Demand for low-grade stock and stud trims have also significantly slowed. Mills started the week quoting low-grade and stud trims at, or on either side of last Friday’s reported levels for production scheduled for the week of 1/25+.

CME Lumber Futures – The CME Lumber Contract for January will expire at Noon CST on Friday 15th January 2021. For the past 5 days, (1/8 – 1/14) CME Futures were up 1-days and down 4-days. CME Lumber futures have lost -$ 46.20 for the week and are trading below the Midweek Cash Market quote of $ 915 by $ 72.00, CME $ 843.00. 

Hem\ White Fir -: The inquiry and sales pace of Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem-Fir, started the week at a slower pace. The price appreciation of the previous weeks, which had price levels close to, at or above last summer’s historic heights, has suddenly stalled leaving price quotes flat to lower at the start of the week and that trend continued in the truckload sales market through the balance of the week. With cars to load or daily demerge fees to be paid, producers listened carefully to carload buyers’ counteroffers and accepted the more reasonable ones. Mills continue to quote production scheduled for the weeks of 1/25+. Gyrations in the CME Lumber Futures market had many buyers taking a more conservative approach to their replenishment needs; wanting to wait and see a clearer direction for the markets. Secondaries with ownership ready to ship from a mill or already on the ground in key locations, offered that ownership below mill quoted levels and were still making an acceptable profit. Demand for low grade and stud trims has also declined. Producers started the week quoting low-grade and stud trim prices at or below last Friday’s levels for production scheduled for the week of 1/18 – 1/25, and that trend continued through the balance of the week.

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., significantly slowed at the start of the week. Mills started the week quoting at or on a narrow line on either side of last Friday’s reported levels, for production scheduled for the weeks of 1/25 – 2/1. Secondaries with ownership either ready to ship from a mill, or already on the ground in strategic locations started the week quoting below mill replacement levels. As a result, later in the week it was being reported that mills were listening to buyer’s ‘small and reasonable’ counteroffers, but accepting few, if any. Having successfully covered a large portion of their near-term needs, many truckload buyers started the week in a more conservative frame of mind. Nevertheless, demand from active jobsites kept buyers in touch with producers checking frequently with them on current price and availability and asking when recent and late shipments might actually be on their way. Carload volume buyers kicked tires early in the week and by midweek many of those quotes turned into orders. Demand for low-grade and stud trims also incrementally slowed. Mills started the week quoting low-grade and stud trims at or on either side of last Friday’s levels for production scheduled for the week of 1/25+.

Cedar Lumber -: The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, siding, pattern stock and timbers remains active. Buyers hoping that the new year would bring additional production and availability were disappointed. As most producers have already committed their Q1 and most of their Q2 production, if not more, to existing customers. Buyers considering alternative species such as imported Sugi for fence pickets and Alaskan Yellow Cedar for decking and boards found that those products are also in high demand and tight supply. Mills started the week quoting prices at or above last Friday’s levels, but most sales transactions took place as Price Time of Shipment. Difficult to source finished products continue to include decking, fencing, narrow width dimensional lumber, all 1” boards, 4x4s and T&G siding. 

Shake & Shingles -: The inquiry and sales pace of Western Red Cedar (WRC) Shake, and Shingles and Eastern White Shingles (EWS) remained subpar again this week. Mills continues to suffer from a lack of available offering and late shipments. Buyers in need of product turned to their local 2-step niche distributors for coverage but found that they too are having inventory issues due to late mill shipments. Mills continue to report a dearth of available raw materials and if sourced noted their higher price. Mills are describing the prospects of any near-term improvement in raw material availability as bleak. Several mills have extended their holiday downtime into this week, trying to build up enough logs to run for several consecutive days. Producers started the week quoting at or modestly above last Friday’s levels. However, with little product to sell overall mill sales were quiet.

Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimensional lumber started showing signs of price fatigue late last week and the slowdown carried over, in varying degrees, into this week. With prices at or already beyond last summer’s historic high levels and production schedules pushing into the weeks of 1/25 – 2/8+, several pro dealer and pressure treated buyers, especially in the northern tier, started rethinking their purchasing strategies. Agonizing over how much of winter was still yet to come, while not wanting to revisit last summer’s shortages and dealing with disgruntled customers. Nonetheless, producers started the week quoting above last Friday’s triple-digit price jumps. The inquiry and sales pace of high-grade stock – D.S.S., S.S. and MSR remains steady to strong. Again, this week. buyers for truss and modular home manufacturers continued to conservatively add inventory volume. Hoping to avoid a repeat of last summer’s inventory debacle. The inquiry and sales pace of low-grade stock remains slow but steady. Mills started the week quoting low-grade above last week’s levels for production scheduled for the week of 1//25+ and prices edged higher through the balance of the week. Demand for stud trims remains strong. Mills started the week quoting double-digits above last week’s triple-digits gains and prices moved higher from there, for production scheduled for the week 1/25+. Demand for small squares and timbers in the Eastside and Westside production zones remains stout. With production schedules already extending into the weeks of 1/25 – 2/8+ and prices being quoted above last week’s significant price increases; buyers for treaters, pro dealers and the large box stores continued to search through the timber markets looking for additional inventory. Demand from pressure treaters for 5/4 x 6 Standard and Premium Radius Edge Decking remains unrelenting. Again, this week, producers started the week quoting high double-digits above last week’s levels and prices moved higher through the remainder of the week, for production scheduled for the weeks of 1/25 – 2/15+. The surge in active COVID-19 cases in the South continues to grow and in turn the pandemic continues to negatively impact jobsites, logging, mill production and shipping capabilities. Late shipments are commonplace.

Pressure Treated -:  The inquiry and sales pace of pressure treated lumber, panels and specialty items remains fairly steady despite several rounds of winterlike weather moving across the country this week. A surge in active cases of the COVID-19 sweeping through pro dealer yards, jobsites and treating plants has temporally slowed both supply and demand in those areas affected. Last week some buyers said they were willing to wait and see what the markets did. This week with brite feedstock price closing in on, at or above last summer historic levels, buyers even in areas where the weather is not cooperating have decided to purchase conservative volumes now rather than risking another repeat of last summer’s outages and grumpy customers. Needless to say, the large box stores who rely on full bins to satisfy their DIY customers feel the same.

OSB & Veneer Panels Overview –: Lite field inventories at both the retail and secondary level, decent jobsite activity in many parts of North America, producers quoting production scheduled for the week of 1/25, to as far out as the week of 3/1+, mill prices close to, at, or already surpassing last summer’s historic levels, and a lack of open market panels for sale all contributed to the markets ongoing sense of urgency. Higher prices and extended production schedules have pushed many buyers out of their purchasing comfort zone. While some buyers expressed a willingness to limit their replenishment this week wanting to see if the slowdown in lumber might would \ could extend to the panel markets. Other buyers with active jobsite to service had little choice but to keep looking for materials and chasing the market higher. Another surge in COVID-19 cases continues impacting not only logging, mill production and shipment capabilities but the virus is now spreading in active jobsites as well. Whether this will impact near-term demand remains unclear.

OSB -: The inquiry and sales pace of OSB continues to reflect a market that is tight in supply, heavily contracted and currently lacking any available open market panels for sale. As a result, many mills with production sold deep into February or beyond remained off market this week. Producers started the week quoting modestly above last week’s levels and prices held at or above those levels the balance of the week. Buyers without contracts and need of replenishment searched the mill and secondary markets looking for coverage and while most came up empty handed, those that did find product reported paying significantly above mill reported levels. Late shipments and transportation issues only added to buyer’s anxiety levels. 

Southern Pine Panels -: The inquiry and sales pace of Southern Pine Rated Sheathing remains active. Buyers with lite field inventories and in desperate need of replenishment started the week scouring the mill and secondary markets looking for panels. Unfortunately, whether at the mill or secondary level there remains a dearth of fast shipping panels. Anything that could ship close to promptly was being sold significantly above quoted mill levels. Mills started the week quoting above last Friday’s levels for production scheduled for the weeks of 1/25 – 2/15. Sales of underlayment, concrete form and siding remain steady and producers started the week quoting at or above last Friday’s levels for production scheduled for the week of 1/25+. Sanded panel pricing varied by thickness with prices on 15/32” and 19/32” flat to higher, while pricing on 1/4”, 11/32” and 23/32” were negotiable, as mills sought buyer feedback that could help eliminate the sudden buildup of inventory on those select thicknesses.

Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing appeared to be more reserved this week. With production schedules expanded anywhere from early to mid-February through early March many buyers found themselves outside of their purchasing comfort zone. As a result, buyers are taking a more cautious approach to their replenishment needs. On top of that, prices throughout the complex ended last week at or already above last summer’s historic levels. Several producers started the week off market, attempting to get all recently placed orders into their production and transportation systems. Mills started the week quoting modestly above last Friday’s levels and prices hovered at or modestly above those levels for the remainder of the week. Carload volume buyers queried mills on price and availability, but few acted on those quotes. The sales of value-added panels, underlayment, sanded, siding, concrete form and other specialty panels remains steady and mills started the week quoting at or above last Friday’s levels for production scheduled for the weeks of 1/25 +.

Food for Thought -: There out to be a law. . . Let us say you own a lumber and building material yard, or perhaps a hardware store. You sell products purchased from a local or national 2-step distributors, perhaps your coop, or maybe your large enough to on occasions buy products directly from the manufacturer. However, at all times you do not manufacture anything. As an example, you have sold a disappearing staircase to a customer and you delivered it in its original box to the jobsite, or maybe your customer stopped by your facility and took it to the job. For whatever, reason, clearly out of your control, that disappearing staircase is defective and as a result someone was injured while using it. Today, as the law reads, ‘no amount of care can free a seller from the product liability’. And the plaintiff and their lawyer(s) know this as well, and as a result, they are suing everyone remotely involved with the disappearing staircase. As far as the plaintiff is concerned, the deeper your pockets the better.

So, even though your total involvement in the defective disappearing staircase is that you bought it from someone else and sold it to the customer or their contractor, you are suddenly being sued. And if through the plaintiff’s discovery they can determine who you bought it from they will be sued as well, along with the manufacturer of the disappearing staircase and if they can find out who supplied the lumber and hardware they will be added into the case as well. Yes, eventually you may be able to get dismissed from the case, but until then you need a lawyer to represent your interests, just as will all the other parties that have been involved in the sales, manufacturing and parts of that defective disappearing staircase.

Since 2015, the National Lumber and Building Materials Dealers Association (NLBMDA) has been trying to get the Innocent Sellers Fairness Act (ISFA) through Congress. According to NLBMDA passage of the act would “bring balance to our legal system by recognizing that business owners that only sell product, and are not involved in the manufacturing process, should not be liable for defects that they did not create.” Unfortunately, since 2015, which means the 113th, 114th, and 115th Congressional sessions the bill has never made it out of committee. In the 116th Congress that recently ended on 1-3-21, the bill was not even reintroduced due to lack of sponsorship.

I might be naive, and I know Congress has more serious issues to attend to, but it would be great, if every lumber and building material dealer and hardware store throughout the country, be it retail or wholesale, wrote to their elected Congressperson or Senators and ask that they carefully consider sponsoring and working towards the passage of the Innocent Sellers Fairness Act. Simply put . . . if all you did was sell the product and if you did not have any involvement in the products manufacturing, you should not be held responsible for the manufacturing defects. Just some Food for Thought.