Notes from the Forest - 05-19-17 Edition

Ladies and Gentlemen:

Buyers slowly returned to the lumber and panel markets this week. It wasn’t because they wanted to. On the contrary, they wanted to sit out another couple of weeks and watch prices decline further. However, you can only ship merchandise out for so long, before the need to replenish over takes the buyer’s ability to hold out for lower prices. No one really bought a lot, but everyone bought a bit more volume than just fill-ins. This helped mills move their limited order files out another ? - full week. In several species discounts were still available but the depth of those discounts was not quite as deep as in previous weeks.

The U.S. Commerce Department reported that U.S. housing starts in April were at a seasonally adjusted annual rate of 1,172,000. This is        <-2.6%> below the revised March estimate of 1,203,000, but is 0.7% above the April 2016 rate. Single-family housing starts in April were at a rate of 835,000; this is 0.4% above the revised March figure of 832,000. Housing permits – the forward-looking portion of the report – noted that housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,229,000. This is <-2.5%> below the revised March rate of 1,260,000 but 5.7% above the April 2016. Single-family authorizations in April were at a rate of 789,000, a decline of -<4.5%> from the revised March figure of 826,000.

Spruce & Stud Markets-:  The inquiry and sales pace of Eastern & Western Canadian SPF Std., & Btr., and No. 2 Btr., improved modestly over the course of the week. The catalyst for the WSPF markets improvement was producers’ willingness to start the week off with double digit discounts on every width, except 2x6, across the complex. An additional encouragement was producers having excess of certain key widths and lengths and their willingness to sell them at even deeper discounts. CME Lumber Futures for May rallied on Monday (end of trading period) almost closing the gap between the cash and futures markets. The trailing months also rallied higher on Monday, but by Tuesday the Futures markets was back to moving higher one day and lower the next.  Sales of low grade stock were steady. Nevertheless, with the rest of the construction grade market correcting, buyers asked for, and mills conceded to moderate discounts, just to keep the sales momentum moving forward. Stud trim sales bucked the market trend and sales and production were in sync and prices traded close to last week’s reported levels. 

Hem \ White Fir -:  The inquiry and sales of Coastal and Inland White and Hem \ Fir remained on the quiet side again this week. Buyers continue their pattern of purchasing hand to mouth; even though their current inventory levels are becoming a bit uncomfortable. Buyers continue to express their feelings that prices remain overly inflated; and the fact that WSPF pricing is vulnerable is doing little to buoy their confidence, or desire to purchase any volume. Overall pricing is flat, with producers adjusting prices as needed to deal with any excess inventory buildup. Sales and inquiry of low grade stock and stud trims are steady and in lock step with production. As a result, prices were little changed from last week.

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., modestly slowed this week. Concerns about pricing in the other species made their way into the minds of Green Doug Fir buyers. Add that to the fact that they had purchased steady volumes over the past 2 – 3 weeks was another reason to hit the pause button, at least for this week. Overall prices on 2x4 – 2x8 – 2x12 traded at values close to last Friday’s levels.  2x6 joined 2x10 in a modest price correction. Low grade sales continue to see-saw back and forth and this week sales were not as strong as last week. Mills immediately addressed the issue by offering small discounts to keep buyers engaged in the marketplace. Stud trim sales are in sync with production and prices held at or modestly above previously 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, which slowed last week, carried over a similar pattern into this week as well. The last time the WRC market pricing was flat was 27th January 2017. Since then, until last week, prices have moved substantially higher week, after week, after week. Domestic producers are finally back to running at full capacity and that is helping minimally with supply. Both Canadian and domestic producers continue to struggle with a lack of logs, (which is not projected to improve until mid-June) in particular the high-quality logs that are needed to produce the high quality finished product that they have taken orders for. Mills have also become acutely aware of the number of their customers who have turned to alternative products, both real and man-made, as they can no longer deal with the current pricing structure and several months of delayed shipments. Continued confusion over the CVD and soon to be announced anti-dumping decision from the U.S. Dept. of Commerce further added to Canadian producers concerns about how to sell firm priced products with so many unknowns. The result is Canadian producers turning their attention to markets in Asia Pacific and the E.U where their products will not be subject to those duties.

Shake & Shingles -: The pace of inquiry of Western Red Cedar (WRC) Shakes and Shingles became a bit more disorganized this week. Some producers reported that their sales were steady to strong. Others reported that the traditional May rush had still failed to kick into gear. Many of the inquiries of last week have quickly become orders this week, which could explain the difference between producers that are busy and those that are not. The Freshet on the Fraser River continues. The resulting higher costs for both transportation and logs continues to take its toll on production schedules and shipment of finished product. A lack of available outbound trucks and rail cars only added to buyers’ frustration, as the number of late shipments continues to increase expeditiously. When producers tried to raise prices to cover their increased costs there was immediate buyer pushback. Many retail buyers have already turned to alternative products, real and man-made, to take care of their customers’ need to complete projects.

Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No. 1 & No. 2, continues to slump. Mills with excess inventory to sell once again started the week, offering double digit discounts, and told the few buyers that were in the marketplace that they are open to listening to firm counter offers below those levels. According to most pro dealers’ sales of both brite stock and pressure treated lumber are steady, aligned with jobsite activity. However, declining prices did little to motivate buyers to purchase much beyond their most pressing needs, and those oft time purchased from local 2-step distribution in units, to avoid trucking delays. The inquiry and sales of high grade stock – D.S.S., S.S., and MSR also continue in the doldrums, as even the high-grade buyers are limiting their purchases, until the markets show some signs of stabilizing.  It was another week where low grade sales held up better than construction grade products and lead times remain in the 1 – 2-week range. As a result, producers were able to hold prices flat or moved them modestly higher. After losing double digits last week, stud trim sales stabilized, as did their pricing.  Producers of small squares and timbers continue to struggle with their production to sale ratio. Westside producers were particularly aggressive, again this week, offering double digit discounts across the complex from the start of the week. Eastside producers offered more modest discounts as they had less excess inventory to deal with. Very little has changed in the 5/4 x 6 Radius Edge Decking markets. Standard Decking is still being offered at double digit discounts, as production continues to overwhelm demand. Premium Decking sales are about a step ahead of production and prices continue to move modestly higher.

Pressure Treated -:   The inquiry and sales pace of pressure treated lumber, plywood and accessories picked up over the course of the week. Unfortunately, the downside to purchasing right now is pricing, which continues to be flat to modestly higher in Western species, and significantly lower in the South. Pro dealers reported after several weeks of what seemed like non-stop rain, the skies have finally cleared and jobsites are once again becoming active. Shipments delayed by the inclement weather are now flowing quickly out to projects. In preparation for the upcoming long Memorial Day weekend, the large box stores have begun to stock up inventory, in advance of what they are hoping will be a banner long holiday weekend of sales. Transportation issues continue to cause pressure treaters some concern, as late raw material shipments are starting to impact production schedules. Treaters that do not have their own fleet of dedicated trucks are facing similar situations with finished material going to customers.

OSB & Veneer Panels Overview -: The inquiry and sales pace of OSB and plywood still remain below their traditional levels for this time of year. Most buyers are refusing to purchase beyond their most pressing needs, not wanting to expose themselves to a market that continues to correct. The handful of buyers who are willing to chance the market and purchase significant volume discovered that they were in a position, in many regions, to negotiate prices significantly below market replacement levels. Transportation issues continue to interrupt shipping causing angst for buyers and sellers. 

OSB -:  The inquiry and sales pace of OSB are still not close to where they should be for this time of year. Buyers continue to purchase hand to mouth; while waiting for the markets to show some signs of stabilizing. Lower prices are doing nothing to inspire buyers to step back into the marketplace and purchase volume. Discounts this week varied greatly from one production zone to another. It was being reported late in the week, but not confirm-able, that several large blocks of OSB were sold when mills capitulated to buyer requests for double digit discounts and in some cases extended terms. Mills continue to offer shipment anywhere from the week of 5/22 to as far out as 6/19, or beyond. Transportation issues, both railcar and truck, remain hit or miss, with mills in the South reporting a severe shortage of available flatbed trucks.

Southern Pine Panels -: The inquiry and sales pace of Southern Pine Rated Sheathing remains sluggish, particularly for this time of year. As a result, mills were offering discounts, in varying degrees, from the start of the week and listened intently to buyer’s firm offers. By the end of the week mills had been able to push order files into the week of 5/22, but several prompt loads were still available at the end of this week. With the market still showing signs of vulnerability, buyers limited their purchases to must have fill-ins; often turning to local 2-step distribution to help balance out inventory needs. The rapid influx of imported panels from Brazil and Chile, along the Eastern Seaboard forced Eastside domestic producers to lower prices, especially on 15/32” 3 & 4 ply, and fight for their share of the marketplace. Trucking issues remain a persistent cause for heartburn, as buyers look for loads that should have shipped 1 – 3 weeks ago, while watching prices sink lower. Sales of underlayment, siding, concrete form and other specialty panels continue to hold steady. The exception remains sanded panels, where sales have slowed and a price correction continues.

Western Fir Panels -:  Last week’s late surge in inquiry and sales of Western Fir Rated Sheathing had minimal follow through this week. Last week’s rush helped producers to move orders firmly into the week of 5/29. However, later in the week mills suddenly had loads available for shipment next week. This quickly eroded buyers’ confidence in the markets. It was being reported that some producers were offering late week discounts to volume buyers, especially items where excess on ground inventory was an issue. Having purchased significant volumes last week   agricultural bin and carload buyers were noticeably missing from the markets this week. Truckload sales into California were particularly brisk. Depending on the producer, transportation issues were a smidge better, or still gut wrenching awful. Sales of underlayment, sanded, siding, concrete form and other specialty panels remain one step ahead of production. Prices continue to hold at previously established levels.  

Food for Thought -:   Mysterious retail and service malady spreading through Tri-Cities in Northeast Tennessee . . . Hopefully it doesn’t spread to your business. Quite the headline, don’t you think? What is this mysterious retail and service malady? It’s the thought that by promising do to do something for a customer or client, that at that point you’re finished. Well . . . your half way finished. 

Allow me to share a few examples and there are plenty more from where these have come from:

Local newspaper is delivered by carrier early in the morning. 8 – 10 weeks ago, after fishing paper out of the only wet spot in the entire driveway I call and ask for one of those newspaper holders that fits on a fence post thing-a-mabob – tired of wet papers. Promise – you’re on the list. Just renewed subscription – wanted to leave check and envelop in the same puddle. Wiser, better half suggested not. Instead take the time to hand deliver payment to newspaper office – again another promise, wonder if it will be fulfilled.

I’m a huge believer in maintenance, catch the problem in advance of what could be a costly repair. Time for the annual heat-pump tune up. It will cover both AC and heat. Call usual repair service who has done it for the past 5 years we’ve owned the house. Last year we started in April asking for service, finally in mid-July he calls and asks if we still need service. This year it was same timing but this time I called and said come or forget it. He came on Monday of this week.

The local businesses and trades people in our area are always complaining that they can’t seem to get local support for their business. They object loudly when you purchase, or hire someone from outside the area to do work in their backyard. Of course, why those out of town people are here working on my house they’re not available in their own area. Could be the grass is greener syndrome.  

So, here’s my question . . . How good is your business at following through on promises? Remember one should never confuse motion with action. HH