Notes from the Forest 09-22-17 Edition

Ladies & Gentlemen:

The inquiry and sales pace of lumber, panels and other building materials remains robust. The recent hurricanes only added to an already energized late summer \ early fall flurry of replenishment. Order files that extend well into Octobre have buyers short on materials no longer asking about price, but rather how soon can I get it.  Transportation issues remain challenging, particularly in the South, and in some instances, that is extending delivery times beyond mill quoted shipment week.

The National Association of Realtors? reported that existing-home sales stumbled in August, for the fourth time in five months, as strained supply levels continue to subdue overall activity. Sales gains in the Northeast and Midwest were outpaced by declines in the South and West. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, retreated <-1.7%> to a seasonally adjusted annual rate of 5.35 million in August from 5.44 million in July. Last month's sales pace is 0.2% above last August, and is the lowest since then. Earlier in the week the U.S. Census Bureau reported on Tuesday that U.S. homebuilding fell for a second straight month in August, as a rebound in the construction of single-family houses, was offset by persistent weakness in the volatile multifamily home segment. The same report showed building permits racing to a seven-month high in August. However, permits for single-family homebuilding, which accounts for the largest share of the housing market, dropped. The mixed report suggested housing could remain a drag on economic growth in the third quarter. 

Spruce & Stud Markets-:  The inquiry and sales pace of Eastern & Western Canadian SPF Std., & Btr., and No. 2 Btr., remains steady to strong. Lite field inventories and accelerating jobsite activity have buyers actively engaged in the markets. Those looking for quicker shipment turned to the secondary market for coverage, but often found that coverage was limited and tight. This in turn, forced buyers back into conversations with the mills, who are reporting order files into the weeks of 10/9 – 10/16.  Prices remain in an upward trajectory but the double-digit increases have given way to a more moderate and tolerable level. The best news coming out of British Columbia this week was that the wildfires that have been plaguing the Province all spring and summer are finally being brought under control. This should ease the logging restrictions and provide additional and much needed log supplies. Sales of both low grade and stud trims remain solid and mills continue to report 7 – 10-day order files. As a result, prices have pushed modestly higher. CME Lumber Futures started the week on a positive note and that continued that way until Thursday when some profit taking took place.   

Hem \ White Fir -:  The inquiry and sales pace of Std. & Btr. – No.2 & Btr., White and Hem \ Fir, remain steady to strong, as the early fall market rally continues. Demand for Fir Larch remains especially strong, but Hem Fir is suddenly catching up. Prices continue to move modestly to moderately higher, as lite field inventories and growing jobsite demand is keeping retail and local 2-step buyers actively engaged in the marketplace. Buyers are looking for quick shipment and specified tallies. While producers are quoting shipment for the weeks of 10/9 – 10/16, and for the most offering their canned (no changes) tallies. Late in the week, the higher prices and extended order files were starting to give some buyers cause for concern; and for some caution was again the key word in any purchasing transaction. Low grade and stud sales continue to hold their own and prices are trading close to last Friday’s reported levels with mills holding 10 days + order files on these items.

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., moderated over the course of the week. It’s not because buyers aren’t looking for coverage. It’s more that buyers can’t find the coverage and the shipment times they are looking for. Mills continue to quote shipment for early to mid-Octobre. Buyers’ needs are more acute and the fact that it has snowed in the higher elevation of the Cascades and Rockies earlier this week, put even greater pressure on getting building projects to the point where exterior work is complete. Pricing was flat to modestly higher across the complex, and those who could wait bought at those levels. Demand for low grade stock and stud trims remain in sync with production levels and prices held close to last Friday’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 remain particularly quiet for this time of year. Buyers continue to refuse to purchase anything beyond their most pressing needs. Buyers continue to push producers for discounts, constantly pointing to the delay in the implementation of the CVD, as a reason that prices should be in a full-blown retreat and their request for price concessions should be granted. Buyers want to start discussions about 1st & 2nd Qtr. needs but continue to refuse to do so, until they are certain of prices will remain stable at these higher levels. Producers continue to counter that assertion, by pointing to: a) the on-going shortage of raw materials due to the wildfires continuing in British Columbia, b) the higher prices they are paying for raw materials they are able to source, c) the lack of anything beyond ‘dawg breakfasts’ available for prompt shipments and d) order files that are well into mid to late Octobre or beyond on key items. The standoff continues, even as producers warn buyers of the potential for a lack of finished product if orders are not placed well in advance of when they want them shipped in 2018.

Shake & Shingles -: The pace of inquiry and sales of Western Red Cedar (WRC) Shake and Shingles remains hit or miss. Domestic producers continue to listen to, and accept modest discounts on orders of almost any size. This has helped them to keep their on-ground inventory at a manageable level. Canadian producers continue to face significant headwinds that include: a) on-going wild fires in British Columbia, b) which in turn have led to extremely tight supplies of raw materials, c) higher prices for the raw materials that can be sourced, and d) the sudden fluctuation in the exchange rate. As a result, Canadian producers are not in a position to accept almost any counter offers, which is sending buyers to the U.S. markets for coverage.

Southern Pine Lumber -:   The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber continues to gain momentum, after last week’s strong showing. Prices were double digit higher on Monday morning and continued to intensify through the remainder of the week. Mill order files have blossomed into the weeks of 10/9 – 10/16, with 2x6, 2x10 and 2x12 in particularly tight supply. Retailers reported strong take away and that has caused field inventories to shrink faster than most buyers had anticipated. Sales of high grade stock – D.S.S., S.S., and MSR., remain robust, as demand from truss and modular home manufactures strengthens to meet the pressing need for housing throughout the storm stricken South. Low grade sales picked up steam from the start of the week and that helped to push their prices higher; in some zones double digits higher, and order files have moved into 2-week + range. You can’t build homes and apartments without stud trims and sales have rebounded. Prices have moved modestly higher as order files were re-established. Demand for small squares and timbers have also increased, especially in the Texas and Florida markets. Prices on selected lengths of 4x4 – 4x6 – 6x6 moved modestly higher again this week. Sales of both Standard and Premium 5/4 x 6 Radius Edge are being reported as steady to sneaky strong. Just as the decking season begins to wind down and unfinished projects are being pushed towards completion. The increased demand has pushed prices higher again this week and producers are now reporting order files on key lengths in the 2 + week range.  

Pressure Treated -:  The inquiry and sales pace of pressure treated lumber, plywood and accessories picked up momentum late last week, and that energy and urgency has easily translated into improved sales this week. Sales to large box retailers, particularly in the Southeast and Texas, were strong. While pro dealers reported steady to strong jobsite activity across the country. The increased cost of brite feedstock has sent the prices of pressure treated products significantly higher over the past 2 – 3 weeks. This in turn, is causing buyers to become extremely cautious, particularly in the Northern tier, as snow in the higher elevations of Montana and Wyoming announced the beginning of the winter weather season.  Several large export orders are being circulated throughout the Southeast for offshore customers, who were in the path of Hurricane Irma and Maria’s destruction. When these orders are placed, it will put a temporary strain on domestic availability particularly in the South. The 2018 contract season is upon us, with treated sales people fanning out in their territories hoping to have this process completed by mid to late Octobre.  

OSB & Veneer Panels Overview -: It was another week filled with energy, urgency, and angst in the Southern Pine plywood and OSB markets. Western Fir sales were steady to strong, but the price appreciation paled when compared to the double-digit increases being experienced in the other 2 markets. Mills are quoting shipment from the weeks of 10/2 – 10/30, depending on the exact product, mill location. Buyers with lite field inventories and growing demand had few choices, but to follow the markets higher or dare to do without. Transportation issues, particularly in the South continue to make on time shipments difficult, if not impossible to accomplish.

OSB -:  If the inquiry and sales pace of OSB was crazy last week; it was even crazier this week. Buyers with lite field inventories and steady to strong jobsite activity scoured the marketplace looking for quick shipping panels. Regrettably, there is a dearth of quick shipping panels available. Producers started the week either quoting shipment for the weeks of 10/9 – 10/16, or they were off the market, still trying to catch up with last week’s deluge of orders. With the exception of Western Canada, where sales seemed to have temporarily cooled, all other zones reported prices up double digits from Monday morning and they continued to climb higher from there. Secondaries with contract ownership held auctions to find the neediest buyer, who was willing to pay a premium price for their ownership.

Southern Pine Panels -: The inquiry and sales pace of Southern Pine Rated Sheathing were robust. Buyers started the week searching for thinner panels and then returned looking for thicker panels later in the week. With their phones and E-Mail inboxes lit up by the first thing Monday morning, producers knew it was going to be another strong week of sales. Mill order files are already into the weeks of 10/9 – 10/23, and in some instance beyond. This prompted mills to start the week with prices double digits above last Friday’s close; and prices proceeded to move higher from there. Due to the extremely heavy demand for panels, several producers have begun to allocate production to their customers. Thus, insuring that everyone has a chance to purchase limited volumes. Secondaries continue to be major players in the marketplace. As prices continue to appreciate and order files extended further into Octobre, some buyers made the conscience decision to purchase limited volume, trying to not let their emotions get the better of them. Sales of underlayment, sanded, siding, concrete form and other specialty panels remain strong. By midweek several key value-added panels were trading at double digits above last Friday’s closing levels.

Western Fir Panels -:  The inquiry and sales pace of Western Fir Rated Sheathing was noticeably slower this week. The sense of urgency that filled the markets over the past 2 – 3 weeks has given way to a more pedestrian pace. Producers continue to quote shipments for the weeks of 10/2 – 10/9, with a few mills opening up the week of 10/16 late in the week. Overall pricing was flat to up just a few dollars. Some buyers held off purchasing any volume, relying on local 2-step distribution, with the hopes that shrinking order files might lead to a moderate price correction. Carload buyers from the Midwest and Northeast were kicking tires early in the week and purchased modest volumes late in the week, at close to last Friday’s reported levels. Truckload sales along the West Coast remained brisk, which helped to support mill pricing levels. The inquiry and sales pace of underlayment, sanded, siding, concrete form and other specialty panels remains steady to strong. Overall prices were up modestly and order files have pushed into early Octobre.

Food for Thought-:  One of the latest buzz words in the procurement world is ideate.   When I first heard it, I was sure someone had made the word up. It was nothing short of some sort of an inside joke, which I was still not privy to. But low and behold, ideate is a real word. Who would have ‘thunk!’ According to Webster’s Dictionary it is a verb, it means to form an idea, imagine or conceive. The process is called ideating. 

A group of people where I work have been assigned to ideate. I was not one of them, but that still hasn’t stopped me from wanting to show my team spirit. So, I’ve posted this note on my office door. It reads . . .

Please do not disturb.

I am Ideating!

Should my eyes be closed,

I am simply envisioning the future.

Dagwood Bumstead (from the comic strip Blondie) has nothing on me.  Just some food for thought ??