Notes from the Forest 1-17-20 Edition
Ladies and Gentlemen:
Trading in the lumber and panel markets was a step or two slower than in the previous weeks. Weather remains a constant factor and the wildcard in the current markets’ movements. Over the course of the week buyers had to contended with a wide variety of weather, all which negatively impacted, jobsite activity, whether for as little as a few hours, to as long as several days. Buyers who purchased conservative volumes, at the start of the month, to help rebuild depleted inventories are waiting for delivery of that material. Only when that product starts to sell, at a consistent rate, will they be able to return and purchase additional inventory. Producers are quoting production scheduled for the week of 1/20, to as far out as the week of 2/3, which allowed them to hold prices at, or modestly above last Friday’s reported levels.
The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) indicates that builder confidence in the market for newly-built single-family homes slipped 1-point lower in January, to a reading of 75. The last 2-monthly readings mark the highest sentiment levels since July of 1999. Any reading over 50 indicates that more builders view conditions as good rather than poor. The Conference Board, Consumer Confidence Index (CFI) reported the share of respondents planning to buy a home rose to 6% in Decembre. The share of respondents planning to buy a newly constructed home increased to 1.1%, and for those who planning to buy an existing home climbed to 3.4%
Spruce & Stud Markets -: The inquiry and sales pace of Western and Eastern Canadian SPF Std., & Btr., and No. 2 & Btr., remain at a typical mid to late January level. A steady stream of inclement weather moving across North America has slowed jobsite activity and buyers need to replenish; beyond what they have recently purchased at the start of the new year. Producers are quoting production scheduled for the weeks of 1/20 – 2/3, with only odds and ends and ‘dawg breakfasts’ available for prompt shipment. Mills used their extended production schedules as the basis for continuing to quote at, or on a narrow line on either side of last Friday’s reported levels. Any discounts, usually token in value, quickly disappeared once the excess inventory was disposed of. Sales of low grade remain steady and prices traded at, or modestly above last week’s established levels. Stud trim sales are robust and production schedules have quickly moved into the week of 1/20 – 1/27, or beyond and prices continue to steadily move higher.
CME Lumber Futures – The CME Lumber Contract for January 2020 expired at Noon CST, on Wednesday 15th January 2020. For the last 4-days of the contract trading, (1/10 – 1/15) CME Futures were Up 2-days and down 2-day. For those past 4-days CME Futures have lost <-$2.50> and are trading above the cash market, $388.00 MBM by $0.60 CME $388.60. March 2020 is now the forward month and will expire on Friday 13th March 2020 at 12:00 Noon CST. For the past 2-days of trading (1/15 – 1/16) CME Futures were up 2-days and down 0– day. For the past 2 days CME Futures have gained $8.40 and are trading above the cash market $388 MBM by $40.80 CME $ 428.80.
Hem\ White Fir -: The inquiry and sales pace of Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem-Fir was not quite as strong as it has been over the previous several weeks. Most traders seemed to be in agreement that inclement weather was the significant factor in slowing buyers need, at least in the near-term, to replenish. Nevertheless, prices remain flat to modestly higher and producers are quoting production for the weeks of 1/20 - 1/27, or beyond on several key items. Demand for low-grade stock remains steady to strong and prices traded at, or modestly above last Friday’s reported levels. Stud trim sales are robust, with 9’trims leading the market charge higher. Mills are quoting stud production scheduled anywhere from the week of 1/20, to as far out as the week of 2/3.
Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., continues to lack the energy and urgency it had prior to end of the year. With unsold production quickly filling sheds and inclement weather impacting the major consumption areas, producers started the week making outbound calls to customers offering additional discounts, to last week’s already reduced prices. Lower prices were definitely not an incentive to the West Coast truckload buyers. Even carload buyers, who know that whatever they buy will take 25 – 40 days to transit across the country showed limited to no interest. Sales of low-grade stock remain slow but steady and prices continue to trade at, or on a narrow line on either side of last week’s reported levels. Stud trim sales are steady to sneaky strong and producers have order files that have pushed into the weeks of 1/20 – 1/27 and prices remain in an upward tilt across the entire complex.
Cedar Lumber -: The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, bevel siding, timbers and pattern stock remained steady to strong again this week. Buyers continue to express their frustration over late shipment of previously placed orders and the lack of available products being quoted by producers to meet their late 1st to mid-2nd Qtr., needs. Producers apologized, but noted that they have no control over the weather and the resulting lack of availability of raw materials, trucks and railcars; all of which are impeding their ability to produce and ship at high volume level. A labor dispute is entering its 28th week continues to drag on and there are currently no bargaining sessions planed. The strike is not only negatively impacting logging efforts, but it is also continuing to limit the availability of wider width dimensional lumber, small squares and timbers. Overall, prices continue to hold at previously established levels on most products. The exceptions remain the same; fence pickets, along with wide dimension lumber, small square and timbers, and now 5/4 x 6 Radius Edge Decking is joining the list. On some of these items, production schedules have pushed into mid to late March \ early April and prices are firm to modestly 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, but are on par for the weeks of mid to late January. Prices continue to trade at previously established levels. However, mills have been trying to figure out a way to edge prices higher, without immediate buyer pushback. An outbreak of snow and bitter cold temperatures hindered logging, as well as, mill production efforts in B.C. Several producers have not returned from their holiday shutdowns and they still have not provided any clear indication when they expect to be back into production. Those producers that are in operation are running curtailed production schedules and with the snow and cold weather and a lack of raw materials many are about to shut down until weather and feedstock availability improves.
Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber slowed modestly over the course of the week. Nevertheless, the market was able to post its 4th straight week of gains. Producers are quoting production for the weeks of 1/20 – 1/27, and beyond on a handful of key items. Buyers’ interest in 2x6 remains strong, but their need for 2x4 has faded. Demand for wider widths (2x8 – 2x10 – 2x12) remains steady. Again, this week, the Central Zone, was the most active, but the Westside and Eastside zones are quickly closing the activity gap. The inquiry and sales pace of high-grade stock – D.S.S., S.S. and MSR, also showed signs of modest fatigue. Although still anticipating stellar sales in 2020, truss and modular home feedstock buyers adjusted their replenishment schedules, as the weather is slowing both jobsite preparation and activity. The sale of No.3 & No. 4 low-grade stock have also eased. Producers are quoting production for the week 1//20 – 1/27 and prices continue to trade at, or on a narrow line on either side of last Friday’s reported levels. Stud trim sales also slowed a step or two over the course of the week. Mills are quoting production scheduled for the weeks of 1/20 – 1/27, but demand was not quite strong enough, this week, to push prices higher. The inquiry and sales pace of small squares and timbers remains strong. In the Westside Zone, sales of 4x4, 4x6, and now 6x6 are running ahead of production. Resulting in prices that are, modestly to moderately higher again this week. In the Eastside Zone, the sales of 4x4s, 4x6s, 6x6s continue to remain in lockstep with production and prices continue to trading at, or modestly above last Friday’s reported levels. Demand for 5/4 x 6 Radius Edge Decking is once again, in both production zones, well within mid to late January seasonal levels. Westside Zone producers are reporting increased demand for Standard Decking products; particularly 8’ – 10’ lengths. This has resulted in the price of Standard Decking moving higher again this week. Demand for Premium Decking is in close proximity with production and prices are being quoted at, or modestly above, on selected lengths, last Friday’s reported levels. Eastside Zone producers are reporting that their sales of Standard and Premium Decking are in step with production and they continue to quote and sell at, or modestly above last Friday’s reported levels.
Pressure Treated -: The inquiry and sales pace of pressure treated lumber, plywood and accessories has once again become heavily dependent on the weather. Last week, buyers who had participated in a ‘winter buy’ checked with their supplier about when shipments might commence. Depending on the weather some wanted shipments moved up, while others dealing with winter weather asked them that their initial orders be delayed. Last week, buyers who hadn’t participated in a ‘winter buy’ worked diligently on rebuilding their depleted pressure treated inventories. This week those purchases have begun to arrive at their facility. Now weather will be the determining factor as to how soon those buyers will need to return to the marketplace to purchase additional materials. The rising costs of brite feedstock is leading to higher prices for finished treated products. While it is tempting to purchase now when prices are on the rise and there is minimal downside risk, many treated buyers are dealing with HQ’s demands to control spending during the 1st Qtr. Export treaters are reporting that their inquiry and sales levels remain steady to seasonally strong.
OSB & Veneer Panels Overview –: The inquiry and sales pace of OSB and plywood had limited follow through from last week’s modest uptick. Inclement weather throughout North America remains the barrier to jobsite activity. Having purchased near-term needs last week, buyers returned to the sidelines waiting for field activity to resume, which in turn will trigger their need for additional replenishment. Producers are quoting production scheduled for the weeks of 1/20 – 1/27, but prompt loading were usually available if needed. Overall prices continue to hold at, or on a thin line on either side of last Friday’s reported levels. Office wholesalers are reporting that the sale of their contract ownership has become ‘challenging.’
OSB -: The inquiry and sales pace of OSB experienced little follow through from late last week’s small bump in market activity. Having covered their near-term needs last week, buyers have moved back to the sidelines, as they wait for both the weather and jobsite activity to improve. Buyers also know that should there be a sudden inventory shortfall, they can easily find coverage at the local 2-step distribution level. Producers are quoting production scheduled for the weeks of 1/20 – 1/27 and that has resulted in prices being quoted at, or modestly above last Friday’s reported levels. Buyer counter offers, even of the token variety, are being dismissed out of hand. Office wholesalers are reporting that the sale(s) of their contract ownership proved to be a bit more challenging this week, than last.
Southern Pine Panels -: The inquiry and sales pace in Southern Pine Rated Sheathing remain underwhelming. Producers are quoting production scheduled for the weeks of 1/20 – 1/27, but prompt shipments always seemed to be available if needed. Unseasonably warm, but extremely wet and windy weather throughout the South and Mid-Atlantic continues to hold jobsite activity at bay. As a result, buyers continue to display little interest in rebuilding their depleted inventories. Instead they continue to opt for highly mixed truckloads from a mill, or in many instances fill in units from a local 2-step distributor. Mills started the week quoting from last Friday’s reported levels, but with sales stalled, mills selectively offered modest discounts on over produced thicknesses, while holding other prices flat and firm. The sales of underlayment, siding, concrete form, and other specialty panels remain slow but steady and prices continue to trade at, or a few dollars above previously established levels. Producers, are quoting production scheduled for the week of 1/20.
Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing experienced minimal follow through following last week’s ever so slight uptick in activity. Producers are quoting production scheduled for the weeks of 1/20 – 1/27. Mills continue to hold pricing firm; believing that any price concession would not garner them any additional sales. West Coast truckload buyers continue to purchase near-term, fill-in needs; while continuing to avoid volume purchases, until the market and jobsite activity can support such a move. Carload volume buyers in the Midwest and Northeast purchased modest volumes last week and have returned to the sidelines, as they too wait for additional signs of increased needs. The sales of value-added panels – underlayment, siding, concrete form, and other specialty panels remain slow but steady and prices continue to trade on a narrow line on either side of previously established levels, for production scheduled for the week of 1/20.
Food for Thought: According to the U.S. Bureau of Labor Statistics, the building industry continues to face an acute shortage of skilled workers. According to the latest Commercial Construction Index, 91% of more than 2,700 contractors, construction managers, builders and trade contractors are reporting having a difficult, to moderately difficult time finding skilled labor. Through most of 2019 contractors have been trying to fill 225,000 skilled labor jobs each and every month. That is 2.7 million jobs on a yearly basis. This in spite of Association of Builders & Contractors annually investing in workforce development in excess of $ 1 billion. The question being asked throughout the building trades and in the retail lumber and building materials industry is ‘where are we going to find qualified people to fill these positions?’
Back in my youth, growing up in Chicago, there were 4-year vocational high schools that a young person could attend and graduate with a high school diploma, as well as having learned a trade and having completed 1 – 2 years of an apprenticeship. The schools were sponsored by the various trade unions and it was a win – win for the students, the community and the trades. Today, while there are still vocational high schools, however, they are more centered and dedicated into getting students prepared for further educational studies in computer science, medical technology, business administration etc. If anything, a young person showing interest in the trades, being a carpenter, plumber, roofer, electrician, HVAC, or other trade member are discouraged from such studies. Oddly enough people in the trades can and do earn a good living and the shortage ahead only means that these jobs will be paying even more in the coming years.
I am definitely not opposed to higher education. I am a product of higher education, but not everyone is cut out for advanced studies, and those people who are so inclined should be encouraged to follow their dreams. I know a computer can design a building, but to date I’ve never seen one actually build it. Just food for thought.