Notes from the Forest 10-14-2016 Edition
Ladies and Gentlemen:
The accelerated pace of the lumber and panel markets last week, has given way to a more manageable, almost pedestrian pace. Hurricane Matthew stirred the markets up and a significant volume of panels and lesser amounts of lumber were sold in anticipation of the board up and clean up after the storm. This week with Canadian Thanksgiving on Monday, CME Lumber Future Gyrations on Tuesday and the expiration of the ‘stand still” period of the SLA buyers stepped to the sidelines and waited to see what direction the markets would choose next.
As per usual, housing industry news is difficult to find this early in the month. I did come across some interesting information in regards to U.S. and Canadian lumber production. According to the Western Wood Products Association’s (WWPA) “Lumber Track” publication, U.S. production of softwood lumber through July totaled 19.299 billion board feet, up 3.2% compared to the first seven months of 2015. Through July, lumber production in the West was up 0.8% compared to the same period last year. Production in the South was up 5.1%. Nationwide, July production totaled 2.597 BBF, off <-11.5%> from June and <-4.5%> off the pace of July 2015. Statistics Canada reported that Canadian lumber production in July totaled 2.247 million board feet, down <-10.1%> from June but 1.3% higher than the July 2015 totals. Shipments from Canadian sawmills in July were down <-8.9%> from June, but up 7.3% from July 2015.
Spruce & Stud Markets-: The inquiry and sales pace of Eastern & Western SPF Std., & Btr., and No. 2 Btr., was slow again this week. The markets could not overcome the combination of Canadian Thanksgiving on Monday, CME Futures down limit on Tuesday, recovering some of the losses Wednesday, only to move lower on Thursday, and the expiration of the SLA moratorium on Wednesday. The overall uncertainty in the marketplace kept buyers on sidelines, waiting to see what the markets would do next. Mill order files are already into the weeks of 10/24, and that gave mills the ability to hold prices at previously established levels. Later in the week it was being reported that some minor discounting was taking place, but only for volume purchase customers. Sales of low grade stock remains robust, and availability is not keeping up with demand. As a result, prices inched higher as order files moved towards the end of the month. Demand for stud trims were also steady and prices were flat to modestly higher.
Hem \ White Fir -: The inquiry and sales pace of Coastal and Inland Hem \ White Fir remains lackluster, and prices once again reflected what mills needed to move to prevent further inventory buildup. Mills remain confident that field inventories are ultra-lite and that buyers should be about ready to step back into the marketplace. Buyers concede that their inventory levels are low, but considering the time of the year, the availability of on ground stock, and the lack of price movement in the market they can’t bring themselves to purchase beyond their most pressing needs. A recent snowfall in the higher elevations in the West and Upper Midwest further deepened their resolve to continue their selective purchasing pattern. It was another week where low grade sales were better than construction grade stock. Stud trim sales are in lockstep with production and pricing was overall flat but firm.
Green Doug Fir -: The inquiry and sales pace of Green Doug Fir Std., & Btr., and No. 2 & Btr., continues in the pattern that was established months ago. Interest continues to alternate between the narrow widths (2x4 – 2x6) for a week or two and then shifts to the wider widths (2x8 – 2x10 – 2x12). This week and last week’s buyers seemed focused on the narrow widths and prices were flat to modestly higher. As result, prices adjusted minutely on the wider widths as mills attempted to keep sales in line with production. Sales of low grade stock and stud trims are in sync with production and prices held steady at previously established 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 remains brisk for this time of year. Retailers and local 2-step niche distributors have deliberately been keeping their inventory levels lite. This has resulted in a steady stream of inquiry and sales at the producer level for items that have been sold and are needed to complete projects prior the end of the traditional building season. Pricing on most items remain rock solid, and a few key items actually inched higher. As for 2017 Q-1 & Q-2 sales, the pace has not been nearly as robust as producers have been anticipating. This in spite of product shortfalls throughout the entire course of this year. Discussions about the expiration of the SLA were frequent, but with nothing to really base a strategy on, neither mill nor retailer \ niche distributor was quite sure what was going to happen next. Many are hoping that when things finally shake out that WRC will not be a product subject to the potential tariffs and volume limitations. The announcement that Tri-Pro Forest Products has decided to close their Orofino, Idaho facility due to a lack of logs, was somewhat lost in the issues of the day – SLA expiration, and the devastation caused by Hurricane Matthew.
Shake & Shingles -: The sales pace of Western Red Cedar Shake and Shingle continue to be slower than many traders had anticipated. As we move further into Octobre, it is becoming clear that the traditional spike in consumption prior to the end of the building season is not going to happen this year. There has not been a significant move to purchase beyond pressing needs, even as prices adjust lower. The Shake market seems to have a firmer tone. Shingle prices are being influenced by what mills have available and ready for shipment; giving pricing a wide swing from one producer to another. The SLA moratorium expired on Wednesday at midnight and traders are still waiting to see what is going to happen next.
Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No. 1 & No. 2-dimensional lumber has started to slow. Mills counter acted the slower pace by offering lowering prices in all zones on 2x6 and wider material. Those moderate adjustments were just the catalyst to get buyers to return to the markets to purchase limited volume. While no one bought a lot, everyone bought just enough to keep prices from drifting further lower. This week’s shining star was 2x4, and mills are reporting order files that are 2+ week long and pricing moved modestly higher, as demand continues to outpace production. Sales of high grade – D.S.S., S.S., and MSR – did not slow as significantly as construction grade stock, and overall prices were flat to higher, with order files in the 7 – 10-day range. Demand for low grade remains on the strong side, and sales continue to outpace production; and mills pushed prices higher. Stud trim sales have moderated, however mills have extended order files and that allowed them to hold or move prices modestly higher. The inquiry and sales pace of small squares and timbers continues to improve. Producers in the Westside zone, in particular, are reporting robust sales and as order files moved out, prices moved higher. Sales in the Eastside zone were good but mills worked on building their order files over hiking prices. The inquiry and sales pace of both Standard and Premium 5/4 x 6 Radius Edge Decking remains lackluster. Mills continue to offer discounts on both grades, but noted that as the week progressed they were not needing to discount as deeply as they have been in the previous weeks. Mills along the Southern Atlantic Coast reported production interruptions in the aftermath of Hurricane Matthew. Many remain without power, and employees. Washed out roads and railroad tracks made shipping difficult if not impossible.
Pressure Treated -: Sales of pressure treated lumber and accessories slowed modestly during the course of the week. However, considering the time of the year sales are being reported as good, to sneaky strong. The damage of Hurricane Matthew was extensive, and many home and business owners are anxious to start the clean-up and rebuilding process. It is going to be several weeks if not months before all of the insurance adjustment work is completed and rebuilding can begin. When it does, pressure treated sales are certainly going to spike. Buyers are definitely not buying the volumes they were purchasing just a few weeks ago. Instead many buyers are now replenishing frequently and counting on their pressure treated lumber supplier to have material to them in 24 – 48 hours of an order being placed.
OSB & Veneer Panels Overview -: Compared to last week’s torrid pace in the OSB and plywood markets, this week seemed almost pedestrian. Buyers are back to purchasing what they need and little extra, if anything at all. Mill order files remain locked in the weeks of 10/17 – 10/31 depending on the specific item, species and producing zone. Overall pricing held steady at last Friday’s reported levels. Buyers who bought volume last week are now waiting for that inventory to arrive, and more importantly to be sold. Transportation issues along the Southern and Mid-Atlantic Coast were being reported.
OSB -: The inquiry and sales pace of OSB has noticeably slowed from last week’s accelerated pace. Buyers have reverted back to their purchasing of pressing needs and little more. Overall pricing held steady, with Western Canada the only zone offering minor discounts starting at midweek. Buyers did their pre-Hurricane Matthew purchasing and are now waiting for what they bought to arrive and more importantly to be sold. Mill order files remain in the weeks of 10/17 – 10/24, with a few producers late in the week opening up the week of 10/31. Shipment coming from along the Southern Atlantic Coast are be hindered by flood and some case missing parts of major interstate highways and railroad track and bridges. It is being reported that some of the repair work on these roads and bridges is going to be significant and could take up to 6 – 12 months to complete.
Southern Pine Panels -: The inquiry and sales pace of Southern Pine Rated Sheathing moderated after last week’s initial Hurricane Matthew driven spike in sales and pricing. Overall prices traded close to last Friday’s reported levels. Mill order files are holding in the week of 10/24, but towards the end of the week producers in the Central and Westside zones reported having some extra truckloads, or carloads, for shipment late next week. Mills along the Southern Atlantic Coast are still dealing with the aftermath of Hurricane Matthew. Many producers in that region are reporting that they are still without power; while others have electricity but many of their employees are unable to make it to work due to continued flooding and in some instance roadways that have been washed away. This is also negatively impacting shipments from this area as well. Most producers know that it is going to be sometime – weeks, and months – before the insurance adjusters and Federal relief money can make their way into the devastated areas. As one trader noted, ‘most people do not have flood insurance and this is going to significantly impact the rebuilding process.’ Sales of underlayment and sanded remain difficult, but mills reported that while some discounting was necessary, those discounts were not as deep as in previous weeks. Sales of siding, concrete form and other specialty panels were in step with production and prices were unchanged.
Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing remains on the quiet side. Mills started the week quoting from last Friday’s list prices and tried to hold the line. However, buyers insisted on discounts as an incentive to buy. Refusing those overtures quickly caused surplus inventory to build at the mills. By midweek, producers were willing listen to modest counter offers. Mills are quoting for shipment the week of 10/24, but if a buyer insisted on a quicker shipment, a truckload or in some cases a carload suddenly appeared on the inventory list. Several producers reported taking carload volumes for shipment to the East Coast, and those were reportedly sold at double digit discounts below last reported levels. Secondaries worked diligently to keep up with contract ownership, often offering that ownership, at prices slightly below mill replacement levels. Sales of underlayment remain a challenge and mills were discounting from the early hours of Monday through the remainder of the week. Sales of sanded, siding, concrete form and other specialty panels were on the slow side but mills are holding 7 – 10 day order files, and as a result, were able to sell enough volume to hold prices steady.
Food for Thought -: It’s National Fire Prevention Week – Let’s Celebrate. President Woodrow Wilson proclaimed the first National Fire Prevention week observance back in Octobre of 1920. It is meant to coincide with the observance of the Great Chicago and Peshtigo Fire of Octobre 9th 1871. Through the years, thanks to modern technology the themes, have changed but preventing fires and being able to escape and live through a fire remain key.
This year’s theme has been “Smoke Detectors and Fire Extinguishers Don’t Last Forever.” The average smoke detector has an average life span of 10 years. Even if you still have one that uses a removal battery. The newer models are now sealed and have a 10-year life span. No more annoying beeps\tweets in the middle of the night. Fire extinguisher need to be inspected at least twice a year and if the needle has moved passed the middle, it might be time for a replacement. And while we’re thinking about the unthinkable, have a house or apartment evacuation plan and a place that everyone goes to once they’ve exited the house. One final thing and this is difficult, but fire departments throughout the country stress that “Once you’re out stay out.”