Notes from the Forest 10-4-19 Edition

Ladies and Gentlemen:

Traders who were anticipating that Octobre would get off to its traditional fast start, were disappointed with week one’s trading results. Buyers’ concerns about the potential for downside risk surfaced early in the week. Resulting in buyers continuing to limit their purchase near-term needs. Buyers noted that there seemed to be ample supply available from all sectors of the supply chain, which could cover any inventory shortfall quickly. Pro dealer buyers are reporting that their sales are steady to strong. This as contractors in Canada, the Midwest and Northeast work to button up outside work. However, between current on ground inventory levels and previous, lower priced, purchases on the way their needs, at this time, for additional inventory is minimal. Producers with production schedules bogged down in the weeks of 10/7 – 10/14, did their best to hold prices firm. However, with the limited number of inquiries and even fewer orders, it was difficult for producers and secondaries not to listen and accept buyer counter offers. As prices softened buyers moved further onto the sidelines.

The National Association of Realtors? (NAR) has provided the final piece of the August 2019 housing industry puzzle. The NAR Pending Home Sales Index (PHSI) is a forward-looking report based on signed real estate contracts to purchase existing single-family homes, condos and co-ops. Not the actual closing. The PHSI was up 1.6% in August, and is 2.5% higher year over year. Each of the 4 major regions have reported both month-over-month and year-over-year gains in contract activity. The August gains, reversed a slump in July and according to a statement from the NAR, “was likely fueled by falling mortgage rates.”

Spruce & Stud Markets -: The inquiry and sales pace of Eastern & Western Canadian SPF Std., & Btr., and No. 2 & Btr., continues to lack the energy typically associated with the start of Octobre. Buyers were making inbound calls to mills as early as Monday morning, but while they were asking about current price and availability, most of them were really checking in on the late shipment of previously purchased materials. Four out of 5 days of declines in the CME Futures market, (see below) also helped to erode buyers’ confidence in the market. Producers are quoting production scheduled for the week of 10/7, with some transactions in the week of 10/14, being reported late in the week. Office wholesalers have ‘canned’ tallies available for prompt shipment. Mills started the week looking for a new trading level for 2x4 and 2x6. Producers opened the week quoting $10 MBM below last Friday’s reported level on 2x4, and $4 - $5 MBM lower on 2x6; and then encouraged buyers to provide them with firm counter offers. The wider widths (2x8 – 2x10 – 2x12) were being quoted at last Friday’s levels and traded close to those levels through the remainder of the week. Low-grade and stud trim sales have also slowed and mills started on Monday offering modestly lower prices and listening to reasonable counter offers.

CME Lumber Futures – The CME Lumber Futures Contract for Novembre will expire at Noon CST on Wednesday 13th Novembre. For the past 5-days of trading (9/27 – 10//3) CME Futures were Up 1-day and down 4-days. For the past 5-days CME Futures have lost <-$7.80> and are trading above the Midweek cash market, ($358.00 MBM) by $6.20 (CME $ 364.20).  

Hem\ White Fir -: The inquiry and sales pace of Std. & Btr. No.2 & Btr., White and Hem \ Fir, in both the Coastal and Inland markets slowed modestly over the course of the week. Mills are quoting production scheduled for the weeks of 10/7 – 10/14. Lower prices and shorter production schedules on Canadian WSPF products, provided buyers with alternatives and helped to limit the upward momentum in the marketplace. Nevertheless, with the exception of 2x4, where some minor price reductions have been made, the remainder of the market remains flat but firm. An early winter snow storm that blanketed parts of Eastern Washington State, Idaho, Wyoming, Montana, with up to 48” of snow, slowed consumption and production in those areas. Buyers continue to cover their near-term needs and are adding the chances of inclement weather to their buying plans. Demand for both low-grade and stud trims remains slow but steady. Producers quoted low-grade and stud trims at, or on either side of last week’s reported levels.

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., weakened further over the course of the week. Mills have not been able to move their production schedules beyond the week of 10/7. Producers immediately started the week making outbound calls in the hopes of getting buyers to reengage with the market. Mills started the week offering single digit discounts on 2x4 – 2x6 – 2x8 and double-digit reductions on over supplied 2x10 and 2x12 and then listened carefully to buyers’ counter offers. Unfortunately, a second week of lower prices across the complex only served to push buyers further to the sidelines. Again, this week. demand for low-grade stock remains in close proximity with production and mills quoted and sold at, or on a very narrow line on either side of last Friday’s established levels. Stud trim sales remain soft and mills modestly adjusted prices lower from the start of the week with the hopes of getting supply and demand in better alignment.

Cedar Lumber -: The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, bevel siding, timbers and pattern stock picked up additional momentum as the week progressed. Buyers who have been on the fence, for the past several weeks, debating whether they should, or shouldn’t add inventory for the 4th Qtr. and beyond, showed more interest in the process this week. The catalyst, a concern about the availability of finished product for the 4th Qtr., and early next year. Many buyers are concerned that a recent mill closure of a mill, another mill curtailing logging efforts, and an ongoing labor dispute at another mill, which is entering into its 13th week, all have the potential of tightening availability. Overall, prices continue to hold at previously established levels. The outliers remain the same, 1x4 and 1x6 fence pickets, as well as timbers. On these items, prices are moving modestly higher and production schedules on pickets have moved, at some producers, into the early weeks of January 2020. While timbers are being quoted for production scheduled for late Octobre \ early Novembre.

Shake & Shingles -:  The inquiry and sales pace in the Western Red Cedar (WRC) Shake and Shingles and Eastern White Shingles (EWS), showed modest signs of improvement, after last week’s pause in activity. Buyers continue to purchase only what they have sold. However, many of the quotes of the past 30 – 45 days are finally becoming bonafide orders. Overall, prices continue to hold at previously established levels. Late in the week, a few buyers were reporting that a handful of producers were attempting to adjust their prices modestly higher, to compensate for the higher prices of raw materials. The results, they are saying, of a recent mill closure, curtailed logging operations at another and an ongoing labor dispute which is entering its 13th week, and with no signs of a near-term settlement. Other producers are reporting that they have an ample supply of raw materials and held their prices firm. At the moment trucking is not an issue.  

Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber continues to lose traction. Even 2x4 and 2x8, which have been in tight supply over the past several weeks, have suddenly become more plentiful and prices are in the process of adjusting lower. 2x6 and 2x12 are still being over produced and prices were double-digits below last Friday’s reported levels at midweek and declined further through the remainder of the week. Producers are quoting production scheduled for the weeks of 10/7 – 10/14, but mill offer sheets have a wide variety of products, in all grades, available for prompt shipment. Buyers are back to purchasing near-term needs and little more. Softening prices and availability from mills, office wholesalers, and local 2-step distributors, have stiffen buyers’ resolve to limit their purchases and exposure to potential market downside risk. The inquiry and sales pace of high-grade stock – D.S.S., S.S. and MSR remains steady. Truss and modular home manufactures are reporting that their sales remain in an upward tilt. Resulting in their need to continue to add to inventory. Depending on the specific width, high-grade pricing remains flat and firm, to modestly higher. Producers are quoting low-grade production for the weeks of 10/7. Mills continue to quote prices at, or on a narrow line on either side of last Friday’s reported levels. Stud trim sales remain steady to strong. Mills are quoting production for the weeks of 10/7 – 10/14 and prices continue to trade at a level established 9 weeks ago. The inquiry and sales of small squares and timber, in both the Eastside and Westside zones remain in their established patterns. Demand for 4x4s remains sluggish and mills, trying to keep production sold, started the week by offering $5 - $ 10 MBM discounts on selected lengths. Again, this week, supply and demand of 4x6s are in close proximity and pricing continues to hold at established levels. 6x6s remain the star of the complex. Demand for 6x6 remains solid and mills have production schedules into mid to late Octobre, and prices trekked higher. Demand for 5/4 x 6 Radius Edge Decking has once again slowed and there was little, to no follow through to last week’s minor uptick in sales. The spread between Eastside and Westside zone pricing continues to grow in favor of Eastside mill production. In an attempt to offset the price discrepancy, Westside producers started the week by lowering prices $5 MBM on Standard Decking and $10 - $ 15 MBM on Premium. Eastside producers held their pricing on Standard Decking at, or on a narrow line on either side of last Friday’s reported levels. Premium sales remain lackluster and Eastside producers started the week quoting $ 5 - $ 10 MBM below last Friday’s established levels.

Pressure Treated -: The inquiry and sales pace of pressure treated lumber, plywood and accessories started the week with a rush of energy and urgency. Perhaps, it was the start of Octobre, or maybe because parts of Texas were finally drying out, or possibly the winter weather conditions, which over the weekend dumped up to 4’ of snow in Eastern Washington, Montana, Wyoming, Idaho and parts of the Dakotas, ( precursor of things to come); but treated buyers, as early as Monday morning, were working diligently to fill inventory holes, as they try to keep up with their very busy contractor customers. Treaters across North America are reporting, that on a whole, their Septembre sales were better than their strong sales of Septembre 2018. Large box stores reported steady sales over the past weekend, as DIY’ers finish up their projects. Export sales remain quiet.

OSB & Veneer Panels Overview –: Octobre is traditionally a busy month in the panel markets. Nevertheless, the OSB and plywood markets started the month of Octobre on a quiet note. Concerns about the near-term health of the panel markets, continue to limit buyers desire to purchase anything beyond their most pressing needs. The fact that there appears to be ample supply of product in all sectors of the supply chain and mills quoting production scheduled for the weeks of 10/7 – 10/14, were just 2-more reasons for buyers to keep their purchases to a minimum. Overall, pricing was flat to modestly lower at midweek and those pricing trends continued through the remainder of the week.

OSB -: The inquiry and sales pace of OSB continues to lack the energy and urgency usually associated with early to mid-Octobre. Buyers continue to limit their purchases to near-term needs and with ample supply available from a plethora of sources, they can’t find any reason to change their purchasing habits at this time. Producers are quoting production for the weeks of 10/7 – 10/14, but a prompt shipment always seemed to be available if it was necessary to complete the sale. Producers and office wholesalers with contract ownership in the Southeast and Southwest started the week quoting $ 5 - $ 10 MSF below last Friday’s reported levels, as they worked diligently to sell off the remaining production and or contract ownership remaining from last week and this. In the other zones, producers quoted from last week’s levels and listened carefully for buyer feedback.

Southern Pine Panels -: The inquiry and sales pace in Southern Pine Rated Sheathing remains on the quiet side. Producers are quoting production scheduled for the weeks of 10-7 - 10/14, with a handful of sales in the week of 10/21, occurring late in the week. The issues with Brazilian imported panels remain a topic of discussion. The difference in pricing between domestic and Brazilian imports have given buyers reason to pause switching. Sellers spent most of the week talking about their positions. Producers with any semblance of an order file talked about a steady to strong market and the possibility of higher prices. Producers with limited sales talked about being flexible and asking buyers for firms. The conflicting stories did nothing but confuse buyers and set them on edge. As a result, most buyers just continued to purchase near-term needs, often searching for highly mixed truckloads and asking office wholesalers and local 2-step distributors to compete with the mill(s) for the order. Producers started the week quoting at last Friday’s reported levels and prices trended on a narrow line on either side of those values for the remainder of the week. The sales of value-added panels – underlayment, sanded, siding, concrete form and other specialty panels remain in sync with production. Resulting in another week of pricing that is flat, but firm and production scheduled for the weeks of 10/7 – 10/14.

Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing remains lackluster. Truckload buyers remain the backbone of the marketplace. This week’s limited truckload sales continue to reflect buyers’ concerns about the overall health of the market. Buyers purchased highly mixed truckload(s) needed to cover pressing near-term needs; while refusing to expose themselves to any additional market downside risk. Carload volume buyers and their agricultural bin buyer counterparts continue to keep a low profile. Producers started the week quoting production scheduled for the weeks of 10/14 – 10/21. However, late in the week a handful of truckloads suddenly became available for shipment next week. Mills started the week quoting from last Friday’s reported price levels. However, neither producers, nor office wholesalers with contract ownership, ever let $1 - $3 MSF get in the way of a truckload sale. Mills were willing to accept even deeper discounts if a carload buyer in the Midwest, or Northeast presented them with a firm offer. The sales of underlayment, siding, concrete form, and other specialty panels remain slow but steady. Producers are continuing to quote production scheduled for the weeks of 10/7 – 10/14 and prices continue to hold at previously reported levels.

Food for Thought: Next week is National Fire Prevention Week – Octobre 6th – 12th. Let’s All Celebrate! The first Presidential proclamation of Fire Prevention Week was made in 1925 by President Calvin Coolidge. It is meant to coincide with the observance of the Great Chicago and Peshtigo Wisconsin, fires 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 remains key.  

This year’s theme is “Not every Hero Wears a Cape . . .  Plan and Practice your Escape!” The campaign recognizes the everyday people who motivate their households to develop and practice a home fire escape plan; which can have life-saving impact. According to Lorraine Carli, vice president of Outreach and Advocacy at the National Fire Protections Association (www.fpw.org), “this year’s campaign works to celebrate people of all ages who learn about home fire escape planning and practice, bring that information home, and spurring their families to action. From young students who learn about the campaign at school, to parents who attend a community event like a fire station open house - all of them truly are heroes because they’re taking steps to make their households much, much safer from fire.” Carli goes onto say that “people tend to underestimate their risk to fire, particularly at home. That over-confidence lends itself to a complacency toward home escape planning and practice. But in a fire situation, we’ve seen time and again that advance planning can make a potentially life-saving difference.”

A home escape plan includes working smoke alarms on every level of the home, in every bedroom, and near all sleeping areas. It also includes two ways out of every room, usually a door and a window, with a clear path to an outside meeting place (like a tree, light pole or mailbox) that’s a safe distance from the home. Home escape plans should be practiced twice a year by all members of the household.

For more information about Fire Prevention Week and “Not Every Hero Wears a Cape. Plan and Practice Your Escape!,” along with a wealth of resources to help promote the campaign, visit www.fpw.org