Notes from the Forest 11-1-19 Edition

Ladies and Gentlemen:

The trading pace in the lumber and panel markets slowed modestly over the course of the week. A round of inclement weather, which included accumulating snow in the Rockies and Midwest and 2 + days of rain, oft times heavy, in the South and Mid-Atlantic slowed jobsite activity. Nevertheless, prices have been able to build onto last week’s increases. Mills are quoting production scheduled for the weeks of 11/11 – 11/25. Prompt shipments remain difficult to source and pricey when located. Retail buyers remain proactive but cautious; walking the fine line between having enough inventory on the ground to meet current and anticipated needs, while at the same time preparing for the end of the year inventory draw down and the dollar goals that must be met. Secondaries were the largest participants in last week’s market activities. This week they turned their attention to selling what they had just purchased.

The National Association of Realtors? (NAR) has provided the final puzzle piece for the Septembre housing market. The NAR has reported their Pending Homes Sales Index (PHSI), which is a forward-looking indicator based on contract signing, not the actual closing, rose 1.5% in Septembre. This marks the second consecutive months of gains. The 4-major regions were split in Septembre, with the Midwest and South recording gains and the Northeast and West posting month over month declines. The PHSI is up 3.9% when compared year-over-year, Earlier the S&P CoreLogic Case-Shiller National Home Price Index (NHPI) was released. The NHPI rose 3.2% in August, up from the 3.1% gain in July. Prices in the nation’s 10 major cities rose 1.5%, which is down from July’s gains of 1.6%.  

Spruce & Stud Markets -: The inquiry and sales pace of Eastern & Western Canadian SPF Std., & Btr., and No. 2 & Btr., slowed modestly this week. Especially when compared to last week’s hectic pace. Depending on the specific mill and buyer’s tally, producers are quoting production for the weeks of 11/18 – 11/25. Office wholesalers and local 2-step distributors were the most active participants in the market last week. This week they were active sellers, competing head to head with the mills.  Pro dealers who bought additional inventory late last week and early this week, were back on the sidelines and in the process of determining their future needs in light of the return to Standard Time, anticipated weather changes and year-end inventory goals. The extended production schedules permitted producers to move prices modestly \ moderately higher. The longer the mills’ production schedule, the more bullish they appeared to be. Demand for both low-grade stock and stud trims continues to gain momentum. Production schedules are extended into the week of 11/11 – 11/18, and prices were up modestly higher at midweek and inched higher through the remainder of the week.

CME Lumber Futures – The CME Lumber Futures Contract for Novembre will expire at Noon CST on Friday 15th Novembre. Many traders are in the process of rolling out of their Novembre contracts and into January 2020 contracts. For the past 5-days of trading (10/25 – 10//31) CME Futures were Up 3-days and down 2-days. For the past 5-days CME Futures have lost <-$5.90> and are trading above the Midweek cash market, ($388.00 MBM) by $8.20 (CME $396.20).  

Hem\ White Fir -: The inquiry and sales pace of Inland Std. & Btr. No.2 & Btr., White and Hem \ Fir, slowed modestly over the course of the week as winterlike weather impacted jobsite activity and sales. However, last week’s strong sales have left Inland producers with production schedules into the week of 11/11 – 11/18, and overall prices traded at, or modestly above last Friday’s reported levels. Coastal sales remain steady and are being pushed higher by increases in the Canadian WSPF markets. Overall, Coast and Inland buyers seemed focused on the narrow widths (2x4 & 2x6) and prices were modestly higher at midweek and that pricing trend continued through the remainder of the week. Demand for low-grade stock is in sync with production at both Coastal and Inland mills. Resulting in prices that are flat but firm. Stud trim sales remain steady to strong. Producers have developed 2-week production schedules on stud trims, resulting in prices that are flat to modestly higher throughout both selling regions.    

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., continues to gain momentum. The entire complex is filled with energy and a sense of urgency. Producers are quoting production, depending on the buyer’s tally, scheduled for the weeks of 11/11 - 11/25, with some orders being taken for the week of 12/2 production late in the week. Again, this week, buyer’s attention seemed focused on 2x4, 2x6 and 2x10. However, 2x8 and 2x12 were not that far behind. Prices were up $ 5 - $ 17 MBM at midweek and that pricing trend continued through the remainder of the week. Low-grade sales remain in close proximity with production and prices traded at, or a few dollars on either side of last week’s reported levels. Demand for stud-trims have also increased and producers started the week quoting $ 5 - $ 7 MBM above 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 experienced a modest uptick over the course of the week. Overall, prices continue to hold at previously established levels on most items. Concerns about an inadequate supply of finished products available for 1st and 2nd Qtrs., of 2020, have buyers reassessing their near-term and extended needs, checking on price and availability of those items and then placing orders with agreed upon extended delivery dates. A strike at a major producer, which is entering its 17th week, along with a permanent mill closure and a lack of logging in certain areas of B.C., has resulted in tight supplies of timbers and wide dimensional lumber in all grades. As a result, prices remain in an upward tilt on these products. Buyers continue to report having difficulty in sourcing fence pickets, both 1x4 and 1x6. Prices on pickets are once again on the move higher and lead times are currently into mid to late January 2020. 5/4 x 6 Radius Edge Decking continues to trade at established levels.  

Shake & Shingles -:  Depending on who you were talking with and when, the inquiry and sales pace in the Western Red Cedar (WRC) Shake and Shingles and Eastern White Shingles (EWS) markets are either steady and slightly ahead of traditional levels, or they are slowing and lagging behind late Octobre \ early Novembre levels. Weather always plays a major role in the WRC Shake & Shingle market late in the year. As long as outdoor work can continue, business will remain decent. The first signs of prolonged inclement weather and jobsites will quickly shut down and sales will fall into their traditional end of the year doldrums. Producers continue to report a dearth of available logs. A strike at a major producer is entering its 17th week, and logging in the Vancouver area remains curtailed and it appears it may become permanent. As a result, mills continue to run either curtailed production schedules, or only operate when they have an accumulation of logs that will support at minimum 24 – 36 hours of full production. Overall prices continue to hold at previously established levels.

Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber was able to build modestly on last week’s market uptick. Buyers continue to purchase conservatively and once their near-term needs have been covered, they returned to the sidelines waiting and wanting to see if the market can continue to sustain the improved pace. Producers have been able to extended production schedules into the weeks of 11/11 – 11/18. Again, this week, mill offer sheets had limited prompt shipping items; usually limited to ‘dawg breakfast’ tallies Prices throughout the complex were $ 3 - $ 8 MBM above last Friday’s reported levels at midweek and prices moved incremental higher through the remainder of the week. 2x12s, posted their first gains since the week of July 26th. The inquiry and sales pace of high-grade stock – D.S.S., S.S. and MSR, have also showed signs of modest improvement. Truss and modular home manufactures are reporting that their sales remain slow but steady. However, a recent tightening in truck availability and a firming in prices has made their buyers more open to having additional inventory on hand. Mills continue to report steady demand for low-grade stock. Resulting in producers quoting low-grade 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 11/4 – 11/11 and prices continue to trade at a level established 13-weeks ago. Trading of small squares and timbers has become regionalized. In the Westside Zone, the sale of 4x4s remains challenging. Mills started the week quoting below last Friday’s reported levels, in the hopes of attracting buyers back into the market. 4x6 sales are in close proximity with production and prices remain flat but firm. 6x6 sales have stalled and mills started offering lower prices from the start of the week. In the Eastside Zone, the sales of 4x4s are mixed, with selected lengths needing modest discounts. 4x6 sales are in sync with production, resulting in prices that are flat but firm. 6x6 sales are also mixed. Increased demand for both 10’ & 16’ allowed mills to move prices modestly higher. The remaining lengths are being priced flat. Demand for Standard Decking continues to accelerate and producers have been able to develop extended production schedules and prices are moving higher. Premium Decking varied between the Westside zone where mills resorted to discounting on selected lengths, to keep production sold and the Eastside zone where producers were able to hold, or gently lift prices higher.

Pressure Treated -: The inquiry and sales pace of pressure treated lumber, plywood and accessories displayed further signs of a seasonal slowdown over the course of the week. For the most part pressure treaters in the South took the slower pace in stride; noting that it was typical for late Octobre \ early Novembre. Treaters in the Midwest and Northeast commented that although things are starting to slow, they are still busier than they normally would be at this time of the year. Further adding that they hoped the weather would continue to hold, which would help them and builder’s catchup with building delays caused by the prolonged winter weather earlier in the year. Buyers continue to replenish on a 1 to 1 basis. While continuing to keep a close watch on the long-range weather forecast; not wanting to get caught with too much inventory when the weather does turns. The annual contract renewal process is well under way and buyers are fully engaged with their treated suppliers. Similar to last week export sales remain slow but steady.

OSB & Veneer Panels Overview –:  The OSB markets have come back to life and brought Southern Pine and Western Fir Rated Sheathing along on their coattails for the ride. Price increases and extended production schedules in OSB helped to lift both plywood markets higher and the discounts of past several week have quickly evaporated. Producers are quoting production anywhere from the week of 11/11 to as far out as the week of 11/25, and prompt shipments are difficult to source and if found are pricey. Prices on OSB were $ 5 - $ 15 MSF higher at midweek and increased from there. Plywood prices were flat to modestly higher at midweek and that trend continued through the remainder of the week. An outbreak of winter like weather from the Rocky’s into the Midwest and heavy rain and winds in the South and Mid-Atlantic helped to moderate the sales pace mid to late week.

OSB -: The inquiry and sales pace of OSB, which came roaring back to life last week, has been able to sustain and build on that energy and urgency through this week. Producers are quoting production scheduled for the weeks of 11/11 – 11/25 + and prompt shipments have become difficult to source, and well above mill replacement levels if they are found. Several mills started the week off market and that further served to increase buyer’s anxiety levels. With the exception of the North Central zone, which was flat, mills started the week quoting anywhere from $ 5 - $ 15 MSF above last Friday’s reported levels and prices increased through the remainder of the week. Delivered prices also spiked due to a significant tightening of supply. Snow in the Rocky’s and Midwest tended to help moderate the trading pace later in the week.

Southern Pine Panels -: The inquiry and sales pace in Southern Pine Rated Sheathing has been able to sustain the energy and urgency that developed late last week. A combination of scheduled maintenance downtime and additional OSB curtailment announcements prompted buyers to reconsider their current and projected inventory needs into mid-Novembre. Local 2-step distributors and office wholesalers, seeing an opportunity to get between the mills and buyers, were the largest participants in the markets last week. This week the same parties turned into active sellers, competing against the mills for sales. Pro dealers and pressure treaters continue to rely on their contracted volumes. Mills are quoting production scheduled for the weeks of 11/4 – 11/18. The availability of prompt shipments was noticeably smaller than in previous weeks. Prices were up modestly at midweek and that pricing trend continued through the remainder of the week. The inquiry and sales pace 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, to modestly higher on selected items and with production scheduled for the weeks of 11/4 – 11/11.

Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing was able to build modestly on late last week’s market firming. Mill production schedules range from prompt, to as far out as the week of 11/25. Producers attempted to move prices modestly higher early in the week and experienced limited buyer pushback. Truckload buyers remain the driving force in the marketplace and while they did purchase some additional inventory late last week and early this week, those purchases were on the conservative side. Buyers are waiting to see if the market’s uptick can be sustained. Carload volume buyers in the Midwest and Northeast are reporting the discount offers they are hearing this week are noticeably smaller than in previous weeks. The sales of underlayment, siding, concrete form, and other specialty panels remain steady. Sales transactions continue to take place at, or on a narrow line on either side of last week’s reported levels. Producers are quoting production scheduled for the weeks of 11/4 – 11/11.  

Food for Thought:  Our little city, Johnson City TN., population 64,978, (2016) is listed in Livability.com, as one of ‘BEST’ places in America to live. There are nearby rivers, mountains, walking and biking trails and a regional airport. There is a level 1 trauma center and several supporting hospitals It is the home of East Tennessee State University, Milligan College, Northeast State Technical Community College. The public primary and secondary schools are ranked high as well.

Unfortunately, Johnson City and Washington County TN., have the distinction of being listed as one of the worse, if not THE worst place for building, contractors and remodelers in Northeast Tennessee. A recent event brought city and county officials to meet face to face with builders, contractors and remodelers to discuss their grievances and search for reasonable accommodations. I read in the local paper that the city and county officials got an earful. Apparently, much was said, but as per usual, little has changed. It made me wonder what it is like where you are?

These are just 3 prime examples of builder, contractor and remodelers’ issues that were voiced at the meeting:

v Building the same 3 – 4 models of a single-family homes in a preplanned community and having to resubmit and wait 5 – 7 weeks to get approval and sometimes being ordered to make changes to a building blueprint that was just recently approved and built on.

v Never seeing the same inspector twice. Frustrations were particularly high on this issue. Multiple electrical, plumbing and structural inspectors, from the city, county and sometimes the state. “One says do it this way” and you do it exactly as instructed and the next one comes and says “no that’s all wrong, redo it like this”. Costly, time consuming and a major frustration for the builder\ contractor\remodeler. Also, for the homeowners who are waiting for the project to be completed.

v From the remodelers, a lack of building code enforcement agents. The city should have 5, but currently there are only 2. The amount of time it takes to get them back to a dwelling with a violation to help clarify the issue and recommend their solution, it is sometimes as much as 1 – 2 months. Then the waiting for permit approval. Delaying the project and increasing frustration levels.