Notes from the Forest 12-10-21 Edition

Ladies and Gentlemen:?

The lumber and panel markets are typically on the quieter side as the year ends. However, this year they have been anything but quiet. For many traders it feels like déjà vu, with prices heading upward and lead times moving outward. Many buyers questioned how much more upside the markets could potentially have, considering the time of the year. Several conversations this week were buyers and sellers talking from their inventory, or where they wished their inventory positions were. Higher prices, extended mill production schedules, some into early to mid-January, limited to no prompt shipping lumber or panels available at the mill or secondary levels, transportation delays, which have led to further shipment delays, all have combined to increase buyers’ anxiety and frustration levels back to or beyond where they were during the heyday of the markets earlier in the year run. ?

On Wednesday (12-8-21) the U.S. Bureau of Labor Statistics (BLS) reported the Job Openings and Labor Turnover Summary (JOLTS) for October. According to the JOLTS report, as of the last day in October, the number of job openings increased to 11.0 million (+431,000). The Job opening rate was little changed at 6.9%. The number of hires was little changed at 6.5 million. The hire rate was unchanged at 4.4%. In October, the total number and rate of separations edged lower to 5.9 million (-255,000) and 4.0%, respectively. In October, the number of quits decreased to 4.2 million?(-205,000) and the quit rate declined to 2.8%. In October, the number of layoffs and discharges were little changed at 1.4 million and the rate was unchanged at 0.9%. Over the 12 months ending in October, hires totaled 73.8 million and separations totaled 68.1 million, yielding a net employment gain of 5.7 million. These totals include workers who may have been hired and separated more than once during the year.

Spruce & Stud Markets -: The inquiry and sales pace of Western and Eastern Canadian SPF Std., & Btr., and No. 2 & Btr., remains stout. Several producers spent the week coming on and going off market. This as they tried to accommodate planned holiday shutdown times around contract obligations. Producers also did not want to extend their production schedules too far into January; fearing they could be leaving price appreciation money on the table. Mills started the week quoting double-digits above last Friday’s levels and prices trekked higher from there; for production available for shipment the week of 1/10+/-. Buyers started the week searching through the markets looking for coverage on immediate needs. Many buyers expressed their disappointment at the limited variety and availability of products being offered by the mills. Secondaries did have extremely limited offering but were selling that ownership above mill replacement levels. Demand for low grade remains strong. Mills started the week quoting low-grade above last Friday’s levels and prices pressed higher from there; for production available for shipment the week 1/3+/-. Stud trim sales continued to build on the previous weeks’ activity. Mills started the week quoting stud trims above last Friday’s levels and prices trended higher from there; for production available for shipment the week of 1/3+/-. Transportation issues remain a frustration for traders. ?

CME Lumber Futures –: The CME Lumber Future Contract for January will expire on Friday, January 14th, 2022, at 12:00 Noon CST. For the past 5- days (12/3 – 12/9), CME Futures were up 4- days and down 1-day CME Lumber futures have gained $ 109.80 and are trading above midweek Cash Market of $800 by $224.30 CME at $1024.30. One Year Ago, today (12-9-20) CME Futures closed at $754.50.?

Hem\ White Fir -: The inquiry and sales pace of Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem-Fir, easily built on last week’s surge in market activity. With many mills planning on downtime during the holidays, many buyers have become concerned about having sufficient inventory coverage to meet their late December and early to mid-January anticipated needs. As a result, buyers were back in the market looking for additional replenishment from Monday morning forward. Narrow widths led the markets higher, but the wider widths were not that far behind. Mills started the week quoting high double and on select items triple-digits above last Friday’s levels and prices moved higher from there; for production available for shipment the week of 1/10+/-. Demand for low-grade products from the industrial sector continues unabated. Mills started the week quoting low-grade double-digits above last Friday’s levels and prices pushed higher from there; for production available the week of 1/3+/-. Demand for stud trims is stellar. Mills started the week quoting high double and triple digits above last Friday’s levels and prices climbed higher from there; for production available for the week of 1/10+/. ?Transportation issues added another level of complexity to an already stressed marketplace.?

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir (GDF) Std. & Btr., & No. 2 & Btr., remains robust. Many producers started the week off market as they tried to get last week’s voluminous orders into their production schedules. Mills that were on market started the week quoting double-digits above last Friday’s levels and prices trended higher from there; for production available for shipment the week of 1/10+/-. Buyers focused on narrow widths at the start of the week, but by midweek, all the widths were clearly in play. The spread between KD products and GDF continues to grow and remains in the favor of GDF. As a result, buyers who can switch between species and KD and Green are making the switch. Long length sales (22’+) remain exceptionally active and their prices continued to trek higher. Demand for low-grade moved into a higher gear. Mills started the week quoting low-grade above last Friday’s levels and prices moved higher from there; for production available for shipment the week of 1/10+/-. Demand for stud trims increased, just as availability suddenly tightened. As a result, mills started the week quoting stud trims double-digits above last Friday’s levels and prices pressed higher from there; for production available for shipment the week of 1/10+/-.?

Cedar Lumber -: ?The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, siding, pattern stock gained additional momentum during the week. Realizing that reduction in old-growth logging were going to impact the availability of WRC logs and in turn production, buyers stepped into the market to cover at minimum their Q1 needs. Others pushed mills for coverage into Q2 and some even beyond. Mills uncertain as to how the old-growth log reduction will directly impact their ability to maintain current production levels, tried to extend their production schedules, without over committing and disappointing. The increased Antidumping and Countervailing duties also gave producers cause to pause and take a more wait and see attitude towards additional sales. Mills started the week once again quoting boards, dimensional lumber, fencing, pattern stock, radius edge decking, siding and timbers at or above last week’s levels. But most sales were conducted at Price Time of Shipment, as both buyers and sellers dealt with the new and ongoing headwinds in the WRC lumber market. ???

Shake & Shingles -: The inquiry and sales pace of Western Red Cedar (WRC) Shake, and Shingles remains active. Buyers started the week, again, combing through the markets looking for offerings that closely matched the materials they needed. Regrettably, it was another week where many mills were off market and buyers found little if anything available. Limited availability of raw materials and the chance that there will be even less next year, had mills responding exclusively to their top customers. Several buyers still waiting on late shipments and getting turned down on additional materials, moved to the sidelines. With many once again pursuing alternative species or manufactured products to help fill the void from the loss of WRC Shake and Shingle products. Producers started the week, as a price guide only, quoting above last Friday’s levels. However, the few orders that were placed this week were sold as Price Time of Shipment. Transportation issues remain a constant headwind for traders. ?

Southern Pine Lumber -: ?The inquiry and sales pace of Southern Pine No.1 & No.2-dimensional lumber remains energized. Late last week’s sudden surge in market activity easily carried over into this week. Wet weather, which has limited logging, coupled with ongoing COVID-19 outbreaks continue to hamper mill production. As a result, buyers are struggling to find replenishment at both the mill and secondary level. Mill production and shipment times reflect pre-planned holiday shutdown times. Mills started the week quoting No.1 & No.2-dimensional lumber double-digits above last Friday’s levels and prices moved higher from there; for production available for shipment the week of 1/10+/-.?Demand for high-grade jumped into a higher gear during the week. A lack of available SPF high-grade products has typical SPF users looking to the Southern Pine markets for coverage. As a result, high-grade prices pushed higher and lead times extending into early to mid-January. Demand for low-grade stock continues to outpace availability. Mills started the week quoting low-grade double-digits above last Friday’s levels and prices climbed higher from there; for production available the week of 1/3+/-. Stud trim sales remain steady to strong. Mills started the week quoting stud trims double-digits above last Friday’s levels and prices traded higher from there; for production available for shipment the week of 1/3+/-. Demand for small squares and timber experienced increased interest during the week. Mills started the week quoting 4x4 – 4x6 – 6x6 at or above last Friday’s levels and prices traded flat to higher from there; for production available for shipment the week of 12/27+/-. Demand for 5/4 x 6 Standard and Premium Radius Edge Decking continues at a typical seasonal slower pace. Mills started the week with limited inventory available and quoting R.E.D. at or above last Friday’s levels and prices traded in a similar pattern from there; for production available for shipment the week of 1/3+/-. Transportation issues continue to create pinch points in the Southern Pine supply chain. ?

Pressure Treated -: ?Weather continues to dictate the inquiry and sales pace of pressure treated lumber, panels, and specialty items. Where the weather remains conducive to outdoor deck, fence and foundation construction, pro dealers continue to report steady jobsite activity. However, due to the time of year, most dealers, especially in the north, continue to limit their replenishment to absolute needs. Even an uptick in the price of brite feedstock and the accompanying increase in the price of treated products has not made buyers stray from their lean and mean philosophy. At least through the remainder of the year. DIY sales remain on the quiet side, as would be expected two-weeks before Christmas. Transportation issues remain a problem and they are anticipated to last well into 2022. ?

OSB & Veneer Panels Overview –:?The OSB and plywood panel markets gained additional energy and urgency during the week. Most mills have holiday downtime planned into their production schedules. As a result, most mills are quoting shipment the week of 1/10+/-. Complicating the projected shipment times, are unrelenting transportation issues. With many freight experts now predicting that the shortage of trucks and empty railcars will continue well into 2022. Producers started the week quoting above last Friday’s levels and prices climbed higher from there. With production schedules into January, buyers’ cautious approach to the marketplace have given way to a willingness to pay higher prices if the mill or secondary would accept their purchase order. Many traders reflected on the similarity between the current market and last December and early 2021 activity. ?

OSB -: The inquiry and sales pace of OSB easily built on late last week’s hectic market activity. Buyers’ needs for late December and early to mid-January replenishment have quickly overwhelmed the extremely limited amount of open market panels producers have available. Mills first priority remains honoring contract obligations and that includes accepting additional contract orders per the specific customer’s agreement. Mills started the week quoting above last Friday’s levels and prices pushed higher from there; for production available for shipment the week of 1/10+/-. Secondaries have only limited availability and sold that ownership, be it in units or a truckload, well above mill replacement levels. ??

Southern Pine Panels -: The inquiry and sales pace of Southern Pine Rated Sheathing grew even more chaotic during the week. Buyers with lite field inventories frantically searched through the markets looking for replenishment to meet late December and early to mid-January needs. But reported limited to no success. With planned holiday downtime already incorporated into their production schedules, several producers started the week off market, as they entered recently placed orders into their system, while making sure they left enough open production time to cover January contract obligations. Mills started the week quoting double-digits above last Friday’s levels and prices trekked higher from there; for production scheduled for shipment the week of 1/17+/-. Mills Cert. sales remain upbeat, but not as strong as Rated Sheathing. Producers started the week quoting Mill Cert. above last Friday’s levels and prices edged higher from there; for production available for shipment the week of 1/10+/-. The inquiry and sales pace of value-added panels, underlayment, sanded, siding, concrete form, and other specialty panels remain steady to strong. Mills started the week quoting above last Friday’s levels and prices trended higher from there; for production available for shipment the week of 1/10+/-.?

Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing easily built on last week’s ‘best sales since early April’ momentum. Several mills started the week off market, as they tried to adjust production schedules to accommodate for planned holiday shutdown times and still have sufficient production time available to cover January contract obligations. Mills started the week quoting high double and triple-digits above last Friday’s levels and prices climbed even higher from there; for production available for shipment the week of 1/10+/-. Buyers started the week searching for replenishment to cover the balance of December and early to mid-January needs. Unfortunately, they found themselves in direct competition with Southern Pine and Canadian plywood buyers, who were also searching for coverage, in the Western Fir market. It is being reported that some mills are allocating production, and in most cases only to a select group of customers. Office wholesalers with contract ownership, sold that ownership at a premium to mill replacement levels. Sales of CC, CC Plugged & Touch Sanded, Struct I, and Mill Cert. markets also surged higher. Producers started the week quoting these items above last Friday’s levels and prices moved higher from there; for production available for shipment the week of 1/3+/-. The inquiry and sales pace of underlayment, siding, concrete form, and other specialty panels also built on last week’s increased market activity. Mills started the week quoting specialty panels at or above last week’s levels and prices traded at or pressed higher from there; for production available for shipment the week of 1/3+/-. ?

Food for Thought-: ?I remember as a youth being taught that any decision, especially a business decision, should be based strictly on data. Anything less than data, was anecdotal and based on some facts, but lots of human emotions and perceptions added in. ?

Which leads me to two questions . . . 1) Where are they getting these numbers from? And 2) how can we make good business decisions based on state and federal government data, which can be revised the following day, week, month, or quarter and in some cases variations within those exact time frames? On top of that some of the information is 2 months behind, for example the Job Opening and Labor Turnover Survey (JOLTS) written about above, is for October, we will not learn about November 2021 until January 2022, and December 2021 until February 2022. Before you start with its those @#%*! (fill in your current party of disdain), my recollection of this phenomena dates to the early 1970’s and both parties have held the highest offices in their state’s and our nation since then, and the data revisions have been in each and every administration.?

As lumber, panel, and building materials dealers, large box store retailers, builders and developers, we know that everything from housing starts, permits and completions, to unemployment, to the Consumer Price Index (CPI), to real Gross Domestic Product (GDP), which by the way actually get revised twice, after first being announced as ‘Advanced’, to personal income and outlay, etc. etc. all impact the purchasing decisions we make every day. While we make decisions based on what we are seeing now, we know in the back of our minds that it could change next week, next month or next quarter. In turn, when that does happen, making you wonder what was I thinking??

Just some food for thought. ?