Notes from the Forest 2-18-22 Edition

Ladies and Gentlemen:?

With lumber and panel prices moving higher and production schedules stretching well into mid \ late March, many buyers wanted to step away from the markets. As their concerns over the past 18 – 24 months of market volatility and the potential for downside risk are once again at the forefront of their purchasing decisions. However, with jobsites awakening in the North from their winter slumbers, and springtime already taking hold in the South, not being active in the markets posed even greater risks. Especially, as delayed shipments continue to leave their on-ground inventory levels vulnerable to active springtime building levels. Logistics problems continue unabated and the near-term prognosis for improvement is bleak. There were unconfirmed rumblings coming from the multifamily and budgeted non-residential sector that higher prices might, once again, force work to be placed on hold.?

The U.S. Census Bureau reported on Thursday (2-17-22) that privately‐owned housing starts in January were at a seasonally adjusted annual rate (SAAR) of 1,638,000. This is -4.1% below the revised December estimate of 1,708,000, but is 0.8% above the January 2021 rate of 1,625,000. Single-family housing starts in January were at a rate of 1,116,000, this is -5.6% below the revised December figure of 1,182,000. The January rate for units in buildings with five units or more was 510,000. Building Permits are the forward-looking portion of the report and in January privately-owned housing units authorized by building permits were at a SAAR of 1,899,000. This is 0.7% above the revised December rate of 1,885,000 and is 0.8% above the January 2021 rate of 1,883,000. Single-family authorizations in January were at a rate of 1,205,000; this is 6.8% above the revised December figure of 1,128,000. Authorizations of units in buildings with five units or more were at a rate of 629,000. On Wednesday (2-16-22), The National Association of Home Builders (NAHB) /Wells Fargo Housing Market Index (HMI) reported that builder sentiment in the market for newly built single-family homes edged 1-point lower in February to a reading of 82. Despite these recent monthly declines, the HMI has posted very solid reading at or above 80 for the past 5-months. Any reading above 50 indicates that more builders view conditions as good rather than poor and that demand remains strong. ?

Spruce & Stud Markets -: Mill prompt shipment offerings are down to a ‘dawg’s breakfast.’ Activity in the Eastern and Western Canadian SPF Std. & No.2 & Btr.; markets started the week building on the previous week+ sudden surge in activity and rebounding prices. Buyers started the week actively in search of replenishment to meet their end of Q1 and early to mid Q2 anticipated needs. Transportation issues in Canada abound. In turn, leading many buyers to wonder exactly how much of the current price surge and extended mill order files are logistics related, and how much is additional field inventory needs. Secondaries who were incentivized sellers early last week, are once again active buyers. While still selling what is left of their current ownership above mill replacement levels. Mills started the week quoting double-digits above last Friday’s levels and prices trekked higher from there; for product available for shipment the week of 3/7+/-. Demand for low-grade continues to improve. 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 of 2/28+/-. Stud trim sales continue to accelerate. With demand for 9’ & 10’ trims particularly robust, producers started the week quoting stud trims above last Friday’s levels, and prices rose higher from there; for production available for shipment the week of 3/7+/-.?

CME Lumber Futures –: The CME Lumber Future Contract will expire at 12:00 Noon CDT on Tuesday March 15th, 2022. For the past 5- days (2/11/22 – 2/17/22), CME Futures were up 3-days and down 2-days. CME Lumber futures have gained $40.50 for the week and are now trading above the Midweek Cash Market of $1290 by $0.40 CME Futures at $1290.40. One Year Ago, today (2-17-21), CME Futures closed at $986.80.?

Hem\ White Fir -: Unrelenting transportation issues, extended mill order files, and surging prices in other lumber species had buyers active in the HEM \ White Fir marketplace throughout the week. Buyers have quickly transitioned from conservative and cautious, to active and ready to issue purchase orders, if the mill or secondary can cover their tally. Albeit most of the sellers’ lead times are a bit out of buyers’ comfort zones. Long lengths (22’+) were of particular interest to buyers. Mills started the week quoting construction grade dimensional lumber above last Friday’s levels and prices pressed higher from there; for product available for shipment the week of 3/7+/-. Buyers’ interest in low-grade has been rejuvenated. Mills started the week quoting above last Friday’s levels and prices traded at or modestly higher from there; for production available for shipment the week of 2/28+/-. Demand for stud trims remains stout. Mills started the week quoting stud trims double-digits above last Friday’s gains and prices trekked higher from there; for production available for shipment the week of 2/28+/-. ?

Green Doug Fir -: Late last week’s abrupt about face in the Green Douglas Fir (GDF) Std. & Btr., & No.2 & Btr., market easily carried over into this week. Buyers who were pressing for discounts as late as last Thursday afternoon, found themselves chasing the market higher this week. Buyers started the week focusing on the narrow widths, but by midweek, the entire complex was energized. Mills started the week quoting above last Friday’s levels and prices moved higher from there; for production available for shipment the week of 3/7+/-. Mills and secondaries warned buyers to add at minimum 3 to as many as 5 weeks onto their quoted shipment dates, to allow them time to secure an available truck or empty railcar. Demand for long lengths (22’+) continues unabated and mills pushed prices higher, for production available for shipment the week of 3/14+/-. Low-grade sales have also changed course. Mills started the week quoting low-grade above last Friday’s levels and prices edged higher from there; for production available for shipment the week of 2/28+/-. With K.D. prices once again moving higher, GDF stud trim sales quickly regained their edge., With 9’ & 10’ trims leading the way, mills started the week quoting stud trims above last Friday’s levels, and prices climbed higher from there; for production available for shipment the week of 3/7+/-. ?

Cedar Lumber -: ?With two major B.C. Western Red Cedar (WRC) lumber producers curtailed, due to a lack of logs, buyers’ concerns intensified, as did their determination to fill, as quickly as possible their late Q1 and early to mid Q2 replenishment needs. As buyers, especially those without benefit of a contract(s), scoured the market for coverage, mills battled high absenteeism within their labor force, ongoing equipment malfunctions and the aforesaid mentioned lack of logs. Mills started the week, as a price guide only, quoting above last Friday’s levels, but any order a mill accepted was either PTS or PTS +, and without a confirmed shipment date. Buyers noted that timbers and decking, both of which were at the top of many of their ‘must have’ lists, remained extremely difficult to source. However, as in previous weeks, locating boards, dimensional lumber, fencing, pattern stock, and siding was not all that much easier. Logistics issues continue to add another unwanted dimension to the WRC lumber markets.?

Shake & Shingles -: The Western Red Cedar (WRC) Shake & Shingle markets struggled through another week of high labor absenteeism, little to no accessible raw materials, and limited to no new products available for sale. Several producers remained off market throughout the week. The few mills that were trying to manufacture worked two or three days at best. Buyers with pending jobsites orders to fill are clearly frustrated. Mills can sympathize with them, but without knowing how much raw materials they will be able to secure, and at what price, made it difficult for them to accept new orders. No.1 5x and Perfections were nearly impossible to source, again this week. And for many buyers those two items were at the top of their list of needs. Mills started the week, as a price guide only, quoting at or above last Friday’s levels and prices traded at or inched higher from there. However, the few orders that the mills were willing to accept were sold PTS (+), with no firm shipment date provided.???

Southern Pine Lumber -: ?Buyers who had been anticipating a prolonged price correction in the Southern Pine No.1 & No.2-dimensional lumber markets were caught off guard, with late last week’s 180-degree market turnabout. That directional change has carried over into this week. Mills have reduced or eliminated their excess inventory. That in turn has forced buyers to jump back into the markets fray. Mills stared the week quoting construction grade dimensional lumber above last Friday’s levels and prices moved higher from there; for production available for shipment the week of 2/28+/-. High-grade products remain difficult to secure, and prices remain in an upward trajectory; with product currently being quoted for the week of 3/14+/-. Low-grade sales improved, but pricing varied from one production zone to another. Mills started the week quoting low-grade at or above last Friday’s levels and prices traded in a similar pattern from there; for production available for shipment the week of 2/28+/-. Stud trim sales have unexpectedly cooled. Mills started the week quoting stud trims at or modestly below last Friday’s reduced level and prices traded close to those levels from there; for production available for shipment the week of 2/28+/-. Demand for small squares and timbers remains seasonal. Producers started the week quoting in varying degrees - Eastside producers being more aggressive with their pricing than their Westside counterparts – above last Friday’s levels and prices traded at or edged higher from there; for production available for shipment the week of 2/28+/-. 5/4 x 6 Standard and Premium Radius Edge Decking remains difficult to source. Producers continue to limit their R.E.D. production to contracted volumes and are using the remaining raw materials to produce 2x6’s, which are providing a greater return. Mills are quoting R.E.D. for production available for shipment the week of 3/14+/-. Logistics remains a challenge and late shipments continue to be reported. ?

Pressure Treated -: A sudden firming in the brite feedstock markets, quickly altered buyers’ opinions and approaches to pressure treated replenishment. Buyers in the South, with springtime on their doorstep, moved back into the marketplace to cover needs and anticipated needs through March. Buyers where winter is still a factor, remain conservative and cautious in their replenishment strategies. However, with prices moving higher, waiting, and paying more seemed counter intuitive, and as a result these buyers began cautiously adding to their springtime inventories. As prices move back towards record high levels, large box store buyers remain hesitant to add to previously ordered inventory. Noting that higher prices have previously proved to be a deterrent to DIY’ers moving forward with projects. Transportation issues continue to impede inbound brite feedstock shipments, as well as outbound finished product. ?

OSB & Veneer Panels Overview –: ?A multitude of production and logistics issues, coupled with an ongoing surge in demand for lumber products, served as the vehicle that moved the panel markets higher again this week. The OSB markets continue to lead the charge, posting significant gains in prices again this week, while reporting a growing number of delayed shipments. The plywood markets also experienced another week of improved sales, and the higher prices and extended production schedules reflected the increase in their business. Buyers’ frustration and anxiety levels remain close to all-time highs. With springtime quickly approaching and jobsite activity starting to stir from its winter hibernation, buyers’ need for panels continues to grow. Sourcing and securing those panels, whether already on order, or needing to be placed has become job priority No.1 for buyers. Any seller with panels available for close to prompt shipment can name their price or simply put up that ownership for auction. ?

OSB -: ?Limited to no new open-market panel offerings, logistics issues which have caused late shipments of previously placed orders and forced mills to arbitrarily reduce contract and extra contract orders topped buyers list of frustrations with the OSB markets. In anger, some buyers have reportedly threatened to cancel their OSB orders and move them to plywood panels. OSB producers know, however, that plywood panels are also in tight supply and the same transportation issues plaguing their operations are negatively impacting plywood shipments as well. Any seller with OSB panels available for close to prompt shipment were able to name their price and many resorted to auctions of that product to assure they got the highest prices for that ownership. Mills started the week quoting above last Friday’s gains and prices trekked higher from there; for production available for shipment the week of 3/14+/-. Mills did caution buyers that they needed to add 3 – 5 weeks or more onto that production shipment date, to allow them to source and secure trucks and empty railcars. ?

Southern Pine Panels -: ?The unexpected and sudden change in direction in the Southern Pine Rated Sheathing markets late last week, sent buyers charging back into the markets seeking replenishment. That same market activity effortlessly carried over into this week. A similar change in direction in the lumber markets, a lack of OSB and imported plywood panels, and unending transportation issues are being credited for snapping the SYP plywood markets out of their recent malaise. Mills started the week quoting sheathing above last Friday’s levels, and prices pushed higher from there; for production available for shipment the week of 3/14+/-. Mill Cert. sales have also blossomed. Mills started the week quoting Mill Cert., above last Friday’s gains and prices traded modestly higher from there; for production available for shipment the week of 2/28+/-. The inquiry and sales pace of underlayment, siding, concrete form, and other specialty panels continues to hold steady. Mills started the week quoting the entire complex at or above last Friday’s levels and prices held at or edged higher from there; for shipment available the week of 2/28+/-.?

Western Fir Panels -: ?Increased activity in the lumber markets, as well as a dearth of available OSB and Southern Pine plywood panels, served as the incentive that pushed buyers back into Western Fir Rated Sheathing market late last week. That same activity has easily carried over into this week. Producers noted a tightening in availability and corresponding higher prices for veneers, as competition from other veneer users intensified during the week. Buyers remain cautious, uncertain if the sudden surge in market activity can be sustained. Mills started the week quoting sheathing above last Friday’s price gains, and prices traded higher from there; for production available for shipment the week of 3/14+/-. The sales of CD Struct I, CC, CC PTS and Mill Cert also gained additional momentum during the week. Producers started quoting all these products at or above last Friday’s levels and prices traded at or edged higher from there; for production available for shipment the week of 2/28+/-. The inquiry and sales pace of value-added panels, underlayment, sanded, siding, concrete form, and other specialty panels remains steady. Mills started the week quoting at or above Friday’s levels and prices traded at or inched higher from there; for production available for shipment the week of 2/28+/-.?

Food for Thought-: ?Buyer’s Remorse. If the various industry trade publications I have been reading are accurate, buyers’ remorse is growing rapidly throughout North America. Buyers are apparently second guessing every purchase they have recently made. Whether it was buying a new or used vehicle, to booking plane tickets and hotel reservations for a pending trip, many of which were purchased as refundable, to the purchase of a new or existing primary residence, or that long planned vacation home, buyers are wondering if they did the right thing in making that purchase. While at the same time questioning what they could have or should have done differently, or perhaps. . . not purchased anything at all.

After last Friday’s CME Lumber Futures swing from $ 45 up limit, to down -$ 33.90, in a trading day, we can now add lumber, and I am sure panel and building materials buyers to the growing list of people suffering from buyers’ remorse. By Monday, as we know, the Futures market had righted itself, and what we experienced on Friday, was just some good old fashion profit taking. Yet, it was a long weekend and Monday for many lumber and panel buyers. Tuesday and Wednesday’s upward Futures movement helped sooth their frazzled nerves. Thursday was a down limit day in Futures and the doubt cycle and second guessing started all-over again. ??

The problem with buyer’s remorse and second guessing every purchase, as I see it, is that it consumes valuable time and saps vital energy. If done frequently enough, it eventually leads to purchasing paralysis, which in turn, prevents the buyer from being able to make necessary spontaneous decisions based on information at hand. And that, as we all know, leads to a whole different basket of problems. The crystal ball is typically fuzzy and only hindsight can really be 20-20. ?

But you say, sometimes I get it wrong. Well, frankly, we all do. But if we can substantiate our purchase, based on need and deadlines that must be met, we should quickly realize that not making that purchase would have left us without a vehicle, the long awaited and much needed vacation, or that house in the school district we want our children to attend etc. etc. ?

Yes, it would be great whether at work or just in life if we got every decision, we made right. However, perfection is not for us mere mortals. If we are right more times on our decisions that incorrect, then in my opinion we are doing okay. Just some food for thought.