Notes from the Forest 3-10-23 Edition

Ladies and Gentlemen:?

Hawkish rhetoric from Jerome Powell, the chairman of the Federal Reserve, to members of Congress about inflation and the potential for higher interest rates, a selloff on Wall Street due to that news, coupled with another bout of inclement weather moving across North America, helped to hold lumber, panel and building material jobsite usage and replenishment purchases in check during the week. Mills continue to report that current price levels are closing in on or are already below breakeven and there were hints of additional curtailments (none publicly announced) in the offing, if prices do not improve. Weather delayed shipments remain a problem for buyers in certain regions. Producers and office wholesalers remain ever optimistic that when the weather finally settles in on springtime that the markets will get back to business. ?

On Wednesday (3-1-23), The U.S. Census Bureau reported that total construction spending during January 2023 was estimated at a seasonally adjusted annual rate (SAAR) of $1,825.7 billion, 0.1% below the revised December estimate of $1,827.5 billion. The January figure is 5.7% above the January 2022 estimate of $1,726.6 billion. Private construction spending was at a SAAR of $1,442.6 billion, virtually unchanged from the revised December estimate of $1,442.0 billion. Residential construction was at a SAAR of $874.4 billion in January, 0.6% below the revised December estimate of $852.1 billion. Nonresidential construction was at a SAAR of $595.2 billion in January, 0.9% above the revised December estimate of $589.9 billion. In January, the estimated seasonally adjusted annual rate of public construction spending was $383.1 billion, 0.6% below the revised December estimate of $385.5 billion. Educational construction was at a seasonally adjusted annual rate of $84.1 billion, 0.6% below the revised December estimate of $84.6 billion. Highway construction was at a seasonally adjusted annual rate of $117.3 billion, 0.9% below the revised December estimate of $118.4 billion.?

Spruce Markets -: ?The Eastern and Western No.2 & Btr. SPF markets ebbed and flowed throughout the week. There were short spurts of activity, which buoyed sellers’ spirits, typically followed by periods of inactivity. Buyers continue to replenish conservatively, uncertain about the markets’ direction. Mills started the week quoting at or below last Friday’s levels and prices traded in a similar pattern from there. Industrial sales continue to outpace those of the construction grade. Mills started the week quoting low-grade at or in a narrow range on either side of last Friday’s levels and prices hovered close to those levels during the week. Stud trim sales remain sluggish and buyers remain reluctant to purchase beyond near-term needs. Mills stud trim prices clearly reflect the mill’s on-ground inventory position, upcoming production schedule, and the strength of demand for a specific stud trim. ESPF and WSPF mills are quoting shipment for the week of 3/27+/-. ?

CME Lumber Futures –: The CME Lumber Future Contract for March will expire at 12:00 Noon CDT on Wednesday, March 15, 2023. For the past 5 days (3/3 – 3/9), CME Futures were down 5 consecutive days and have lost $9.80 and are trading below the Midweek Cash Market of $365 by $3.00, CME Futures at $362.00 One year ago (3-9-22) the March CME Futures contract closed at $1350.20. ?

Hem\ White Fir -: ?The K.D. Hem \ White Fir Std. & Btr., and No. 2 & Btr., markets remain lackluster. Buyers continue to work through on-ground inventory and are waiting for signals from the markets that a bottom has formed. Producers started the week quoting below last Friday’s levels and accepted or dismissed counteroffers based on their inventory positions. Industrial buyers are working through recent purchases. As a result, mills started the week quoting low-grade in a narrow range on either side of last Friday’s levels and prices traded in a similar pattern from there. Stud trim sales showed signs of stabilizing during the week. Mills started the week trying to firm stud trim prices, but token discounts were often needed to complete a sale. K.D. Hem \ White Fir mills are quoting shipment for the week of 3/27+/-. ?

Green Doug Fir -: The residual effect of inclement weather continues to keep a lid on jobsite activity. However, having been absent from the GDF markets for several weeks, buyers with lite field inventories returned Green Doug Fir (GDF) Std. & Btr., and No.2 & Btr., with greater regularity during the week. Mills started the week quoting narrow width construction grade at or above last Friday’s levels, and prices traded at or inched higher from there. Wider widths were still requiring discounts to keep production sold. Industrial buyers continue to actively engage with the market. Mills started the week quoting low-grade at or modestly higher and prices hovered close to those levels from there. GDF stud trims also experienced a slight increase in activity. Mills started the week quoting GDF stud trims at or modestly below last Friday’s levels and prices traded close to those levels from there. GDF mills are quoting shipment for the week of 3/27+/-. ?

Cedar Lumber -: ?Western Red Cedar (WRC) lumber producers reported a modest uptick in activity during the week. Buyers returned to the marketplace to cover near-term needs but continued to keep speculative purchases to a minimum. When compared to early springtime sales in 2021 and 2022, current replenishment activity seems modest at best. The additional activity, however, did help mills hold prices flat and firm on fencing, siding, dimensional lumber, and timbers. While modest discounts were still required on boards and decking to get a sale completed. ?

Shake & Shingles -: ?Western Red Cedar (WRC) Shake and Shingle sales remain in the ‘between seasons’ doldrums. Weather continues to impede jobsite activity and that is having a domino effect on jobs that builders already have on the books but cannot get started. Buyers continue to limit their purchases to covering job-size quantities and only on sold projects, with many waiting to the last minute before placing an order. Mills started the week, once again, in search of a pricing structure that would encourage buyers to purchase beyond their immediate needs and stock up for spring. With prices drifting lower, buyers showed no interest in any speculative purchases. ?

Southern Pine -: ?Having eliminated a significant portion of their excess inventory last week, by accepting counteroffers, Southern Pine No. 1 and No.2-dimensional lumber mills started the week, with less pressure to discount and more opportunities to inch prices higher. Especially, on anything that was not available for shipment in 7-days or less. With prices appearing to have found a trading level, buyers felt more comfortable in covering near-terms needs and purchasing extra on key items. Pressure treaters were particularly active throughout the week. High-grade sales remain robust and mills with limited production and extended manufacturing schedules kept upward pressure on pricing. Industrial sales remain strong. Mills started the week quoting low-grade at or slightly above last Friday’s levels and prices traded in a similar pattern from there. Stud trim sales remain in close alignment with production. Mills started the week quoting stud trims above last Friday’s levels and prices traded at or inched higher from there. Accelerating demand from pressure treaters and exporters for 4x4 – 4x6 – 6x6 allowed mills to push prices higher throughout the week. 5/4 x 6 Standard and Premium Radius Edge Decking sales continue to lack the energy typically associated with mid-March. Mills started the week quoting R.E.D. at or modestly below last Friday’s levels but were constantly looking for an opportunity to inch prices higher, which they believed would get buyers back into the market. SYP lumber mills are quoting shipment for the week of 3/27+/-.

Pressure Treated-: Interest in pressure treated lumber, panels and accessories improved modestly during the week. Pro dealers and large box store retailers continue to gradually build their field inventory levels to meet already booked and anticipated near-term sales. Sales of decking, fencing, and landscape timbers are particularly robust. This in spite of a major shift in the jet stream that has funneled significantly colder air and created lower temperatures in the Southeast and Mid-Atlantic, where temperatures have been well above seasonal average. The increased sales of treated lumber products have sent buyers for pressure treaters back into the brite feedstock market in search of additional replenishment. Treaters who service the export market reported February was another banner month. ?

OSB & Veneer Panels Overview –: Buyers uncertain about the panel markets near-term, let alone extended direction, continue to limit their purchases to immediate needs. While delaying speculative purchases until such time as the OSB and plywood market signal that demand is exceeding production. Quite the change from a year ago, when buyers were begging producers and office wholesalers not to let them run out of product. Producers and office wholesalers have noted that during the week buyers were checking frequently on weather delayed shipment, with some pressing the seller to ship other orders previously placed, but not due out for shipment, as quickly as possible. Mills continue to voice their optimism for the panel markets once the weather becomes more springlike. ?

OSB -: OSB sales continue to lack the energy and urgency typically associated with early springtime trading. Buyers continue to keep their field inventories lite. Buyers with contract obligations are using those contract(s) to supplement their on-ground inventories. Those buyers who rely on the open market for their purchases are reporting difficulty in sourcing open-market panels for prompt shipment. However, office wholesalers and local distribution often helped fill the void. Mills have been quietly working on getting their production in closer alignment with demand. Slightly lower production levels have helped to support current mill pricing levels and most counteroffers, unless presented with copious volume, are being dismissed out of hand. OSB mills continue to voice their confidence that once the weather cooperates, the OSB market will quickly be rejuvenated. OSB mills are quoting shipment for the week of 3/27+/-. ?

Southern Pine Panels -: Southern Pine Rated Sheathing mills are reporting that production and sales remain in close alignment. Mills noted an increase in the number of calls from buyers checking in on weather delayed shipments, as well as pressing them to ship orders, not scheduled for another 7 – 10 days, as quickly as possible. A clear indication, according to the mills, that field inventories remain razor thin. Mills started the week quoting sheathing at last Friday’s levels and prices held at or inched higher from there. Demand for Mill Cert panels remains steady, and mills quoted Mill Cert. at or on either side of last Friday’s levels. Value-added panels sales continue to hold steady. Increased demand for concrete form allowed mills to inch prices higher during the week, while they held the prices of sanded, siding and underlayment at last Friday’s levels. SYP plywood mills are quoting shipment for the week of 3/27+/-. ?

Western Fir Panels -: Western Fir Rated Sheathing mills are reporting sales remain on the quiet side. Inclement weather up and down the West Coast, and lumber prices still in search of a trading level, had buyers hesitant to purchase beyond immediate needs. Buyers checked frequently for information on weather delayed shipments. Mills quoted sheathing at or modestly on either side of last Friday’s levels and prices traded in a similar pattern from there. Sales of CD Struct 1, CC, CC PT&S and Mill Grade markets continue to hold steady. Producers started quoting the entire complex at or modestly above last Friday’s levels. Increasing activity in the specialty panel market allowed mills to hold prices at or inch them higher on concrete form, sanded, siding and underlayment. Western Fir mills are quoting shipment for the week of 3/27+/-. ?

Food for Thought-: It is National Severe Weather Awareness Week …The National Weather Service says the best time to make a plan is before you need a plan . . . ??

That particularly holds true for the past 6 - 8 weeks as temperatures continue to roller coaster across North America. There have been periods of unseasonably warm temperatures, suddenly interrupted by below normal temperatures. It is that period, as we transition from warm to cold or cold to warm when we have received copious amounts of rain, some with embedded thunderstorms and high winds. Even here in Northeast Tennessee a few tornadoes have touched the ground causing minor property damage, mainly to trees, fencing and roofs. However, elsewhere major destruction of homes and businesses with some deaths have been reported. ?

Our family has a plan for inclement weather, for all four seasons. Hopefully, your family and business do too. Our home does not have a basement, so we know that in case of a tornado we are going to the bathroom on the main floor of the house, it does not have any windows and only interior walls surround it.?We have several mature trees on our property – over 75’ tall – and we know that standing near windows is ill advised. Our flashlights have new batteries and our cell phones will be close at hand. We have a recently purchased AC\DC powered NOAA Weather Radio and it is probably one of the best under $50.00 investments we’ve made. ?

Do you know the difference between a weather Advisory, Watch and Warning??Let’s review: ?

?Advisory = Conditions are right for some dangerous weather. However, nothing is currently occurring.

?????In the winter this also means grocery store shelves will be empty in a matter of hours once the advisory is posted. ????

Watch = Severe weather is possible in and around the watch area. Time to keep an eye on the sky! ?

Warning = Severe weather is already being observed and it’s time to move to your safe shelter place. ?

For more information I encourage you to visit the National Weather Service at www.nws.noaa.gov/om/severeweather/w.w.shtm1