Notes from the Forest 4-9-21 Edition

Ladies and Gentlemen: 

Lumber buyers’ concern about the potential for downside risk faded as the week progressed. A strong showing in CME Lumber Futures, had Futures trading well above the midweek cash market, which further encouraged buyers to get back into the markets. Increasing demand for lumber, panels and building materials from active jobsites had buyers back in the market searching for additional replenishment to augment dwindling facility inventories. The severe shortage of panels remains unrelenting with production scheduled for late April through mid-June and beyond. Transportation and mill production issues, many COVID related, continue to delay shipments. Adding yet, another layer of complexity to an undersupplied market. 

The U.S. Bureau of Labor Statistics (BLS) has posted its Job Opening and Labor Turnover Survey (JOLTS) for February 2021. According to the JOLTS report, as of the last day in February, the number of job openings edged higher to 7.4 million (+268,000). The Job opening rate was little changed at 4.9%. Hires also moved higher to 5.7 million (+273,000), The hire rate was little changed at 4.0%. In February, the total number and rate of separations were little changed at 5.5. million and 3.8%, respectively. In February, the quits level and rate were little changed at 3.4 million and 2.3% respectively. In February, the number and rate of layoffs and discharges were little changed at 1.8 million and 1.2%, respectively. Over the 12 months ending in February, hires totaled 72.3 million and separations totaled 80.9 million, yielding a net employment loss of -8.6 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., started the week off slowly, as. Monday (Easter Monday) was a holiday in Canada. Activity promptly picked up on Tuesday morning as lean field inventories and increasing jobsite activity gave buyers few choices but to step back into the marketplace or risk doing without. The fact that transportation issues both truck and rail continue to deteriorate also played a huge role in buyers’ replenishment strategies. Mills started the week quoting above last week’s levels and prices traded higher through the balance of the week; for production scheduled for the weeks of 4/19 – 4/26+. Sales of low-grade remain steady to ‘sneaky’ strong. Mills started the week quoting low-grade above last week’s levels and prices edged higher from there; for production scheduled for the week of 4/19. Stud trims continued to build on last week’s sales rebound. Mills started the week quoting stud trims above last week’s levels and prices moved modestly \ moderately higher from there; for production scheduled for the week of 4/19+.  

CME Lumber Futures –: The CME Lumber Future Contract for May will expire on Friday May 14th, 2021 at Noon CDT. For the past 4 days, (4/5– 4/7), there was no trading on Friday 4/1, in observance of Good Friday, CME Futures were up all 4-days. CME Lumber futures have gained $61.80 for the week but are trading above the Midweek Cash Market $ 1075 by $31.40, CME $ 1106.40. 

Hem\ White Fir -: The inquiry and sales pace in the Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem-Fir, started the week with a renewed sense of energy and urgency. Mills started the week quoting at or above last week’s levels and prices moved higher from there; for production scheduled for the week of 4/19+. Buyers back from their Easter holiday weekend and in need of inventory replenishment promptly stepped back into the markets. Paying, in some instances, more this week for the same list of materials they passed on over the past 2-weeks due to worries over downside risk. Demand for low-grade stock remains steady. Mills started the week quoting at or above last week’s levels, but the upward price momentum has clearly moderated; for production scheduled for the week of 4/19. Stud trim sales have quickly regained their footing. Mills started the week quoting stud trims at or above last week’s reported levels; for production scheduled for the weeks 4/19 – 4/26.  

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., gained momentum as the week progressed. Apart from 2x4 Std & Btr., and 2x12, which both started the week flat, producers started the week quoting double-digits above last week’s levels and prices traded flat or higher from there; for production scheduled for the week of 4/19+. Buyers concern about downside risk slowly faded as demand from jobsites and their need for replenishment accelerated. Demand for low-grade stock remains slow but steady. Mills started the week quoting at or modestly above last week’s levels, but the upward price push was noticeably less aggressive; for production scheduled for the week of 4/19+. Sales of stud trims also gained traction as the week continued. Mills started the week quoting stud trims at or above last week’s levels and prices edged higher from there.    

Cedar Lumber -:  The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, siding, pattern stock and timbers remains active. Buyers dealing with increasing demand for WRC product spent the week searching through the market looking for coverage. Again, this week, most failed to find a fraction, if anything, of what they needed. Buyers also asked mills for updates on previously placed orders. In general mills responded that they are working to complete all orders and would let the buyer know when their order was ready to ship. Mills are still reporting that WRC logs are extremely difficult to source and when finally located are pricey. Mills started the week, as a price guide only, quoting above last week’s levels but buyers noted that upward surge in pricing on a few select items seemed to be moderating, while other products were now accelerating. Demand for boards and dimensional lumber, small squares and timbers, decking, siding, and fencing all continue to overwhelm mill production capabilities. As a result, more and more WRC buyers are looking for alternative species and manmade products to fill the product void and help builders and contractors finish projects.   

Shake & Shingles -: The inquiry and sales pace of Western Red Cedar (WRC) Shake, and Shingles and Eastern White Shingles (EWS) remains up tempo. Buyers spent another week scouring through the marketplace looking for coverage for additional jobsite quantity orders, while at the same time checking with producers about previously placed orders that are well behind schedule for shipment. Mills continue to report higher prices for and a dearth of available WRC logs. Many producers are also dealing with a labor shortage due to another spike in active COVID-19 case in B.C. As a result, producers have not been able to make much progress in catching up with previously placed orders, let alone having new production available for sale. Ever optimistic, mills remain hopeful that these issues will soon resolve themselves, however, to date that has failed to happen. Mills started the week quoting at or above last week’s levels. Many buyers have become openly vocal in expressing their displeasure about the recent price increases. At the same time, should something they need be offered they did not hesitate to offer a PO. Outbound freight issues deteriorated further.  

Southern Pine Lumber -:  The inquiry and sales pace of Southern Pine No.1 & No.2-dimensional lumber was able to build on last week’s uptick in activity. Producers started the week with less inventory on hand, which in turn allowed them, except for 2x4, to quote at or above last week’s levels and dismiss counteroffers out of hand. Dry weather has improved log harvesting and larger diameter logs are available. This has helped to improve 2x10 and 2x12 production. Mills are quoting production scheduled for the week 4/19+. High grade buyers were more active in the marketplace this week. Truss and modular home manufactures reported a modest uptick in sales, which in turn is requiring additional inventory investment. Low-grade sales continue to hold steady, but there are reports that 2x4 8’ & 10’ are more readily available, while all other widths and lengths remain in tight supply. Mills started the week quoting low-grade at or on either side of last week’s reported levels and prices traded in a narrow range from there. Demand for stud trims remains weak. Mills started the week quoting studs below last week’s levels and prices declined further from there. The small square and timber markets have changed little over the past several weeks. Demand for 6x6 continues to outpace production. Mills started the week quoting 6x6 above last week’s levels. Demand for 4x4 and 4x6 was not as great, Mills started the week quoting 4x4 and 6x6 at or on either side of last week’s levels for shipment the week of 4/19 or sooner. As treaters slowly return to the markets, sales of 5/4 x 6 Radius Edge Decking have gained momentum. Buyers’ focus remains on the Premium grade and mills started the week quoting modestly above last week’s levels, while again holding Standard grade pricing at previously established levels. Radius Edge Decking is being quoted for the weeks of 4/12 – 4/19. A lack of available trucks and production issues continues to disrupt mill’s ability to ship on a timely basis.  

Pressure Treated -:  The inquiry and sales pace of pressure treated lumber, panels and specialty items continues to build momentum. As warmer weather continues its trek northward, area builders and DIY’ers are beginning to plan and start work on their outdoor projects. Large box stores are reporting that foot traffic and sales rebounded after last week’s quieter pre-Easter pace. Resulting in their immediate need to increase replenishment in anticipation of a lively spring sales season. Pro dealers noted that much of March’s tentativeness from builders has given way to ‘it is April, and it is time to get building’. For those that had been on the sidelines due to the price correction in Southern Pine, it meant having to play catch up, but many are being rewarded for waiting with lower prices on select widths and lengths. Trucking remains tight and that is impacting inbound brite feedstock, as well as outbound finished product to dealers eagerly waiting for finished materials to arrive.

OSB & Veneer Panels Overview –:  The demand for OSB and plywood panels remains relentless. Mills started the week quoting above last week’s levels; for production, depending on the specific product, scheduled anywhere from mid to late April through early to mid-June or beyond. Again, this week, there was a dearth of available open market panels. Anything that did appear was quickly snapped up by the lucky buyer(s) who received the call from the mill or secondary; with need easily surpassing price. Plywood mills continue to deal with increasing veneer costs, while all producers are dealing with an ongoing resin shortage and the resulting spike in resin pricing. Transportation and production issues all continue to further delay shipments and are a constant source of frustration for buyers in need of replenishment for active jobsites.  

OSB -: The inquiry and sales pace of OSB remains regionalized. A very select number of buyers, in various regions, are reporting that they are being offered, albeit in limited amounts, open market panels for promptish shipment. However, those offerings come with a hefty premium to mill reported levels. As in previous weeks, those in need and receiving the call gladly accepted the offer, regardless of the price. Buyers who failed to receive such a call remain frustrated and angry. Producers started the week quoting above last week’s reported levels and prices continued to trek higher through the balance of the week; for production scheduled for the weeks of 4/26 – 5/17. As in the past several weeks, several producers were on and off market throughout the week trying to keep production schedules in alignment with recently placed additional contract orders, while continuing to deal with resin shortages and ongoing production and transportation issues.  

Southern Pine Panels -: The inquiry and sales pace in the Southern Pine Rated Sheathing remains strong. Buyers continue to search through the undersupplied mill and secondary markets looking for replenishment, but once again found little, if any, open market panels available this week. While on the phone buyers also continued to check on delayed shipments. It is being reported that some industrious buyers are purchasing available units at various mills within a 100 – 150-mile radius of each other and asking and paying to have a driver make multiple stops to completely fill the truck and get them some much needed replenishment. The problem here, of course, is the ongoing lack of available trucks and the premium they are already getting for one pick up – one delivery hauls. Mills started the week quoting above last week’s levels and prices traded higher from there; for production scheduled for the weeks of 4/19 – 4/26+. Secondaries with anything available for 2 weeks or sooner were getting high double and triple-digit premiums for that ownership; and that included units out of warehouse. Sales of Mill Cert. continue to intensify. Mills started the week quoting above last week’s levels and prices moved higher from there; for production scheduled for the week 4/19+. The sales of value-added panels, underlayment, sanded, siding, concrete form and other specialty panels remain active. Mills started the week quoting at or above last week’s levels and prices moved higher from there; for production scheduled for the weeks of 4/19 – 4/26+.   

Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing continues to hold steady. Buyers continue to walk the fine line between historically high price levels, meeting their customers’ growing jobsite needs and protecting themselves from the potential of downside risk. Mills started the week quoting double-digits above last week’s levels, but the upward pricing trajectory, compared to previous weeks, has noticeably slowed. Mills are quoting production scheduled from late April through early June. Mills have an extremely limited amount, if any, open market panels available again this week. Delayed shipments due to production and transportation issues continued to deteriorate further as the week progressed. Producers are reporting that a spike in resin and veneer costs has increased their cost of production. The rare prompt or close to prompt shipment(s) continue to garner significant premiums to reported mill price levels. Demand for Mill Cert. continues to accelerate. Producers started the week quoting above last week’s levels and prices climbed higher from there; for production scheduled for the weeks of 4/19 – 4/26. With domestic CC production schedules extended almost as far out as those of Canadian producers, Canadian buyers have once again turned their attention to their country’s mill output, resulting in domestic prices being quoted at or above last week’s levels; for production scheduled for early to mid-June. The sales of underlayment, sanded, siding, concrete form and other specialty panels remain strong. Producers started the week quoting at or above last week’s levels; for production scheduled for the weeks of 4/19 – 4/26+.  

Food for Thought-:   The first full week of April traditionally signals the official start of the year’s building season. Activity has been steady in many parts of the South and along the West Coast since the start of the year. However, the return of warmer temperatures and with the last (we hope) of the snow melting jobsite activity in the remaining parts of North American are finally beginning to stir.  

The industry continues to buzz about the potential of downside risk, as well as a serious lack of available panels and of course the well touted overall high cost of lumber, panels and building materials. Over the past several weeks there has been talk about jobsites unable to function due to a lack of panels and other building materials. We have heard reports that some builders have gone so far as to not start new projects because of higher costs and lack of product. Oddly enough, trucks keep making deliveries and crafts people continue to work on finishing projects and starting new ones. I will concede that it appears the larger track builders with contract commitments are faring better than the smaller custom home builders.

Over the past weeks I have again noticed that many associations and groups are once again engaging with and encouraging federal government officials to intervene on their behalf. Reaching out to members of the House, Senate and cabinet heads, as well as making appeals through the media. Their call is for lower lumber, panels and building materials prices, more production, greater availability and lower interest rates. All which they claim are causing home prices to rise. With their blinders carefully in place, they do not seem to believe that would be government interference. While still protesting that building inspectors and OSHA etc., are clear examples of government overstepping its bound and slowing them down.  

When asked what they could do to lower the costs they seem offended by the question. “We need to make a profit you know!” Yes, and so do all the others.