Notes from the Forest-5-10-19 Edition
Ladies and Gentlemen:
The lumber and panel markets continue to chug along into mid-May. The typical energy and urgency traders associate with this time of the year has failed to materialized. It was another week where buyers continued to procure their immediate \ near-term needs; often from local 2-step distributors, or mill owned reloads; while continuing to shy away from speculative purchases, which would add to their on-ground inventory levels. Lumber and plywood production schedules are into the weeks of 5/13 – 5/20. OSB mills have longer production schedules and are quoting for as far out as 5/27. Producers used modest discounts when needed to help eliminate excess inventory, but overall discounting has been limited throughout the week.
CoreLogic? has released its CoreLogic Home Price Index (HPI?) and HPI Forecast for March, 2019. It shows that home prices rose both year over year and month over month. Home prices increased nationally by 3.7% year over year from March, 2018. In fact, prices increased 1% just between February and March, 2019. The HPI Forecast is anticipating an increase of 4.8% by March, 2020. In prepared remarks, Dr. Ralph McLaughlin, deputy chief economist at CoreLogic said, “the U.S. housing market continues to cool, primarily due to some of our priciest markets moving into frigid waters. But the broader market looks more temperate as supply and demand come into balance. With mortgage rates flat and inventory picking up, we expect more buyers to take advantage of easing housing market headwinds.”
Spruce & Stud Markets -: The inquiry and sales pace of Eastern and Western Canadian SPF Std., & Btr., and No. 2 & Btr., has returned to a more pedestrian pace. Believing that it is a lack of demand – often weather related – rather than pricing, producers started the week quoting from last Friday’s reported levels. Mills did their best to hold 2x4 pricing steady, while opening up to modest discounts on inventory build-ups on the remaining widths. The exception is 2x8 in WSFP which is in tight supply due to limited production. Buyers hearing and seeing lower prices quickly decided that purchasing must have fill-ins from local 2-step distributors, or a truckload from an office wholesaler with contract ownership being stored at a nearby warehouse was their best defense to downside risk. Demand for low-grade stock is also subdued and producer pricing clearly reflected where production and demand were in sync (WSPF) and where a small discount was needed to help alleviate a small inventory building up (ESPF). Stud-trim sales remain steady and product traded a few dollars on either side of last Friday’s levels.
CME Lumber Futures – The CME Lumber Futures contract for May will expire on 5/15/2019 at Noon CDT. For the last 5-days (5/3 - 5/9), CME Futures were Up 3-days and Down 2-Days. CME Futures lost <$0.90> this week, and trading above the Midweek cash market, ($329 MBM) report, by $13.80 (CME $342.80). Will Futures and Cash be able to converge by 5/15? Back months are also up.
Hem\ White Fir -: The inquiry and sales pace of Std. & Btr. No.2 & Btr., White and Hem \ Fir, varied between Coastal and Inland producers. Coastal mills are reporting steady sales, especially to their West Coast customers. Demand for wider widths are noticeably stronger, than those for the narrow widths. Price increases reflected where demand was the greatest. Coastal mills are offering production scheduled for the weeks of 5/13 – 5/20. Inland mills are reporting that their sales are slower than in the previous 2-weeks. Inland producers are offering production for the weeks of 5/13- 5/20. Buyers are focused on narrow widths (2x4 – 2x6) and most inquiries came with the caveat of must ship immediately. Sales of 2x12 continue to outpace production and producers were quoting double-digits above last Friday’s reported levels as early as Monday morning. Low-grade sales are only so-so and mills start the week quoting from last Friday’s reported levels but never let a small discount keep them from an order. Stud trim sales at Coastal producers are steady to strong and prices are flat to modestly higher. Inland stud trim sales are lackluster and producers immediately offered small discounts to keep production sold.
Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., remains steady to strong. Producers are trying to increase their production, but are struggling to make up the production volume of the 2 recently closed sawmills. Buyers are laser focused on the wider widths and again this week, they led the market higher. Demand for narrows, (2x6 continues to lag) are not that far behind. Mills are quoting production for the weeks of 5/13 – 5/27. Producers started the week quoting $ 5 - $ 10 MBM above last Friday’s reported levels and prices climbed higher from there. Demand for low-grade stock is back in sync with production and prices traded at, or a few dollars above recently reported levels. Demand for stud trims remains solid and mills either accepted sales at last Friday’s levels, or pushed prices modestly higher as production schedules extended.
Cedar Lumber -: The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, bevel siding, timbers and pattern stock remains steady, but continues to lack the urgency usually associated with this time of year. Pro dealers continue to purchase their near-term needs. Ever confident, that if the need for additional inventory should arise; they will be able to source it with little difficulty. Large box store purchases helped support the markets pricing structure. With weekly advertisements and E-Mails to customers, the box stores know they can’t have empty shelves and have little choice but to purchase in anticipation of those sales. Several WRC producers are currently processing other species in their log deck. Trying to avoid blue stain and other warm weather issues associated with those species. This is contributing to producers extended production schedules for WRC products. In tight supply includes: timbers, 1x4 fence pickets and other fencing items, various siding items and wide width dimensional lumber. Producers, not wanting to send their customers back to the alternative species and man-made product market, continue to hold prices at previously established levels. The easing in transportation issues was short lived – about a week – truck availability is tight again.
Shake & Shingles -: The inquiry and sales pace in the Western Red Cedar (WRC) Shake and Shingles and Eastern White Shingles (EWS), picked up additional momentum over the course of the week. Nevertheless, the pace remains erratic and prices continue to trade at previously established levels. The discrepancy between those producers who are reporting that they are busy Vs. those reporting a lack of sales remained unchanged this week. Sales of Shingles is currently outpacing the sales of Shakes by a fairly wide margin. Buyers are surprised with the amount of prompt shipping product available out of Canada, considering how many producers are either running well below full capacity, or are not in production at all. Raw material costs are still a concern for both Canadian and domestic producers. Transportation issues are delaying shipments anywhere from 1 – 3 + weeks.
Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber continued to lose energy and urgency over the course of the week. Producers with production at full capacity, are suddenly experiencing a build-up, in almost all widths and lengths, of unsold, on ground inventory. Mills started making outbound calls as early as Monday afternoon. They offered deep discounts on 2x6 and lesser amounts on the remaining widths. After having just purchased additional inventory last week, many buyers are suffering from buyers’ remorse. As mills are currently offering modest \ moderate discounts on the products they have just bought. Heavy rains in Texas, Oklahoma, Kansas, Arkansas and the Southeast, did little to buoy buyers’ spirits. The inquiry and sales pace of high-grade stock – D.S.S., S.S. and MSR is somewhat better than their construction grade cousins. Demand from truss manufacturers and modular home lumber buyers remains steady and prices are being quoted at last Friday’s levels. Demand for low-grade stock remains subdued. Mills stared the week quoting modestly below last Friday’s reported levels and seeking firm offers from the few buyers in the marketplace. Stud trim sales remain in sync with production and mills are quoting production for the weeks of 5/13 – 5/20; with prices holding steady at a level established 3-months ago. Demand for small squares and timbers remain in the doldrums. Producers, again this week, searched for the elusive trading level. Westside producers offered double-digit price concessions on 4x4 – 4x6 – 6x6, with some triple digit discounts being reported on slower moving lengths. Eastside producers lowered prices again on 4x6 & 6x6, as they tried to keep their customers from bolting to Westside mills. The decking season is in full swing and demand for 5/4 x 6 Standard and Premium Radius Edge Decking continues to grow. As in the past several weeks, Westside producers are reporting stronger sales than those on the Eastside. Resulting in an increase in both Standard and Premium pricing in the Westside zone, but only modest increase in Standard and nearly flat pricing on Premium in the Eastside zone.
Pressure Treated -: The inquiry and sales pace of pressure treated lumber, plywood and accessories experienced another week of steady to strong sales. Treaters across the country noted that for the most part their pro dealer accounts are still only procuring near-term needs; while continuing to shy away from building inventory. This is the result of ongoing concerns about possible downside risk in the brite feedstock markets. Contractor yards, including those in the Midwest and Northeast are all reporting a surge in their sales, as warmer and drier weather has jobsite activity gathering speed. Large retail box stores reported slower than expected sales this past weekend, due to inclement weather that kept the DIY’ers indoors. Resulting in a slightly smaller weekly replenishment list. Treaters in the South continue to report moderate (7 – 10 days) order files on several key items. Treaters are reporting that their sales for April were on par, if not moderately above last year’s levels.
OSB & Veneer Panels Overview –: Follow through from last week’s increased activity in the OSB markets was decent to strong. OSB mills have successfully built their production schedules into the weeks of 5/13 – 5/27. Plywood sales continue at a measured – almost pedestrian pace. The good news for both Southern Pine and Western Fir Rated Sheathing producers is that discounting was not needed to sell production this week. Plywood production schedules range from prompt (mostly Western Fir) to the weeks of 5/13 – 5/20. Value-added panel sales were not particularly strong and mills resorted to modest discounts, early in the week, to keep that production moving through the supply-chain.
OSB -: The inquiry and sales pace of OSB remains steady to strong. The discounting of the previous weeks has all but evaporated. Sales over the past 2 weeks have allowed producers in many regions to extend their production schedules into the weeks of 5/13 – 5/27. Sales in the West were stronger, again this week, than in other regions. Prices in Western Canada, and the Southwest zone, along with delivered prices to specific cities in those serviced areas started the week $3 - $ 10 MSF higher and held steady, or moved modestly higher. In the remaining zones pricing was flat to a few dollars higher. Office wholesalers with contract ownership reported being able to sell at, or modestly above mill replacement levels, especially if that ownership could ship quickly.
Southern Pine Panels -: The inquiry and sales pace in the Southern Pine Rated Sheathing was able to build modestly on late last week’s increased sales volume. Mills are quoting production for the weeks of 5/13 – 5/20. But as per usual, some prompt shipping loads became available late in the week. Mills started out the week quoting from last Friday’s pricing and reported limited success at those levels. However, when producers attempted to even modestly lift price higher, they were met with almost immediate buyer pushback. When prices were lowered back to Friday \ Monday levels sales resumed, but at a slower pace. Buyers looking for quick shipping panels often turned to local 2-step distribution, or an office wholesaler who, in most cases, are able to ship within 24 – 36 hours of order placement. The availability of imported panels from Brazil and Chile along the East Coast dropped modestly; lifting some of the pressure from Eastside producers. Sales of value-added panels – underlayment, sanded, siding, concrete form and other specialty are slow and mills have inventory on the ground and ready to ship. Mills resorted to discounting on Monday morning to get production sold.
Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing has returned to a pedestrian pace. Mills are quoting production scheduled anywhere from prompt to next week. As a result, buyers are back purchasing only their most pressing needs and avoiding any speculative purchases. Mills started the week quoting from last Friday’s reported levels and held those levels for most of the week. Office wholesalers continue to look for a spot that will give them a position between the mills and buyers, but were not able to accomplish that this week. West Coast truckload buyers continue to dominate the marketplace. Carload buyers in the Midwest and Northeast made discounted overtures to the mills, but found very little interest at the levels they were offering to purchase volume at. Mills are certain that the carload volume buyers are quickly coming up on buy it, or risk doing without, due to carload transit times. The sales of underlayment, sanded, siding concrete form and other specialty panels remains lackluster and producers are quoting on a very small line on either side of last Friday’s reported levels. Most items are being quoted for shipment the week of 5/13.
Food for Thought -: With the strains of Sir Edward Elgar’s Pomp and Circumstance playing the college and universities, graduation season is once again upon us. Many of those graduates are fortunate enough to have interned at various businesses and have already found employment. Others will be leaving the halls of higher education but not quite sure what lies ahead for them. These are bright young women and men and I have to ask, as I ask every year about this time . . . What have we in the lumber and building materials industry done to attract these people into our industry? And more importantly once they join us how do we retain them?
I have been around the lumber and building material industry for over 5 decades and I still find the industry fascinating and ever changing. We have technology, we have machinery, we are active in the ecological and green movements, and we provide shelters for people and places for industry. We have much more to offer in the ways of employment opportunities than just seasonal help in the garden centre. If our industry is going to continue to grow and thrive it can’t rely on those of us who, while not planning on leaving any time soon, can’t be here forever.
To all the Mother and Mother figures in our lives . . .