Notes from the Forest-5-17-19 Edition

Ladies and Gentlemen:

Buyers keep challenging the mills and office wholesalers to give them a reason to purchase beyond their most pressing needs. The best reason the sellers have been able to provide thus far, is that prices are less expensive today, than they were at this time a year ago. That almost immediately triggers buyers’ memories of last year’s big sell off, which started just about now. And with that buyers return to purchasing must haves, and if possible, in units, as they attempt to keep their exposure to the marketplace at a minimum. Lumber and plywood production schedules are into the weeks of 5/20 – 5/27. OSB mills have longer production schedules and are continuing to quote for the week of 6/3. Producers used modest discounts when needed to help eliminate excess inventory, but overall discounting has been kept to a minimum this week.

The U.S. Commerce Department has reported that U.S. new-home construction rose for a second month and topped estimates in April. Residential starts increased 5.7% to a 1.24 million annualized rate after a 1.7% gain in March, which was previously reported as a drop, according to government figures. Permits, the forward-looking part of the report, advanced 0.6% to a 1.30 million rate. Earlier, The National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index (HMI) has reported builder confidence in the market for newly-built single-family homes rose three points to 66 in May. Builder sentiment is at its highest level since October, 2018, after steady declines in late 2018 due to higher interest rates and concerns over slower growth.

Spruce & Stud Markets -: The inquiry and sales pace of Eastern and Western Canadian SPF Std., & Btr., and No. 2 & Btr., remains subdued. The markets once again lack any sense of urgency. Even additional curtailment announcements from both B.C. and Eastern SPF producers did little to spur buyers back into the marketplace. CME Lumber Futures trading above cash (see below) also had no impact on the markets. Producers with prompt shipments available started the week offering modest \ moderate discounts and asking buyers for firm offers. 2x8 WSPF, remains the exception where supply is trailing demand, which resulted in flat pricing on that one item. Buyers for their part remained on the sidelines and only entered the market when they had pressing needs to cover. They often turned to local 2-step distributors for units, or mill owned reload centers, or a flexible in tally office wholesaler, to cover a highly mixed, quick shipping truckload. Sales of low-grade stock are also continuing to suffer from the current markets’ malaise. Prices traded flat to a few dollars below last Friday’s reported levels. Demand for stud trims were marginally better than their construction grade counter parts. Mills sold studs on a very narrow line on either side of last Friday’s reported levels.

CME Lumber Futures – The CME Lumber Futures contract for May expired at Noon CDT on Wednesday 5/15. The May contract settled \ closed at   $328.20, which was above the Midweek cash market price of $ 324.00. Futures ended the May contract $4.20 ahead of cash. The July, 2019 contract is now the lead month and it will expire at Noon CDT on 15th July. There were only 2 days of trading this week, with July as the lead month. CME Futures were Up 1-days and Down 1-Days. In those 2 days CME Futures lost <$7.80> this week, and are trading above the Midweek cash market, ($324 MBM) report, by $ 4.10 (CME $328.10).   

Hem\ White Fir -:  The inquiry and sales pace of Std. & Btr. No.2 & Btr., White and Hem \ Fir, is back on the quiet side. Even the recent announcement of curtailed production has not been enough to persuade buyers to move away from their purchasing pattern of buying near-term needs, while avoiding speculative, inventory building purchases. Pricing is once again, highlighting and identifying where production and demand are in sync; as well as where excess inventory is resulting in modestly lower prices. It is also pointing out where production is limited and prices have moved higher. 2x12 is an example of where production is trailing demand. Mills are quoting production scheduled for the weeks of 5/20 – 6/3. Low-grade stock and stud trims are following the exact same pricing pattern that has been established in the construction grades. Discounting on the excess and flat pricing is where supply and demand are in sync.

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., has slowed, especially when compared to the activity of the past 2 – 3 weeks. Mills with extended production order files, into the weeks of 5/20 – 5/27, and beyond, on selected items, are taking the slowdown in stride. While pricing on the narrow widths (2x4 & 2x6) was flat, tight supply of the wider widths (2x8 – 2x10 – 2x12) allowed mills to move prices modestly higher and buyers in need did not hesitate to purchase at the higher prices. Again, this week, activity in California, especially Northern California, dominated the market. Elsewhere, sales were steady but inclement weather continues to limit jobsite activity in those areas. Demand for low-grade stock and stud trims are in sync with production and pricing is flat to a few dollars above last Friday’s reported levels.

Cedar Lumber -: The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, bevel siding, timbers and pattern stock continue at the status quo. Resulting in another week of flat but firm pricing. Sales are OK, but pale when compared to sales at this time of year in 2017 and 2018. Increased tariffs on imported Chinese fencing and a handful of other cedar products, has stirred the market. The increased Chinese tariffs have the potential, once they are completely implemented, to bring the price of the Chinese imported fencing closer in alignment with, or possibly more expensive than the products coming from Canada with the duty on them. Again, this week, large box stores are the dominate force in the marketplace. Pro dealers, for their part, continue to purchase near-term needs and continue to refrain from building on ground inventory. A Canadian WRC producer has spoken before the NAFTA panel in Washington, D.C., asking that the duties currently imposed on Canadian WRC products, including Shake and Shingle, be removed. Regrettably, any decision on the impassioned plea. is months, if not almost a year away. Transportation issues are once again front and centre and buyers and sellers are back pointing fingers at each other.

Shake & Shingles -: The inquiry and sales pace in the Western Red Cedar (WRC) Shake and Shingles and Eastern White Shingles (EWS), remains steady. However, in comparison it is still nowhere close to the pace of 2017 and 2018. The weather has finally improved across most of the U.S. and Canada, which has permitted jobsite activity to resume. As in the past several weeks, demand for Shingles continues to well outpace those for Shakes. An effort to get the U.S. Duty repealed on Canadian WRC Shake and Shingle has commenced and while traders are keeping an eye on the action, it will be months, if not a full year before a decision could be rendered. Until then, it’s the status quo on the duties. Transportation issues remain a thorny subject for the buyers and sellers alike. Delays of up to 3 weeks are currently being reported.  

Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber are back in the doldrums. Prompt availability, particularly of narrow widths (2x4 – 2x6) and lower prices across the entire complex, which mills hoped would jump start their markets; failed to achieve the necessary results. Buyers have returned to purchasing highly mixed truckloads, which will cover their most pressing and near-term needs. Producers with excess on ground inventory offered even large discounts to buyers willing to purchase straight width loading; but that too failed to peak buyers’ interest. Local 2-step distributors are reporting an uptick in unit sales, as buyers turn to them for prompt shipping fill ins. The inquiry and sales pace of high-grade stock – D.S.S., S.S. and MSR was not immune to the market’s slowdown. Demand from truss manufacturers and modular home lumber buyers has also slowed as recent flooding rains in the Southeast, Mid-Atlantic and Texas has slowed shipment of both trusses and new homes. Prices are following the pattern established in the construction grades. Demand for low-grade stock remains lackluster. Mills stared the week quoting modestly \ moderately below last Friday’s reported levels and seeking firm offers from the few buyers in the marketplace. Stud trim sales remain a brite spot in the market, Stud trim sales remain in sync with production and mills are quoting production for the weeks of 5/20 – 5/27; with prices holding steady at a level established 13-weeks ago. Demand for small squares and timbers remain well below seasonal norms. As a result, mills in both the Eastside and Westside production zones started the week offering discounts – oft times double-digits discounts – on 4x4 – 4x6 – 6x6. The downward pressure on 6x6 is particularly strong. The declining prices on small squares and timbers have both pressure treaters and pro dealers limiting their purchases to absolute needs, as they wait for the market to finally stabilize. The decking season is upon us and demand for 5/4 x 6 Standard and Premium Radius Edge Decking continues to improve. As in the previous weeks, Westside producers are reporting strong sales and many went off market late last week as they attempted to get sales and production back into alignment. Pricing on the Westside was modestly higher again this week on both Standard and Premium. Eastside zone sales are not as robust, but producers sold enough Standard decking to move prices modestly higher again this week, while continuing to hold Premium prices steady.  

Pressure Treated -: The inquiry and sales pace of pressure treated lumber, plywood and accessories remains seasonally strong. Pro dealers reported another week of strong sales, in spite of heavy rainfall that made jobsites in Texas, the Southeast, Mid-Atlantic and Northeast difficult to navigate early in the week. Pro dealers continue to refrain from purchasing beyond their immediate needs, which is placing additional pressure on treaters to have the stock they need available for prompt shipment. Large box stores continue to report a surge in their sales, with fencing and landscaping items on the top of many DIY’ers list. In anticipation of the long Memorial Day weekend, and an advertising blitz, large box stores are in the process of increasing their on-ground inventory levels to meet their anticipated customers’ needs. Treaters are still reporting that on several key items they have developed extended production schedules, which can and has conflicted with pro dealer and large box store needs.

OSB & Veneer Panels Overview –: Tiny ripples of energy continue to flow across the plywood and OSB markets. However, they are not sustained and the end result is flat but firm pricing throughout the panel complex. Any attempt to push prices higher is being met with almost immediate buyer pushback. Any counter offer from a buyer to a mill is being received in a similar manner. Plywood mills are quoting production scheduled for this week to as far out as the week of 5/27. OSB mills are quoting production from the week of 5/20, to as far out as the week of 6/10, and all points in between. Slower panel sales have helped to divert some of the transportation issues . . . but not all.

OSB -: The inquiry and sales pace of OSB is once again missing the energy and urgency, associated with the past few weeks. As a result, prices were flat across the complex at midweek and changed very little through the remainder of the week. Western sales, which have been the driving force in the markets for the past 2 - 3 weeks have suddenly dried up. As those buyers wait for recent purchases to arrive. The other zones were really never as busy and the slowdown in the West further convinced the remaining zone buyers that their current plan of purchasing near-term and immediate needs will limit their exposure to the markets and continue to serve them well. Mills are quoting production anywhere from as soon as next week, to as far out as the weeks of 6/3 – 6/10, and all points in between. Office wholesalers, with contract ownership are reporting that slowing sales at the producer level has filtered down to them and sales are not as easy as they had been the past 2 – 3 weeks.  

Southern Pine Panels -: The inquiry and sales pace in the Southern Pine Rated Sheathing remains on the quiet side. Last week’s increase in market activity helped mills sell off some of their excess inventory and that in turn helped to support this week’s flat pricing structure. Again, this week, any attempt by producers to move prices higher was met with immediately buyer pushback. The same held true for buyers seeking discounts – there were none available. Producers are quoting production scheduled for the weeks of 5/20 – 5/27, but prompt loads always seemed to be available if a buyer made that the sticking point of the sale. Buyers remain concerned about the overall near-term health and direction of the market. Because of those concerns many buyers are continuing to limit their purchases to highly mixed truckloads. And when they are ready to buy, they have a plethora of sources (mills, office wholesalers, local2-step distributors) to purchase that highly mixed truckload from. The sales of underlayment, sanded, siding concrete form and other specialty panels remain dull. Mills starting the week with excess on ground inventory and offered modest \ moderate discounts in the hopes of getting buyers to reengage with the marketplace. Regrettably, the lower prices actually moved buyers further away from the market.  

Western Fir Panels -:  The inquiry and sales pace of Western Fir Rated Sheathing remains lackadaisical. Mills are quoting production scheduled for the weeks of 5/20 -5/27. However, at the end of the week several producers had unsold production from this week, which still needed a home. With prompt shipments readily available; truckload buyers continue to purchase highly mixed truckloads, to cover their near-term needs. Carload buyers in the Midwest and Northeast continue to rely on their current on ground inventory and local 2-step distribution to fill in as needed. Again, this week, ?” 4-ply, was the star of the markets and prices moved a few dollars higher. The remaining thicknesses traded within a dollar or three of last week’s reported levels. Sales of value-added panels – underlayment, sanded, siding, concrete form and other specialty are slow and several mills have inventory on the ground and ready to ship. A buildup of underlayment panels forced mills to resort to modest discounting Monday morning.  

Food for Thought -:  The best time to make a plan . . . is well before you need that plan.

It’s been a while and I can’t really say that I’ve missed it, but a rapid moving line of thunderstorms has just moved through the area. The winds suddenly picked up, the trees start to sway and then came the lightening, thunder and heavy rain. It thankfully didn’t last more than about 30 minutes and then the sun came back out. Our family has a plan for inclement weather, for both the summer and winter. Hopefully, you and your family have one too. In case of a tornado we are going to the bathroom on the main floor of the house. Our home does not have a basement. We know that with strong winds and the large number of mature trees on our property that standing by a window is ill advised. Our flashlights have new batteries and our cell phones are close at hand. We have purchased an AC/DC powered NOAA Weather Radio and it is probably one of the best under $30.00 investments we’ve ever made. The old battery powered one is in the bathroom, so we won’t have to leave our shelter area to fetch the other radio.

Our NOAA radio did not have an alert with this particular storm, but we know difference between an advisory, watch and warning. I want to make sure that you know too. So, let’s review:

·         Advisory – This means that conditions are right for some sort of dangerous weather. However, nothing is yet occurring.

o   In winter it means having 3 days of supplies ready, prepared for a power outage or even lack of running water.

o   This generally also means that within a matter of hours of it being posted grocery store shelves are going to be bare.

·         Watch – This means severe weather is possible in and around the warning area. Time to keep an eye on the sky!

o   This applies to both winter storms, as well as severe thunderstorms and possible tornados.

·         Warning – This means the weather issue has already been observed and its time to move to your safe shelter and review your safety plan with all family members.

For more information, please visit the National Weather Services at https://www.nws.noaa.gov/om/severe weather/ww.shtml.