Notes from the Forest 5-22-20 Edition

Ladies and Gentlemen:

Long holiday weekends scheduled on either side of this week made the lumber and panel markets appear to be a little less chaotic. In truth, sales were steady to strong and prices continued to move higher, albeit with the exception of Southern Pine lumber, with a little less gusto. Many mills continue to operate at curtailed levels, but some additional production has been brought back online. Mill production schedules have pushed into mid to late June. Uncertain about future needs, poor housing data for April, ongoing late shipments, higher prices and the extended production schedules all served as catalysts in moving buyers back into a more conservative frame of mind. Many domestic buyers are taking a wait and see attitude, at least until they return from the long Memorial Day weekend.  

The National Association of Realtors? (NAR) is reporting that total existing-home sales, which include single-family homes, townhomes, condominiums and co-ops declined <-17.8%> from March, to a seasonally-adjusted annual rate of 4.33 million in April. Year-over-year, new home sales were down <-17.2%>, which ends a 9-months in a row upward streak. Earlier, the U.S. Census Bureau has reported that Privately-owned housing starts in April were at a seasonally adjusted annual rate of 891,000. This is <-30.2%> below the revised March estimate of 1,276,000 and is <-29.7%> below the April 2019 rate of 1,267,000. Single-family housing starts in April were at a rate of 650,000; this is <-25.4%> below the revised March figure of 871,000. The April rate for units in buildings with five units or more was 234,000. Permits are the forward-looking part of the report and Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,074,000. This is <-20.8%> below the revised March rate of 1,356,000 and is <-19.2%> below the April 2019 rate of 1,330,000. Single-family authorizations in April were at a rate of 669,000; this is <-24.3%> below the revised March figure of 884,000. Authorizations of units in buildings with five units or more were at a rate of 373,000 in April. Earlier, the National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index (HMI) for May, reports that builder confidence in the market for newly built single-family homes increased to 7 points to a reading of 37. This coming off its largest single month decline in its history in April.

Spruce & Stud Markets -: The inquiry and sales pace of Western and Eastern Canadian SPF Std., & Btr., and No. 2 & Btr., was a touch quieter this week. Impacted by the Victoria Day celebration in Canada this past Monday and the upcoming Memorial Day holiday in the U.S. this coming Monday. ESPF and WSPF producers are quoting production for the weeks of 6/8 – 6/15 and there is little, if anything, available for immediate shipment. WSPF prices started the week $ 2 - $ 3 MBM above last Friday’s levels and prices moved higher through the remainder of the week. ESPF prices started the week $ 3 - $ 10 MBM above last Friday’s levels and those prices pushed higher, as well, through the balance of the week. Sales of low-grade stock remain steady to strong and mills started the week quoting modestly above last Friday’s levels, for production scheduled for the weeks of 6/1 – 6/8. Stud trim sales in WSPF were also on the quieter side and mills are quoting production scheduled for the weeks of 6/1 – 6/8, with prices flat to a few dollars higher. Stud trim sales in ESPF were steady to sneaky strong and mills started the week quoting production for the week of 6/8 and prices that were modest \ moderately higher.  

CME Lumber Futures – The CME Lumber Contract for May expired on Friday, May 15th at 12:00 Noon CDT.  At its close Futures were down <$ 10.50>, with Friday cash at $ 358.00 and CME Futures at $333.00. The CME Contract for July, is now the forward month and will expire on Wednesday July 15th. at 12:00 Noon CDT. For the past 5-days of trading (5/15- 5/21) CME Futures were up all 5-days. For the past 5-days CME Lumber Futures have gained $25.70 and are trading above the midweek cash market $ 360.00 MBM by $10.30, CME $ 370.30 MBM.

Hem\ White Fir -: The inquiry and sales pace of Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem-Fir remains strong. Depending on the specific item, mills are quoting production scheduled for the weeks of 6/1 – 6/15. Besides ‘dawg breakfasts’ there is little prompt shipping lumber available at the mill level. Mills started the week quoting anywhere from as little as $ 2 MBM, to as much as $ 20 MBM above last Friday’s level and once again prices moved higher through the balance of the week.  Low-grade sales also continue to be steady and mills are quoting production scheduled for the weeks of 6/1 – 6/8, and prices are being quoted at, or modestly above last Friday’s levels. Stud trim sales are robust. Mills started the week, depending on the species and trim, quoting, $ 5 - $ 12 MBM above last Friday’s levels and prices pressed higher through the end of the week.

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., remains steady to strong, but not quite as stout as in the previous weeks. This week buyers seemed to be searching for coverage for their near-terms needs, while shying away from purchasing too far into the uncertainty of the future. Many producers started the week off market as they attempted to rein in their production schedules, which currently stretch into the weeks of 6/1 – 6/8, and beyond. Producers started the week quoting single-digits above last Friday’s levels, but prices did continue to inch higher through the balance of the week. Low-grade sales remain steady to strong and mills are quoting production scheduled for the weeks of 6/1 – 6/8 and prices are being quoted flat to a few dollars higher. Demand for stud-trim remains solid and prices are being quoted double-digits above last Friday’s levels for production scheduled for the weeks of 6/1 – 6/15.

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 at a fevered pitch. Large box stores and pro dealers demands only seemed to intensify further as the week progressed. Buyers started and ended their week searching for anything on their long wish list that a mill could ship anywhere close to prompt. Buyers who turned to their local 2-step niche distributor found that they too were short on, or missing the very same key items. Log supplies remain tight and large diameter logs are even more difficult to source. Even with their mills running at full capacity, producers are reporting another week of limited \ tight supply of anything 4” – 6” wide, as well as 10” – 12” wide, small squares and timbers, as well as fencing and 5/4 decking. Producers are quoting these hard to find items above last Friday’s levels and for production scheduled, on some items, into mid to late 3rd Qtr. Transportation issues are on the rise.

Shake & Shingles -: The inquiry and sales pace of Western Red Cedar (WRC) Shake and Shingles and Eastern White Shingles (EWS) were back on the quiet side this week. Buyers continue to wait for further clarification on the U.S. Commerce Dept. announcement, which added an extra 50 days to review any previous duty rulings. The decision, however. came just hours before the ruling was to be confirmed and go live. Buyers just as soon not pay the duty if they can avoid it. Just as log availability seemed to be modestly improving last week, the Freshet on the Fraser River has begun and it appears that it is significantly higher than normal. Buyers are once again concerned about log availability. This as they continue to deal with a lack of ongoing production since the start of the year. Producers moved prices selectively higher last week, as their costs for raw materials, labor, insurance and transportation had all increased to levels that demanded such action. Buyers made note of the increase, but that did nothing to influence their buying decisions.

Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber was not quite as chaotic this week. Mills are quoting production scheduled for the weeks of 6/1 – 6/15. Mills started the week quoting double-digits above last Friday’s levels and prices did creep higher through the remainder of the week. Over the course of the week buyers have become much more conservative in their approach to the marketplace. Uncertain what mid to late June and beyond will hold in actual need. As an example, brite feedstock buyers for pressure treaters, want to wait and see just how strong large box store sales are over the Memorial Day weekend and then how much the box stores reorder, before considering the purchase of additional brite feedstock for inventory. The inquiry and sales pace of high-grade stock – D.S.S., S.S. and MSR, remains steady. This as truss and modular home manufacturers reported improving sales. High grade prices moved upward, in step with the construction grade market. The sale of No.3 & No.4 low-grade stock also strengthened over the course of the week. Mills are quoting production for the week of 6/1 – 6/8 and prices are being quoted at, or slightly above last Friday’s levels. Stud trim sales remain robust and producers are quoting production for the week of 6/8 – 6/15. Prices started the week being quoted double-digits above last Friday’s significantly higher level and continued to push higher through the remainder of the week. The inquiry and sales pace of small squares and timber remains stellar. Producers just cannot keep up with the ongoing demand from pressure treaters and pro dealers. Mills are quoting production for the weeks of 6/8 – 6/15, and beyond. Producers in the Westside and Eastside zones started the week quoting significantly above last Friday’s levels. Most buyers were just happy when they found a supplier willing to take their order. Further complicating matters is the fact that mills are shipping 6 – 10+ days behind schedule. The inquiry and sales pace of 5/4 x 6 Radius Edge Decking remains torrid. Mills are quoting production scheduled for the weeks of 6/8 – 6/15, and beyond. They too are shipping behind schedule. Demand for both Standard and Premium decking in anything 8’ – 16’ is far exceeding mill capacity in both production zones. Prices started the week being quoted above last Friday’s already jaw dropping levels. 

Pressure Treated -: The inquiry and sales pace of pressure treated lumber, plywood and accessories continues at a breakneck pace. Large box stores continued to gear up for the long Memorial Day holiday weekend sales event. Pro dealers are equally as busy, as jobsite activity intensifies and demand seems to be growing by the hour. Pressure treaters are working non-stop and are still reporting that they are unable to keep up with demand. On top of all of that, a pinch point has developed in the brite feedstock supply chain. Brite feedstock producers are currently shipping 6 – 10+ days behind schedule and orders being taken today are for production scheduled for the weeks of 6/8 – 6/15. Pressure treated prices are double-digits, and in some cases, triple-digits above where they were being quoted at the start of May. Many exporters have turned their attention towards filling in the gap in domestic production and availability. In turn that is leaving many offshore customers in a lurch.

OSB & Veneer Panels Overview –:  The inquiry and sales pace of panel products was not quite as hectic this week. Bookended by 3-day holiday weekends, Victoria Day in Canada this past Monday and Memorial Day this coming Monday, many traders took an extra day or two of vacation which in turn made it a short trading week on both sides of the border. Mills are quoting production for the week of 6/8, to as far out as the week of 6/22. The extended production schedules, in these uncertain times, has put many buyers in much more conservative frame of mind. Nevertheless, prompt shipping panels continue to be difficult, if not impossible to source. Prices started the week being quoted $ 5 - $ 15 MSF above last Friday’s levels and they inched higher through the remainder of the week. Office wholesalers are selling their contract ownership above mill replacement values.

OSB -: The inquiry and sales pace of OSB was not quite as strong as they have been in the previous weeks. With production schedules approaching the weeks of 6/15 – 6/22, many buyers decided to take a step back from the marketplace and to wait and see what the markets look like after the long Memorial Day weekend. Nevertheless, producers had mill and delivered prices $ 5 - $ 10 MSF above last Friday’s levels, first thing Monday morning and prices inched higher through the remainder of the week. Office wholesalers with contract ownership were able to sell that ownership above mill replacement levels and buyers in need were happy to pay the premium for the prompter shipping panels.

Southern Pine Panels -: The inquiry and sales pace of Southern Pine Rated Sheathing was not quite as robust this week. Late shipments and producers quoting production scheduled for the weeks of 6/8 – 6/15, has put buyers back into a much more conservative frame of mind. Concerned about purchasing that far into the future, during these uncertain times. Nevertheless, again this week, there were little, to no prompt shipping panels available at the mill, office wholesale and 2-step distribution levels. Imported panels from Brazil and Chile remain a non-factor and Eastside zone mills are trying to make up for their absence. Producers had prices higher first thing Monday morning, but the uptick was not quite as stout as in the past several weeks. Mill Certified sales continue to accelerate and with it their pricing. The sales of value-added panels, underlayment, sanded, siding, concrete form and other specialty panels remain steady to strong. Mills started the week quoting production for the weeks of 6/8 – 6/15, and depending on the specific item prices are being quoted flat to higher.

Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing continues to accelerate. Producers are quoting production scheduled for the weeks of 6/1 – 6/8. Many producers spent a good part of the week jumping off and back on market, as they tried to rein in their production schedules. Again, this week, West Coast truckload buyers dominated the marketplace. Carload volume buyers, returned to the market at midweek as they try to anticipate what their late June and July needs are going to be as jobsite activity is allowed to resume. The sale of underlayment started the week double-digits above last Friday’s levels and climbed higher. Sanded, siding, concrete form and other specialty items sales remain steady to strong. Mills are quoting production for the week of 6/8 - 6/15 and prices are being quoted at, or modestly above last Friday’s reported levels. 

Food for Thought-:  The worst time to have a case of the munchies is when the pantry and frig are empty and the grocery stores are closed. The worst time for pro dealers and large box stores to need lumber and panels is when construction and DIY activity is continuing to ramp up and the mills are shipping behind scheduled, while running at curtailed production levels and a few remain totally shut down.

With mills already quoting production scheduled for early to mid-June; buyers are once again attempting to hit the pause button and are asking the immortal question of ‘what if? Oddly enough they’re just about the same ‘what if’ questions that are holding the mills back from resuming full production. Clearly mills have May in the bag and while the early weeks of June appear to be strong, sales this week were not quite as robust. Could it be because Canada celebrated the long Victoria Day weekend this past Monday and the U.S. is preparing for Memorial Day this coming Monday? No matter what the reason, it seemed a smidge quieter this week than in the previous 3-4 weeks. We’ll certainly know more about the markets trajectory once all the buyers get back to work on Tuesday 5/26. Until then buyers and sellers will continue to ask themselves and others . . . What If?

In keeping with tradition, ‘Notes from the Forest’ will not be published the week of Memorial Day. Notes will return on Friday June 5th. Until then from my family to yours, wishing you a safe, sane, and enjoyable Memorial Day Weekend