Notes from the Forest-5-24-19 Edition

Ladies and Gentlemen:

With Victoria Day celebrated this past Monday in Canada, and domestic buyers hoping to get an extra day, or 2, of vacation in prior to the long Memorial Day weekend, the lumber and panel markets were full of distractions. There were short bursts of activity throughout the week, but with an abundance of prompt shipping lumber and panels, and prices overall flat in the panel markets and modestly to moderately lower in the lumber markets; buyers just could not be swayed to purchase anything beyond their near-term needs. From the sellers’ standpoint they hope that when buyers return on Tuesday that they will be prepared to reengage with the markets. They are hoping that buyers will quickly realize that prices are at investment levels and summer maintenance curtailments are close at hand.  

The U.S. Department of Housing & Urban Development has reported that the Sales of new single‐family houses in April; 2019, were at a seasonally adjusted annual rate of 673,000.  This is <-6.9%> below the revised March 2019 rate of 723,000, but is 7.0% above the April 2018 estimate of 629,000. Earlier in the week, The National Association of Realtors? (NAR) reported that sales of existing U.S. homes fell <-0.4%> in April, when compared with March, to a seasonally adjusted annualized rate of 5.19 million units. When compared with April, 2018, existing home sales were <-4.4%> lower. This is the 14th straight month of annual decline. This in spite of a sizable drop in mortgage interest rates in April. As high prices and tight supply at the low end of the market continued to sideline buyers.

Spruce & Stud Markets -: The inquiry and sales pace of Eastern and Western Canadian SPF Std., & Btr., and No. 2 & Btr., remains on the quiet side and supply is continuing to outpace demand. With Victoria Day celebrated this past Monday in Canada, and domestic buyers preparing for Memorial Day this coming Monday, the WSPF & ESPF markets experienced a short trading week. Producers are quoting production for the weeks of 5/27 – 6/3, but prompt shipping volumes are readily available from both producers and office wholesalers with contract ownership. While the Futures market reacted (see below) to an out of control wildfire in Alberta, the cash market continues to struggle to find a price level that will get buyers to reengage with the markets. Mills started the week offering modestly lower prices and asking buyers for firm offers. Buyers remain on the sidelines and lower prices did nothing to dissuade them from purchasing anything beyond their near-term needs. Again, this week, buyers turned to local 2-step distributors for units, or mill owned reload centers to cover a highly mixed, quick shipping truckload. Sales of low-grade stock and stud trims are continuing to suffer from the markets’ downturn. Prices traded flat to a few dollars below last Friday’s reported levels on both items.

CME Lumber Futures – The CME Lumber Futures contract for July expire at Noon CDT on Monday 7/15. For the last 5-days of trading (5/16 – 5/23) CME Futures were Up 3-days and Down 2-Days. CME Futures lost <-$4.40> this week, and are trading above the Midweek cash market, ($308 MBM) report, by $ 15.70 (CME $323.70).   

Hem\ White Fir -:  The inquiry and sales pace of Std. & Btr. No.2 & Btr., White and Hem \ Fir, continues to struggle to keep up with production. Mills are quoting production for the weeks of 5/27 – 6/3, but there is plenty of inventory on the ground and ready for prompt shipment. Mills with empty railcars to load and demerge on those cars growing by the day, started the week by making outbound calls to their preferred customers. Offering the modest to moderate discounts on all on ground inventory. Further complicating the situation is the large number of offerings coming from Canadian producers; who are also suffering from an imbalance of on ground inventory for sale. Buyers continue to purchase only their most pressing needs. Ever confident that when they do enter the marketplace, they will have a plethora of choices to make their purchase from. Again, this week, low-grade stock and stud trims are following the pricing pattern that has been established in the construction grades. Discounting on the excess and flat pricing where supply and demand are in sync.

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., remains sluggish. The fact that K.D. Doug Fir is currently trading below Green pricing, has really put pressure on the Green market. Mills are quoting production for the weeks of 5/27 – 6/3. However, a buildup of 2x6, the result of the afore mentioned slower sales, had mills offering modest discounts from the start of the week. However, buyer interest at the lower prices was limited at best. Wider widths were not as readily available and mills have been able to edge prices higher on 2x8 & 2x10, while holding 2x12 flat but firm. A week of wet and dangerous weather in parts of Texas and Oklahoma limited the carload buyers’ interest in the market. Northeast carload volumes checked prices and availability, but failed to pull the trigger on any additional purchases. Demand for low-grade stock remains in sync with production and prices were unchanged. Demand for stud trims has slowed and producers went on the offensive and lowered prices modestly early in the week to keep production from becoming an issue.

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 to strong. Large box store retailers dominated the marketplace again this week, as they continue to gear up for the long Memorial Day weekend and the weeks that immediately follow. Fencing and decking are high priority items for the box store buyers. Buyers are reporting that they are surprised and are now struggling to find prompt shipments on several key items. This as several producers are now quoting production scheduled anywhere from mid-June, to as far out as mid-August on select \ key items. As buyers raise their voices in concern about the sudden shortages, producers have been quick to remind them that they warned them about this in late March and early April. Overall, pricing continues to hold steady. Producers continue to assess the risk of raising their prices and evaluating what such an increase might have on their sales. The increasing tariffs on Chinese fence pickets has had minimal impact on the current market pricing. Transportation issues remain an issue.

Shake & Shingles -: The inquiry and sales pace in the Western Red Cedar (WRC) Shake and Shingles and Eastern White Shingles (EWS), was not as strong as it has been in the past several weeks. It could be the result of buyers in Canada having this past Monday off to celebrate Victoria Day, and many domestic buyers trying to get a jump on the long Memorial Day weekend. Producers noted that prices are on the rise for raw materials, and the quality isn’t coming close to reflecting the higher prices. The start of the Freshet on the Fraser River has seen an almost immediate doubling in the price of freight. For the first time this year, buyers are reporting that they are having issues in locating product for prompt shipment. Royals are particularly difficult to find on either side of the border. Canadian mills continue to hold prices at previously established levels. However, domestic producers did attempt to push their quotes higher, but with less success than they had expected. Transportation issues are resulting in shipment delays of up to 3 – 4 weeks.  

Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber continue to lack the energy and urgency typically associated with this time of the year. Production, again this week, far outpaced sales. Producers started the week offering double-digit discounts on the narrow widths (2x4 – 2x6 – 2x8) and more modest discounts on the wider widths (2x10 – 2x12). Buyers continue to purchase only their most pressing needs, and often turned to local 2-step distribution to purchase units; in the hopes of limiting their exposure to the marketplace. With 2x6 No.2 approaching multi-year lows, a handful of volume buyers did step back into the markets to purchase carloads. However, by the end of the week, mills once again had a significant surplus of 2x6. The inquiry and sales pace of high-grade stock – D.S.S., S.S. and MSR remains lackluster. Buyers for both truss and modular home manufacturers are reporting moderately slower sales, but with prices vulnerable and most items available for prompt shipment, the need to keep inventory on the ground has been greatly diminished. Demand for low-grade stock remains subpar. Mills started the week, again, quoting modestly \ moderately below last Friday’s reported levels and seeking firm offers from buyers. Stud trim sales remain the brite spot in the market. Stud trim sales remain in sync with production and mills are quoting production for the weeks of 5/27 – 6/3; with prices holding steady at a level established 14-weeks ago. Demand for small squares and timbers remain in the doldrums. Mills in both the Eastside and Westside production zones started the week, once again, offering double-digits discounts – on 4x4 – 4x6 – 6x6. Producers have prompt loadings available and are struggling to find buyers who are willing to give them a firm offer; for even on a highly mixed truckload. Demand for 5/4 x 6 Standard and Premium Radius Edge Decking seemed to slow a notch, or two over the course of the week. Westside producers are reporting slower sales; resulting in flat but firm pricing on both Standard and Premium decking. Eastside zone sales are not quite as good, but producers sold enough Standard decking to hold prices flat to modestly higher. Premium prices remain flat but firm.

ressure Treated -: The inquiry and sales pace of pressure treated lumber, plywood and accessories started off the week filled with energy and urgency. This as buyers prepared for the long Memorial Day Holiday weekend. However, by Thursday morning the markets had quietly slipped into holiday mode. Thanks to significant holiday advertisements and follow up E-Mails, the retail box stores were by far the dominate players in the market this week. Vulnerable pricing on brite feedstock, served as a deterrent, which helped curb treated buyers’ appetite for additional on ground inventory. Pro dealers’ purchases remain highly regionalized. Buyers in the Southeast and Texas continue to report steady to strong jobsite activity and with treaters having established order files, on several key items, they purchased accordingly. Buyers in the Midwest and Northeast acknowledge that their sales are finally accelerating, but remain confident that treaters have ample supplies on the ground and can replenish them promptly if necessary.  Pressure treaters who service offshore accounts reported a dismal 1st Qtr., with sales to the Caribbean, Central and South America, along with China well below the previous year’s sales levels. As anticipated, hit or miss trucking issues popped up over the course of the week.

OSB & Veneer Panels Overview –: With Victoria Day celebrated this past Monday in Canada, and Memorial Day this coming Monday, the OSB and plywood markets were filled with distractions. Buyers continue to focus on their near-term needs, as they try to avoid any exposure to the marketplace. Prices, again this week, were overall flat but firm throughout the entire panel complex. Buyers attempts to counter offer had limited success, and usually were predicated on their willingness to take prompt shipment on what the mill had on the ground. Plywood mills are quoting production scheduled for the weeks of 5/27 – 6/3. OSB mills are quoting production from the week of 5/27, to as far out as the week of 6/17, and all points in between. Domestic trucking issues grew more aggravating as the week progressed.

OSB -: The inquiry and sales pace of OSB remains lethargic. With Victoria Day celebrated this past Monday in Canada, and domestic buyers preparing for Memorial Day this coming Monday the markets were filled with distractions. Buyers continue to purchase their near-term needs and little if anything in addition. Much of this week’s needs have been covered at the local 2-step distribution, or office wholesale level. Mills are quoting production for the weeks of 5/27, to as far out as the weeks of 6/10 – 6/17, and all points in between. As early as Wednesday morning producers were making outbound calls to their large volume customers offering prompt shipments, (depending on the availability of trucks, or railcars) but only quoting at last Friday’s reported levels. Overall, pricing was flat at midweek and that trend continued through the remainder of the week. A large wildfire approaching the Tolko mill in High Level, Alberta, Canada, has forced the suspension of production at the facility. There was, however, no immediate market reaction to the unscheduled down time. 

Southern Pine Panels -: The inquiry and sales pace in the Southern Pine Rated Sheathing continues to lack the energy and urgency usually associated with this time of the year. Producers are quoting production for the weeks of 5/27 – 6/3. However, by Wednesday afternoon \ Thursday morning, several producers were making outbound calls to offer truckloads (if a truck could be sourced) or carloads for prompt shipment. Overall, prices continue to hold at previously established levels. However, producers are continuously looking for an opportunity to nudge prices higher. Buyers continue to purchase fill ins, oft times in units from local 2-step distributors; as they try to limit their exposure to a market that has changed very little in the past 3-weeks. Office wholesalers continue to sell their contract ownership at, or near mill replacement levels, but they admit it has been challenging. Sales of value-added panels – underlayment, sanded, siding, concrete form and other specialty remain steady but slow. Producers started the week quoting from last Friday’s levels with many items available for immediate shipment. Trucking tightened as the week progressed.   

Western Fir Panels -:  The inquiry and sales pace of Western Fir Rated Sheathing remains well below seasonal trading norms. Mills are quoting production for the weeks of 5/27 – 6/3. However, prompt shipments appeared on mill lists, as early as, Wednesday afternoon. With prompt delivery available from mills, office wholesalers and local 2-step distributors, West Coast truckload buyers continued to limit their purchases to near-term needs. Carload buyers, who have been away from the market for quite some time, remain on the sidelines, relying on their current on ground inventory, as well their ability to get a quick fill in truckload from local reload centers. Producers started the week quoting at last Friday’s levels, but an oversupply of thick panels (5/8” & 3/4") led to some modest discounting on Tuesday morning and that pattern continued through the remainder of the week. The sales of underlayment, sanded, siding concrete form and other specialty panels remained on the quiet side. Mills started the week quoting from last Friday’ levels and reported selling modest volume at those levels.

Food for Thought -:  In keeping with tradition, ‘Notes from the Forest’ will not be published the week of Memorial Day. Notes will return on Friday June 7th. Until then I ask you to keep in mind not only the men and women who have bravely served our Nation in the past, but those who are currently serving our Nation. Their services are equally great.

From my family to yours, wishing you a safe, sane and relaxing Memorial Day.