Notes from the Forest-5-3-19 Edition

Ladies and Gentlemen:

The lumber and panel markets started the week on firmer footing and there is a degree of optimism in the air. Last week’s announcement from 2 large British Columbia producers that they were curtailing production at their mills and taking large volumes of WSPF off the market, served as the catalyst in getting buyers to reengage with the lumber and panel markets. Follow through this week has not been as strong as many traders had anticipated. Some buyer’s remorse is surfacing. Lumber and plywood producers are quoting production for the weeks of 5/6 – 5/13 and some OSB mills have production scheduled into the week of 5/20. Producers started the week quoting from, or modestly above last Friday’s reported levels. Buyers reported that discounts, even the token variety were harder to come by early in the week. However, later in the week some prompt shipments did become available and were offered with a modest price concession. Transportation issues seemed to be easing, but pockets of problems still do exist.  

The U.S. Commerce Department has reported that U.S. construction spending unexpectedly fell in March, after three straight monthly gains, pulled down by declines in both private and public construction projects. The Commerce Department reported that construction spending decreased <-0.9%>, in March. Data for February was also revised lower to show construction outlays rising 0.7% instead of increasing 1.0% as previously reported. Earlier, The National Association of Realtors? (NAR) reported their Pending Homes Sales Index (PHSI) for March 2019. The PHSI is a forward-looking report that looks at contract signings, not the actual final closing. According to the NAR, spurred by mortgage rates that were at their lowest level in  more than a year, house shoppers signed 3.8% more contracts to buy existing homes in March compared with February. That was higher than analysts had expected. However, sales were <-1.2%> lower when compared with March, 2018. The 15th straight month of annual PHSI declines. 

Spruce & Stud Markets -: The inquiry and sales pace of Eastern and Western Canadian SPF Std., & Btr., and No. 2 & Btr., experienced modest \ moderate follow through after last week’s surge in buying and pricing. The direct result of curtailment announcements from Canfor Corp. and Interfor Corp., B.C. mills. Buyers have stepped away from the marketplace to digest recent purchases; waiting to see the markets’ next move, when the emotions of these announcements wains. Producers with production scheduled for the weeks of 5/6 – 5/13, edged prices modestly higher on 2x4, while holding prices on 2x6 – 2x10 close to last Friday’s levels. Discounts on 2x12 are still available. Late in the week a handful of volume carload buyers reported that mills were back listening to firm offers, but steep discounts were dismissed out of hand. Low-grade sales also modestly slowed and mills responded by holding prices at last Friday’s levels but encouraged buyers to return with firm and reasonable counter offers. Stud trim sales remain steady to strong and producers lifted prices modestly higher. Transportation issues, both rail and truck seem to be easing. 

CME Lumber Futures – The CME Lumber Futures contract for May, will expire on 5/15/2019 at Noon CDT. Many traders have, or are in the process of, rolling their contract ownership forward into the July, 2019 contract. For the last 5-days (4/26 – 5/2), CME Futures were Up 3-days and Down 2-Days. CME Futures gained $0.90 this week, and trading above the Midweek cash market, ($326 MBM) report, by $17.70 (CME $343.70).

Hem\ White Fir -:  The inquiry and sales pace in both Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem \ Fir, started the week building modestly \ moderately on last week’s flurry of activity. The direct result of curtailment announcements being made by 2 large volume lumber producers in British Columbia. Producers started the week quoting production for the weeks of 5/6 – 5/13, or beyond. Demand for 2x12, is exceptionally strong and pricing was higher in all species and both producing zones. With few exceptions discounting is now a thing of the past and by midweek several Coastal and Inland producers had pushed prices modestly higher, and experienced little to no buyer resistance. Low-grade sales are in sync with production and mills quoted at, or a few dollars above, last Friday’s reported levels. Stud trim sales are steady to strong and prices are flat to modestly higher. Transportation issues vary from one producer to another.

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., is robust. Mills are quoting production for the weeks of 5/6 – 5/20. Wider widths items (2x8 – 2x12) are in particularly tight supply. Recent permanent mill closures, coupled with increased demand from buyers in California, as well as increased interest from carload buyers in Texas, Oklahoma and the Northeast, helped to push price $ 5 - $ 10 MBM higher at midweek and prices continued to move higher from there. 2x6 was the outlier, with production and demand just about in sync, and prices held close to last Friday’s reported levels. Low-grade stock and stud trims are currently outpacing production and prices edged higher.  

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 to accelerate. However, when compared to the activity in 2017 & 2018, at this time of year, it almost seems as if the current market is at a pedestrian pace. Activity in Texas, the Midwest and from large box retailers dominated the market again this week. As those buyers finally felt comfortable with the weather and business climate to add additional speculative purchases into inventory. Timbers are back on the difficult to source item list; joining wide width dimension lumber, various siding items and numerous fencing items. Pricing remains flat but firm. Under normal circumstances, increased sales activity would lead to higher prices. However, producers seem content to hold prices flat and work on increasing their production schedules. The last thing the sellers want is to spook buyers out of the market with higher prices and back into the waiting arms of the alternative species or man-made product suppliers. Traders noted that transportation issues seemed to be easing ever so slightly.

Shake & Shingles -: The inquiry and sales pace in the Western Red Cedar (WRC) Shake and Shingles and Eastern White Shingles (EWS), remains uneven. There are still producers continuing to report that their sales are steady to strong. While other mills are continuing to report a dearth of sales. Canadian producers are reporting that raw materials remain in very tight supply and what is available is both expensive and not necessarily of the best quality. To counteract those issues many Canadian mills are running well below capacity; others remain shuttered, unable to reopen from their winter shutdown. Some recently opened Canadian mills are already curtailing, or ceasing production until feedstock becomes more available. Domestic producers are holding onto their recently increased -to Canadian Duty - levels, but are now reporting much slower sales and increased buyer pushback. Traders continue to report an issue with both railcar and truck availability and rate hikes have just been announced by both sources.  

Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber has become transactional. Buyers are in the process of digesting recent purchases and are back to filling in pressing needs. Mills are quoting production scheduled for the weeks of 5/6 – 5/13. Overall, supply and demand are just about in sync. Prices are being quoted on a narrow line on either side of last Friday’s reported levels. However, prompt loadings of 2x6 are available and being offered at a modest discount to help alleviate an oversupplied situation. The inquiry and sales pace of high-grade stock – D.S.S., S.S. and MSR are showing signs of renewed energy; as truss manufacturers and modular home buyers have returned to the markets in search of prompt shipping product to fill immediate and pressing needs. Pricing continues to mirror construction grade products. Demand for low-grade stock remain lackluster. Mills, again this week, are offering modest discounts to keep that production sold and moving through the supply chain. Stud trim sales remain in sync with production and mills are quoting production for the weeks of 5/6 – 5/13; with prices holding at a level originally established on 3/1. Demand for small squares and timbers continues to fall short of current production levels. If there was a brite spot, it would be that demand for 4x4 seemed to be improving. This week, Westside producers offered double-digit price concessions on 4x6 – 6x6, while offering 4x4 flat to <-$10> MBM on less popular lengths. Eastside producers added 4x6 to their price changes along with 6x6. 4x4’s were flat.  With decking season finally in full swing demand for 5/4 x 6 Standard and Premium Radius Edge Decking continues to accelerate.  As in the past several weeks, Westside producers are reporting stronger sales than those in the Eastside. Resulting in an increase in both Standard and Premium pricing in the Westside zone, but only modest increase in Standard and flat pricing on Premium in the Eastside.

Pressure Treated -: The inquiry and sales pace of pressure treated lumber, plywood and accessories continues to accelerate. One clever trader told me that all of those April showers have created pent up May demand. Activity was almost back to normal in the Midwest and Northeast, as winter finally released its grip on jobsites and the DIY’ers were able to move on to long planned outdoor projects. Treaters in the Southeast continue to report that their sales are so strong that they have actually developed a 7 – 10- day order files on key items. Treated buyers continue to purchase conservatively, in spite of potential order files and outbound trucking issues. Concerns about downside potential in the cost of brite feedstock, which will translate into lower finished product prices and the price debacle that started just about this time last year, are being given as the reason to limit purchases.

OSB & Veneer Panels Overview –: There is finally an air of optimism in the OSB and plywood markets. The fact that many transactions in the Western Fir and OSB markets took place without discounting is a noticeable change. Even Southern Pine mills only need small token discounts to keep production sold. Plywood mills are quoting production scheduled for the weeks of 5/6 - 5/13. OSB mill schedules are out as far as the week of 5/20. Office wholesalers were more active in the marketplace this week, and those with contract ownership reported selling it with far less difficulty.

OSB -: The inquiry and sales pace of OSB was able to build on late last week’s uptick in the western markets. There is finally an air of optimism in the OSB markets. Prices moved higher in the Western Canadian zone, which is the first increase in 13 weeks. Other zones are also reporting steady sales and producers are finally able to sell without having to offer discounts. Overall, pricing was flat to a few dollars higher in the remaining zones. Mills are quoting production scheduled for the weeks of 5/6 – 5/20, or beyond. Office wholesalers are reporting that the sale of their contract ownership was far easier this week, with many buyers interested in their quicker shipping ownership. Transportation issues varied from zone to zone.

Southern Pine Panels -: The inquiry and sales pace in the Southern Pine Rated Sheathing markets remains measured. Producers started the week quoting from last Friday’s reported levels, but that didn’t last long. With Monday sales off to a slow start and buyers searching for deeper discounts than producers were interested in accepting; mills lowered prices modestly and made follow up calls to their customers showing that they were willing to be flexible and work with buyers, to create a win-win for both parties. Buyers with immediate needs to cover, did take producers up on their offer. However, many more simply said they were OK for now and were going to hold off. Mills are quoting production scheduled for the weeks of 5/6 – 5/13. However, as always, prompt loading always seemed to be made available, if a buyer insisted on that as the basis for the purchase. Another wave of imported panels from Brazil and Chile has just hit East Coast docks, and Eastside producers are feeling the pressure of those lower priced panels. The sales of underlayment, sanded, siding concrete form and other specialty panels remains lackluster and producers are quoting from last Friday’s levels, but never let a few dollars get in the way of any sale. Most items are being quoted for shipment the week of 5/6.

Western Fir Panels -:  The inquiry and sales pace of Western Fir Rated Sheathing built on late last week’s market upturn. Mills sold enough on ground and scheduled production inventory to push order files into the weeks 5/6 – 5/13. Producers firmed prices and were far less receptive to buyers’ counter offers. By the end of the week, even the token $ 1 - $ 2 MSF discounts had evaporated. As mills tried, with varying degrees of success, to apply upward pressure on the market. Truckload sales to West Coast buyers continue to dominate the marketplace, as they have for the past several weeks. However, late in the week the Midwest and Northeast carload volume buyers returned to the marketplace, trying to get a better read on the market and kick some tires. Knowing that anything they buy will not arrive until mid to late May, if all railroad interchanges were to happen smoothly. (And good luck with that.) Sales of value-added panels – underlayment, sanded, siding, concrete form and other specialty remain slow but steady. Mills are quoting production for the week of 5/6 and prices are being quoted close to last Friday’s established levels.

Food for Thought -:  Those Online Reviews and Your Business…Whether they are made directly to your website, or through a third-party provider such as Google, Facebook, Yahoo, YELP, etc., your customers and potential customers are reading reviews about your company. Everything from the products you stock \ offer, their quality, to your service levels and pricing.

According to Northwestern University’s Spiegel Research Centre, nearly 95% of shoppers are now reading online reviews before making a purchase. Clearly, online reviews have changed how consumers make purchasing decisions. This applies to both large ticket purchases and those that you might think would not be impacted at all. Online reviews give buyers more than information, they also have become a way for consumers to engage with other consumers about their experience with your products and services.

So how is your company responding to these reviews? Are you addressing them?  Or are you just letting them linger and if negative, fester? Again, statistics show that 95% of potential customers are looking at these reviews before making a decision. It is also important to note that dissatisfied customers are more likely to post a negative review. The old – unhappy customers will tell everyone within earshot of their problem, while satisfied customers are less likely to say anything, or post a positive review.

There is a new trend, at least with a large number of companies that are being reviewed in the Tri-City TN \ VA region. Businesses are now answering each and every review. Good reviews are answered with ‘We’re glad we were able to meet your expectations. However, our goal is to always exceed your expectations and we promised to do that with your next visit”. To the disgruntled they don’t mince words, they admit they (if in fact they have) failed to satisfy the customers and their needs. They then ask the writer to reach out to X. Some go so far as to indicate they will be receiving a call within the next 24 hours from X. With the goal to make things right if at all possible. I can hear you from here. Sometimes there is nothing you can say or do to make a customer happy. Sometimes they expect you to make their Chevy Chevette into a brand-new car and only pay for an oil change.

These are trying times for brick and mortar operations. Every business is fighting for their part of the market share. Everything you can do to make your business standout from your competitors is always a step in the right direction.

One last thought, if you can take the time to write a negative review, why not take the same amount of time to write a positive review. The business you are lauding will be happy that you do.  Just some food for thought.