Notes from the Forest-8-24-18 Edition
Ladies and Gentlemen:
The lumber and panel markets remain on firm footing. However, last week’s sudden acceleration in both sales and pricing has given way to a more pedestrian pace this week. Having purchased significant replenishment volumes over the past 7 days, buyers have returned to their cautious, wait and see approach to the marketplace. Mills are quoting production scheduled anywhere between the holiday shortened week of 9/3, to as far out as 9/17. The increase in sales volume has, unfortunately, reignited transportation issues in several regions. This is resulting in moderate shipment delays, much to the displeasure of many traders.
The U.S. Commerce Department has reported that July 2018 sales of new single-family homes dropped <-1.7%> to a seasonally adjusted annual rate of 627,000 units. However, this level is still 12.8% above July 2017 levels. The unexpected drop has put new single-family homes at their lowest level since Octobre 2017. June's sales pace was revised up to 638,000 units from the previously reported 631,000 units. Earlier in the week The National Association of Realtors ?(NAR) reported that U.S. existing home sales fell <0.7%> in July, to a seasonally adjusted rate of 5.34 million units. This is the fourth straight month of existing home declines and the longest streak of monthly declines since 2013. Existing home sales, which make up approximately 90% of all U.S. home sales, fell <1.5%> when compared to July 2017 levels. At July’s 2018 sales pace, it would take an estimate 4.3 months to exhaust all current inventory. According to the NAR a supply of 6 – 7 months is viewed as a healthy balance between supply and demand.
Spruce & Stud Market -: The inquiry and sales pace of Eastern and Western Canadian SPF Std., & Btr., and No. 2 & Btr., continues to build on last week’s market turnaround. Several producers started the week off market, as they attempted to catch up with order entry. Last week’s flurry of activity has resulted in mills moving their production order files into the weeks of 9/10 – 9/17. Last week’s double-digit price increases in the narrow widths (2x4 – 2x6) were replaced with smaller advances this week. Mills appear to be making a concerted effort not to spook returning buyers back out of the marketplace with a huge price spike. Sales of low-grade stock proved to be more challenging this week and mills addressed the issue by modestly lowering prices at midweek and then listening to buyer’s counter offers. The inquiry and sales pace of stud trims are just about in sync with production and mills were able to hold prices close to previously reported levels. After being up limit 4 out of 5 days last week, CME Lumber Futures started the new week with a modest gain. Tuesday, however, Futures stumbled and prices moved moderately lower. Wednesday priced dropped further, with the back months down limit. Thursday the current and close in months were down limit and the back months down <-$14.00>. The downward movement in Futures is once again giving buyers concerns about the health of the SPF markets.
Hem\ White Fir -: The inquiry and sales pace of Std. & Btr. No.2 & Btr., White and Hem \ Fir, had limited success on building on last week’s market stabilization and modest \ moderate turnaround. Last week’s flurry of replenishment purchases and the resulting higher prices, have buyers back in their conservative, wait and see about the markets direction mood. Producers feeling the newly found energy and urgency quickly being sapped out of the markets immediately switched gears from raising prices, to starting to work on building order files. This resulted in pricing that clearly reflected where mills had limited availability, resulting in prices that are flat to modestly higher. To an overabundance and prices modestly lower. Sales of low-grade stock and stud trims are highly regionalized and prices are all over the map. Again, a clear reflection of what mills have too much or too little of. Last week’s increase in sales has created some unwanted transportation issues.
Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., continues to slowly build on last week’s upward market momentum. Mills appear to be concentrating on rebuilding their order files, rather than rushing to raise prices. This was reflected in the modest price increases this week and order files pushing into the holiday shortened week of 9/3 and 9/10. Buyers’ interest remains focused on the narrow widths (2x4 – 2x8) but wider widths (2x10 – 2x12) were often added to fill out a truckload. Sale of low-grade stock remains challenging for producers. Again, this week they modestly lowered prices on low-grade and asked for buyer feedback. Stud trim sales remain steady and mills have developed a 7 – 10-day production order schedule. This has resulted in modestly higher prices.
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 slow. Producers are reporting that while inquiry levels are down, their ability to convert those limited inquiries into sales are up. Producers continue to believe that sweltering temperatures, high humidity levels and daily rain storms in major WRC consuming areas is the reason for the slowing in their sales. They believe that once the weather pattern finally moderates that their sales will rebound. In the meantime, prices remain flat but firm, as mills continue to lean on order files that extended into the weeks of 9/3 – 9/10. Thanks to price reductions, producers are reporting that sales of fencing items have improved. Sales of 5/4 x6 decking remain challenging. Sales of timbers continue to well outpace production and while buyers do not like purchasing today for mid-Octobre delivery, in essence they have no choice beyond accepting an alternative product.
Shake & Shingles -: The sales pace of Western Red Cedar (WRC) Shake and Shingles and Eastern White Shingles (EWS) continues to be lackluster. Producers are reporting a steady flow of new and previously circulated inquiries this week. The issue, as it has been for the past several months, is getting those inquiries converted into bonafide orders. Buyers remain adamant that they will not make a purchase until they have a firm commitment for the materials. Much of their attitude is due to the continued uncertainty of the current Antidumping and Countervailing duties that are currently imposed on Shake and Shingle being imported from Canada. Canadian producers made out bound calls to potential customers offering modestly lower prices on previous quotes and assuring buyers that any counter offer would be given all possible considerations. Unfortunately, this did little to motivate buyers back into the markets. Domestic producers continue to quote from their price lists and listen for buyer comment. Trucking issues persist, especially with the mills now having a large number of partial truckloads \ multiple stops to ship.
Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No.1 & No.2-dimension lumber has easily been able to build on the momentum established last week. Producers have been able to move production schedules into the holiday shortened week of 9/3 and 9/10. Buyers remain focused on 2x4 and prices were up double-digits at midweek and climbed modestly higher through the remainder of the week. Mills held prices at, or modestly above reported levels on the other widths. Once again, Westside producers were pricing more aggressively than the other 2 reporting zones. Sales of high grade stock – D.S.S., S.S. and MSR, remain steady to strong, as demand from modular home and truss manufactures remains robust. Resulting in high grade prices that are flat to modestly higher. Unfortunately, the momentum in the inquiry and sales did not extend into the low-grade or stud trim markets. Demand for these products was not nearly as strong this week, and by midweek producers were alerting volume customers that they were willing to listen to modest counter offers. Mills reported some success with this approach. The inquiry and sales pace of small squares and timbers remains underwhelming. After several weeks of double-digit price reductions, buyers are still not interested in small squares and timbers. This precipitated another double-digit price correction again this week. Demand for 5/4 x 6 Standard and Premium Radius Edge Decking remains significantly below seasonal levels. With the exception of 16’ Premium Decking in both reporting zones, all other lengths of both Premium and Standard decking were down double-digits again this week. Late shipments due to trucking issues, have once again crept back into the picture.
Pressure Treated -: The inquiry and sales pace of pressure treated lumber, plywood, and accessories are once again regionalized. Weather remains an obstacle to treated sales. Continued high temperatures and humidity levels, accompanied by daily down pours in the eastern half of the country continues to slow jobsite activity. The firming trend in the pricing of many brite feedstock items, which excludes timbers and radius edge decking, has given treated buyers the much-needed confidence to step back into the market and purchase beyond their most pressing needs. Pro dealers are in the process of gearing up for the traditional Septembre through mid-Novembre end of construction season push. Large box stores continue to report slow but steady sales. They, however, continue to anticipate the traditional surge in sales starting with the long Labor Day holiday. Reports of trucking issues are once again surfacing, particularly in the Southeast.
OSB & Veneer Panels Overview –: With mill production schedules stretching from the week of 9/3, to as far out as 9/17, panel producers remain in control of their markets. Southern Pine producers reported another week of robust sales and prices pushed higher. Sales of Western Fir Rated Sheathing and OSB were a bit more reserved. Overall, buyers are in the process of digesting recent volume replenishment purchases and are taking a more cautious, ‘let’s wait and see’ approach to the markets before stepping back in for additional volume. Thanks to increased sales volumes, transportation issues have resurfaced in many areas. With the long Labor Day weekend approaching, producers are expecting trucking will tighten further.
OSB -: Having purchased significant OSB replenishment volumes over the past 2 weeks; buyer have moved into a digestive phase. Resulting in the inquiry and sales pace of OSB being noticeably more reserved this week. Depending on the specific producer and zone, mill production schedules have moved into the week of 9/3, to as far out as 9/17. Extended order files and higher prices have once again pushed buyers out of their comfort zone and caution is once again the word of the day. Secondaries are reporting that they are now able to sell their contract ownership at or modestly above mill replacement, especially if it can ship prior to something coming from a mill. Improved sales have resulted in the resurgence of transportation issues in several producing regions.
Southern Pine Panels -: The inquiry and sales pace of Southern Pine Rated Sheathing continues to accelerate. The markets are once again charged with energy and urgency. Producers have been able to sell production scheduled for the weeks of 9/3 – 9/10, with some mills opening the week of 9/17 late in the week. As demand continues to grow mills have been able to push prices higher, with 15/32” 4-ply, 19/32”, and 23/32” seeing the most action this week and with that prices were up $8 - $ 10 MSF at midweek and continued to climb from there on those items. Sales of value-added panels, underlayment, sanded, siding, concrete form and other specialty panels also remains strong. Producers have been able to develop 1 – 2-week order files on most of these products and prices continue to hold at previously established levels. Trucking issues have resurfaced, not quite as disruptive as in the early spring, but still annoying for buyers waiting for replenishment inventory to arrive.
Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing were not nearly as strong this week, as they have been over the past 10 days of trading. Mills are quoting production scheduled for the holiday shortened week of 9/3 and 9/10. However, late in the week a handful of truckloads for shipment late next week suddenly surfaced. Having purchased significant volume over the past 2 weeks, buyers have reverted back to their conservative, cautious and’ let’s see what happens next’ approach to the markets. Thanks to the extended production order files, producers were able to hold pricing at modestly above last Friday’s reported levels. Sales of underlayment, sanded, siding, concrete form and other specialty panels remain steady to sneaky strong. Mills have established 7 – 10-day production schedules on value-added panels and prices continue to trade at previously established levels. Improving sales have once again generated some transportation issues for producers and secondaries.
Food for Thought: Somewhere along the line we have lost the ability to accept defeat. Or as a panel conversation I recently watched on cable referred to it as, ‘the art of knowing how to lose’. And I will add graciously.
Let me make it perfectly clear, if given the choice between winning and losing, I would always prefer to win. Frankly, I don’t know who, when given the choice, would do otherwise. But sometimes the score, the courts, or the court of public opinion make that impossible. How you accept that loss is the difference between being consider being of good character or something much less.
The cable TV panel brought up an example how every child who participates in organized sports today is awarded a trophy. It generally says “PARTICIPANT” but the fact of the matter is that in the real world someone comes in first and someone, well comes in last – several of my favorite teams as of late have fallen into that grouping. How can you learn to adjust in the real world when no matter what happens you get an award? And what value does that award really have, if everyone got one?
Way back in the day, our son, during his high school and college years, competed in band and individual instrument competition – he plays the saxophone. I can’t tell you how competitive this really is. To be selected for a divisional, regional, and state band, or to get into a college of musical education, you have to participate in a blind audition (the judges sit with their back to the musician or vocalist and they are judged on how they perform at that very moment. There are no do overs, and at the end there are only X number of chairs available and Y number of participants’. Some participants go home broken hearted and some give up. But a majority accepted the defeat graciously congratulated the ones who succeeded and vowed to do better the next time there was a competition.
I know we’ve all heard that second place is nothing more than being the first loser, but I have to disagree. It should be a strong motivation to practice harder, develop new skills and try harder the next time. Winning all of the time would be nice but it wouldn’t be real. Just food for thought.