Ladies and Gentlemen:
Lumber and panel buyers remain cautious and field inventories are unusually lite for this time of year. High temperatures and abundant humidity has slowed jobsite activity and production efforts at the same time. Increased demand for panel products have prices on the rise and order files pressing into early August. Demand for lumber is still trailing behind panel products, but activity was noticeably better this week than last.
Housing industry news releases will be coming out hot and heavy next week, but this week little information about June is available. Here are a couple of interesting factoids. Data from Statistics Canada reports that with 2.428 billion board feet of production in April, Canadian lumber output through four months reached 9.496 BBF, 9% ahead of the year-earlier figure. Quebec, at 2.174 BBF through April, was 16% ahead of the year-earlier level. With 576 million board feet in April, Quebec was the only province to gain from March. Production in Alberta and Saskatchewan decreased <-7%> from March to April. British Columbia mills produced 1.155 BBF in April and 4.587 BBF through four months. The National Association of American Railroads reported that the total North American carloads containing forest products numbered 473,100 in the first six months of this year, a drop of <-3.2%> compared to the same period in 2015. Across US railroads, carloads carrying forest products declined <-6.9%,> while in Canada, those carloads increased 2.2%.
Spruce & Stud Markets-: The inquiry and sales pace of Eastern and Western SPF Std., & Btr., and No. 2 Btr., picked up noticeably last Friday and the momentum has easily carried over into this week. Mills bumped prices modestly higher on Monday and were pleasantly surprised when buyers continued to purchase volume at the new price levels. Mills are quoting shipment for the weeks of 7/25 – 8/1; with secondaries having some ‘canned tallies’ available for quicker shipment but at a modest premium to mill replacement. Retail buyers are reporting steady take away from their facilities. which is serving as a catalyst in keeping buyers engaged in the market. Sales of low grade stock remain on solid ground and mills have modest order files, and with that edged prices a few dollars higher. Sales of stud trims are in sync with production and prices remain within a dollar or so of last week’s reported levels.
Hem \ White Fir -: The inquiry and sales pace of Coastal and Inland Hem \ White Fir, is being reported by traders as flat, to in some areas and species ‘sneaky strong’. Inquiry and sales of 2x4 & 2x6 No. 2 & Btr., Hem-Fir seemed to be buyers’ product of choice early in the week. Later in the week buyers turned their attention to Fir-Larch where demand for wider widths took centre stage. Mills did make price adjustments in either direction, as necessary, but did their best to limit those price changes in an effort to keep buyers engaged in the marketplace. Sales of both low grade stock and stud trims appear to be in lockstep with production and prices traded within a few dollars of previously established levels.
Green Doug Fir -: The inquiry and sales pace of Green Doug Fir Std., & Btr., and No. 2 & Btr., was steady, and demand seemed focused on 2x4 – 2x8. As one mill manager quipped ‘sales are decent, but they are just not strong enough to move prices higher’. 2x10 & 2x12 remain a difficult sale for producers. Mills quoted these items at last Friday’s levels and listened carefully what buyers had in mind for tally and volume. Sales of low grade stock remain sluggish, thanks to triple digit heat and high humidity in the large consuming areas. As a result, mills continue to adjust prices lower in the hopes of getting buyers back into the marketplace. Stud trims sales are suffering the same issues as low grade, and mills adjusted prices modestly lower on these items as well.
Cedar Lumber -: Inquiry and sales of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, bevel siding, timbers and pattern stock remain steady to strong. With a few exceptions, pricing remains unchanged from previously established levels. Mills are continuing to struggle with sourcing feedstock, and once they do find it, the price is high and the quality is noticeably lacking. This in turn is causing production issues, which is delaying shipments to retail and local 2-step niche distributors, and frustrating their contractor customers. Buyers continue to shop for a long list of must have items, but are growing weary of the extended lead times – with some items being offered for late 3rd Qtr. shipment – and much of it being quoted Price Time of Shipment. Of interest is data that is showing that WRC shipments from Canada to the US are up 19% year over year through May 2016. Greater demand + feedstock issues – less remanufacturing capability = a tight market with frustrated buyers; who are being forced to look for alternative solutions, real and man-made.
Shake & Shingles -: The inquiry and sales pace of Western Red Cedar Shake and Shingles continue to gain momentum, as buyers begin searching for coverage on jobs that are scheduled to start at the beginning of the 3rd Qtr. A lack of high grade raw materials is limiting the production of the very products retail buyers and local 2-step niche distributors are searching for. This is leading to higher prices on high grade stock (if the mills are willing to quote firm, vs. PTS) and significantly extended lead times. On the other hand, mill inventories are being overwhelmed by lower grade shingles and this in turn is forcing mills to offer discounts on those products. Pricing on Shakes remains unchanged from previously established price levels.
Southern Pine Lumber -: The inquiry and sales pace of Southern Pine No. 1 & No. 2 dimensional lumber continue to hold steady, and prices remain in a modest upward tilt. Lite field inventories, are forcing buyers back into the market frequently to fill inventory outages. Mills are quoting shipment, depending on the specific item, anywhere from next week through the week of 8/1. Sales of high grade stock – D.S.S., S.S. and MSR remain rock solid and log issues are keeping production levels down. As a result, where construction grade pricing is up modestly, high grade is demanding and selling at double digits above previously reported levels. Low grade stock sales remain in the doldrums, and mills adjusted prices lower again this week but it had little impact on buyers’ interest. Demand for stud trims remains sluggish, but producers were successful in holding prices close to last week’s reported levels. Demand for small squares and timbers is weakening and prices have become vulnerable throughout the complex. The pattern of inquiry and sales of 5/4 x 6 Radius Edge Decking market remains relatively unchanged. Standard Decking remains slightly under produced, and prices were flat to slightly higher again this week. Premium Decking sales are suddenly out of sync with production, and mills offered modest price concessions to keep inventory and scheduled production sold.
Pressure Treated -: After a strong week of sales following the Independence Day holiday, treaters were not really surprised when inquiry and sales slowed modestly this week. Pro dealers continue to report good take away from their facilities, with commercial, and multi-family construction being the focus of their contractor customers. On the other hand, large box retailers noted that high heat and humidity had slowed their foot traffic considerably, and this week’s forecast calls for more of the same. Pricing for finished product remains in lockstep with the raw feedstock + pressure treating upcharges.
OSB & Veneer Panels Overview -: OSB and plywood sales have finally come up to, and are now modestly exceeding seasonal norms. Lite field inventories are keeping buyers constantly engaged in the marketplace looking for quick shipping fill-in volumes. Mill maintenance shutdowns and a lack of imported panels from Brazil and Chile are helping both plywood mills and OSB producers to keep order files extended into the weeks of 7/18 – 8/1 or beyond and prices in an upward trajectory.
OSB -: The inquiry and sales pace of OSB continues to gain momentum, and prices are slowly but steadily moving higher. Mills have taken the words counter offer out of their vocabulary; especially as some producers have started quoting shipments into the weeks of 8/1 to as far out as 8/15; while other mills are still offering shipments for the weeks of 7/18 – 7/25. Mills in the North Central zone were particularly busy early in the week, but other zones had similar increases in activity as the week progressed. Secondaries do have a limit amount of their contract ownership that can ship quicker to buyers in need, but that usually came with a premium.
Southern Pine Panels -: The inquiry and sales pace of Southern Pine Rated Sheathing remains steady to strong and last week’s uptick in sales carried over into this week. Demand for thicker panels - 15/32” 4-ply and thicker – seemed to be the focal point for buyers this week and prices on these items moved steadily higher. A lack of production in the Eastside had buyers in that zone scrambling for coverage. A lack of imported panels from Brazil and Chile, which have become the mainstay of the market in recent months, also added to buyers’ angst. Mills are quoting for the week of 7/18 – 7/25, but secondaries did have faster shipping ownership to help buyers in need, but of course that came with a modest upcharge to reported mill replacement levels. Sales of underlayment, sanded, siding, concrete form and other specialty panels remains robust, prices are modestly higher and order files are 2 – 3 weeks out on most items.
Western Fir Panels -: Western Fir Rated Sheathing producers reported steady follow through from last week’s increase in inquiry and sales. Mills started the week quoting moderately above last week’s established price levels and met little to no buyer resistance; and proceeded to nudge prices a bit higher. Mills opened the week quoting shipment for the week of 7/18 – 7/25 and ended quoting for shipment the week of 8/1. Truckload sales were strong but Northeast carload buyers were back in the market nosing around late in the week. Sales of underlayment, sanded, siding, concrete form and other specialty panels are stout, and order files are 2 – 3 weeks out on most items, and pricing is modestly higher.
Food for Thought: What makes a good supplier? What makes a good customer? In the days of yore, the answer would be about the same from both parties. In today’s lingo it would be ‘someone to help us innovate and collaborate.’ In other words, you show us everything from new cutting edge products, through better financing options and we will purchase from you. We’ll be partners and both of us can prosper and grow. Since the start of the ‘Great Recession’, unfortunately it has become a bit more one sided. That is as a customer we expect you to innovate, collaborate and accommodate, etc. and if you’re lucky we’ll buy something from you.
However, as the economy continues to improve, and yes there are still pockets where that is no longer, or never has been the case; a new phenomenon is taking place in the retail lumber and building material industry. Companies are firing their customers. In the midst of the ‘Great Recession’, almost any customer was a good customer. Slow to pay – it’s not good, but for now that’s OK. Discrepancies on every delivery – not ideal, but we need the business. Being asked to meet every price on every item from a multitude of suppliers, some 50 or more miles away – ‘gulp’ but we’ll do it. Unrealistic delivery demands, free take offs, and usually not getting the whole job, etc.etc., were all part of the world back then. But that world is changing.
Pro dealer and 2-step wholesale distribution consolidation has drastically reduced the number of sources for contractors, tract builders and even retail lumber yards to do business with. Construction numbers are up and are projected to continue in an upward trajectory for the next 2 – 3 years. Over demanding customers, who don’t pay in accordance with terms, and who are more hassle than they are margin are being politely told to take their business somewhere else. The problem they face is that good news travels fast and once you have an issue with one supplier, a quick reference check lets the next supplier know what they’re about to inherit.
Don’t get me wrong. I’ve been around retail lumber and building materials industry for a good part of my life. Yes, mistakes are made, the ball gets dropped, and that happens on both side of the sales counter. But in order for any relationship to flourish and grow both sides must be willing to admit their own short comings and work on every issue towards a reasonable compromise. A pro dealer cannot survive without a profit margin, and neither can a builder. But it is unfair to assume that one side is supposed to carry the risk alone, and hope to make it up on the next sale
- Courtesy of Joe "In the Forest" Glitman | Contact Joe on Linkedin