Transportation & Logistics Issues Are the Main Culprits
The lumber market has given us another week of unabated upward momentum as we finished last week with another strong print across the board.
The previous week was a little disjointed, being the first week out of the gate for 2022. However, as the week rolled on, it became quite clear that the continuation of transportation issues would lead the market further up.
Mills continue to report selling. The larger mills that pushed order files out were well into late January and, in many cases, quoting material into early February. Meanwhile, availability out of smaller regional mills was scant, and they seemed to clean up their offerings as the week progressed.
As we roll into our current week, caution abounds on the purchasing side of the market. Caution has been prevalent for quite some time, however, there does seem to be another layer that has hit the marketplace. Buyers are feeling that perhaps we are getting closer to a point where the market finds a bit of a level with some legitimate pushback, and pricing begins to retrench.
At this point, Mills don't show any concern over this caution as they continue to sell product. More importantly, logistical struggles remain to move product in a timely fashion to end-users. The transportation issues have not improved in any material fashion, whether it is the continued lack of rail availability or the complete disarray in the trucking traffic side of the business.
The struggle is very significant, and we continue to hear reports of delays that are reaching into, not weeks in some cases, but pushing into months. This transportation issue is also not singularly focused on the lumber and forestry industry. It is prevalent across all sectors and speaks to a larger problem that we are all facing throughout the market in general.
We are going to need to see logistics improve in a big way before we begin seeing a reasonable amount of product available on the market to give customers options. So the cautious mentality in the market looks to prevail and continue with hand-to-mouth buying at elevated prices remaining at the forefront as we roll through January and into February.
Supply & Distribution Update
As touched on above, shipping is the greatest hurdle to the timely supply and distribution of material at this time. We suggest incorporating extended delivery timelines into your current purchasing strategy.
The challenges created by recent winter weather throughout the Northern hemisphere, the accelerating number of COVID cases, significant seasonal labour shortages in transportation, and impending restrictions on unvaccinated truck drivers engaged in cross-border travel into Canada are combining to turn the smooth flow of material through the supply chain to a grind.
Materials that are otherwise ready to ship from mills and out of distribution have been struggling to find the means to reach their destinations. In some cases, mills have continued to restrict sales to a case-by-case basis through the Canadian provinces and into the US, and are unable to guarantee delivery timelines.
Mill direct offerings have improved on #2&btr and MSR, but plywood and OSB products remain drastically thin. Mill order files range from 3 to 6 weeks out. Distribution and inventories are carrying decreased levels of stocks as they await late loads, but on-the-ground material is available to fill holes in inventories. However, finding carriers to transport loads on a prompt basis remains the market's most pressing challenge.
News We Are Following
2022 Lumber Markets OutlookPaul Jannke - Canadian Forest Industries
The last two years have brought a recession, record-high lumber prices, and a whole lot of turbulence leading to much confusion. Lumber demand is squarely in focus with US housing at the forefront of that. The expectation is that with high levels of home equity and the scarcity of new or move-up home buyers, the coming year will see more renovations on existing homes than new home purchases. Meanwhile, Canadian consumption is expected to weaken over the first half of 2022 before picking up again later in the year. Lumber prices look to remain elevated early in the year due to supply constraints as weather and labour shortages continue.
For BC’s Forestry Industry, Unpredictability Expected to Be the Norm in 2022Matt Scace - Vancouver Sun
Wild swings in prices, wildfires, flooding, and protective legislation have all contributed to economic volatility in BC’s forest industry. There have been mill closures that affected not only the industry but whole communities, leading to a spiraling economic fallout. “The B.C. forestry industry is in a transition phase and, unfortunately, it is a downwards trend currently,” said Chris Duncan, a national leader in forestry and forest product services at MNP, one of Canada’s largest professional accountancy and business advisory firms.
Unvaccinated Cross-Border Truck Drivers Face Quarantines and ScreeningJohn G. Smith - Trucknews.com
As of January 15th, Canadian truck drivers who are not fully vaccinated will have to ensure a 14-day quarantine with testing on days 1 and 8. The need for pre-arrival testing will not be included in the measures that truck drivers will undergo as essential workers. American truck drivers who have not been fully vaccinated will be denied entry into Canada. Similar measures will take effect on the US side of the border as of January 22nd. This will have a significant impact on an already strained supply chain and it could leave a void where truck drivers decide to retire rather than go along with the protocols. “I’m just going to retire and sell my truck,” truck driver Slater said while on a layover in Texas, “It’ll be one less truck on the road.”
There seemed to be an imbalance between supply and demand in the dimensional market as we finished off last week. This felt primarily transportation-related as mills haven't had production issues to speak of. Although in certain instances there have been comments about log supply problems in some parts of the industry, it is yet to have a material effect on the market.
Last week saw limited availability on lists once again, and as this week begins, it's more of the same. Larger mills are quoting and pushing numbers up, reflecting the higher print levels from Friday with deep order files. Smaller mills are quoting primarily 4" and 6", and their numbers have pushed up as well. The question remains: how much material is in the hands of the distribution and supply side? When the market moves up so aggressively and quickly, there can be a wide range of pricing that becomes available for a short period of time in the market.
The 4” market has led the charge week after week. Pricing pushed up yet again, and availability remains tight. Both 16’ and 14’ tend to continue pricing above 8s, 10s, and 12s, with availability on both those lengths being more scarce than on the shorter side.
The gap in pricing between 2x4 and 2x6 remains consistent. Availability of 2x6 16' remains scarce, and at this point, there seems to be a little more demand for 2x6 8', which doesn't tend to be a big mover this time of year.
The 2x8 market seems to be one that is garnering a little less attention overall with this continued activity. Certain mills have reported focusing much of their energy on 4", as that is where much of the interest has remained. This is creating less availability for 8", although the demand there isn’t as strong.
Demand on 2x10 has continued its quiet strength, albeit in the background. Availability here has been a challenge. There seems to be a renewed sense of interest from treaters over the past week to cover off additional 2x10 for upcoming spring needs. From reports, it has not always been easy to find coverage in a prompt manner.
Availability on 2x12 has improved, but as we started the week some of the 2x12 found on lists had cleaned itself up, contrary to what we’ve seen for several weeks. This renewed activity led to a note of scarcity along that product line.
Stud demand this week continues to mirror more of the same stance from weeks prior. To begin this week, mills have largely maintained upward pricing pressure with what limited availability remains for offer. Order files continue to reach out to the end of January or further while some producers extended past 5 weeks remain firmly off the market.
Purchasers looking to replenish stock will find very limited prompt supply. Distribution channels are still seeing heavy interest in fulfilling most immediate needs, albeit at a decent premium over current mill direct replacement levels.
We can expect the stud market to continue to build upon this well-established demand with persistent pricing increases and limited supply being the continuing narrative, not just for this week, but well through January at this rate.
Takeaway in the treated sector has not really started yet, as it is still a little way off, but there did seem to be some further activity in the market overall in the last couple of weeks.
Consumers that had perhaps been holding back or didn't commit to their full volumes for a spring booking program are seemingly coming back to the market. They are looking to top up some of those purchases with the market having run up on whitewood and the feeling that the treated market now is on much more secure footing than some felt it was prior to this current winter runup.
The treaters themselves also seem to be a little more active in looking to continue to cover and purchase more material to satisfy their upcoming needs. This leads many to feel that the treated market appears to be shaping up to have a better start than many were expecting as we rolled through the end of the 2021 treated season.
Although availability on some items seems to be getting better, delivering that product continues to be a persistent struggle. If you have the time to wait, there is more flexibility on some MSR items at the mills.
The situation remains tight for 2x4 and 2x6 2100, and it is still difficult to source for 2 to 3-week delivery, so we are encouraging our customers to be proactive on those items. With further increases to pricing on MSR last week, we have more purchasers looking to LTL MSR rather than filling their shelves at these prices.
Please allow at least 2-3 weeks for delivery on LTL shipments out of our inventory locations. If you do need an update on pricing, please feel free to reach out.
Last week, the panel market was strong, with print on OSB and plywood both pushing higher. Although sales really didn't seem to be a big part of the equation, with mills continuing to report next to nothing for cash availability.
The plywood print trended upwards yet again, although some are feeling like print could actually be higher if mills had prompt material to offer. At this point, most producers continue to remain off the market, citing a lack of transportation and logistics.
Producers resisted the desire to sell additional plywood to push their order file further out. Material that was due for delivery in December has yet to hit the yards of consumers in some areas.
Look for plywood to remain extremely tight for truckload delivery and strong pricing premiums to be quoted on any prompt LTL material through distribution.
OSB print was up as well, although again, in a similar fashion to plywood, many feel that print is lagging where actual cash business is being conducted.
The lack of cash OSB available for offer in the marketplace is continuing to frustrate many and significant premiums are being asked and achieved through distribution by all reports.
The challenges with OSB don't seem to be going anywhere in the near or mid-term, as a lot of contract material has been covered off into the first and second quarter, and we just don't anticipate seeing a large amount of cash availability hitting the market anytime soon.
We have inventories across the country to help fill your LTL and prompt lumber needs. Whether it’s studs, dimensional lumber, MSR, OSB or plywood, we have material on the ground and can fill your mixed truckload needs.
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