Filling Short-Term Needs Continues to Be the Buying Approach
We find ourselves on the back half of the Canadian Thanksgiving long weekend with a shortened week ahead. As many of the Canadian producers were closed on Monday, things felt a little quieter throughout the US marketplace. Many were waiting for mills to come back to market to start the week in full force.
We saw print up again to finish the week on what feels like a Groundhog Day, Deja Vu marketplace over the last several weeks. Mills lists are light, with ask levels creeping up throughout the week and reports that takeaway remains relatively good, although we don’t want to stretch too far out to say it’s a hot market. There certainly seems to be a continued conversation about a balance in the market and enough takeaway for the producing mills to push prices up yet again.
That said, there still remains a significant amount of confusion in the marketplace, and perhaps that surrounds the question of how much fibre is in the hands of the secondary community. Although prices continue to appreciate, there still seems to be more competition at lower price levels throughout the week when looking to put business together at the retail or contractor yard level.
Supply & Distribution Update
The market has maintained its upward momentum with steady but measured sales both out of mills and distribution. Mill order files have continued to extend, and we are now seeing ship dates into mid-November in some cases. Mill direct prompt loads have become a rarity and are priced at a premium if available from some of the larger producers.
Curtailments announced during the height of the wildfire season are still having an effect on the timber supply at the mills. That, coupled with extremely high log prices in BC, saw most producers happy to maintain lower production levels.
Availability on SPF #2&btr remains strong, but with increased demand for SPF MSR and relatively slow production and availability of J-grade, appearance-grade, and studs, there is a continued incline on prices. As well, availability on longs remains tight, and we continue to expect pricing to reflect that.
Takeaway from distribution remains steady, reflecting a trend of buyers filling short-term holes in their inventories. LTL deliveries out of distribution are currently shipping on the week of order date.
Delays on transportation is a growing issue, requiring increased attention in the coming weeks, as is the global energy shortage's effect on shipping costs. Expect longer delivery windows and potentially higher costs on freight in the future.
As in previous weeks, material out of Northern mills into Southern markets remains somewhat of an obstacle as lanes are not seeing a consistent back and forth of materials and goods. Otherwise, truck and car shipments are moving on par with the larger issues of the ongoing global supply chain.
News We Are Following
VIDEO | Canada Cold Shoulders China Over Interest to Join Pacific Rim Trading BlocBy Staff - The Canadian Press
Canada is an obstacle for China and its plans to join the 11-country Pacific Rim Trading Bloc that acts as a gateway to diversifying Canada’s trading opportunities with Asian partners. Trade analysts say Canada can now be more vocal about China entering into the partnership since the two Michaels are now safely home, allowing for a more forceful stance. “Canada has no reason to do any favours for China. Their appalling behaviour toward Canada these past two years, including the bellicose and belligerent criticisms about Canada, provides every justification for a cool, if not frigid, Canadian response to China’s CPTPP application,” said Lawrence Herman, an international trade lawyer and a former Canadian diplomat.
Why is Inflation Rising Right Now?Taylor Tepper - Forbes Advisor Staff
The most recent CPI report indicated a sharp rise in inflation during August with a 5.3% gain year-over-year. The increase was pushed by the prices of gasoline, food, shelter, and home furniture. But when you strip out food and energy prices, the increase was only 0.1% for the month of August, a much more palatable number. The Fed seems unconcerned about inflation overall, as it was expected based on their announcements from a year ago. As well, they believe inflation will get back to more normal levels once the economy sees its full workforce back in action.
The dimensional market led the way again last week, with the bulk of activity reported once again in the narrows. We saw ask levels and availability from the larger mills a little more sparse than they were to start the week prior. Regional mills came back to market with current production, and it was reported that many did find reasonable success in adding to their order file.
We look to dimensional to continue this trend at this point, as larger market factors and forces are certainly at play and supply chain issues throughout much of the economy are creeping in, remaining in the thoughts of many. As we try to navigate these difficult times, lumber looks to continue its current trajectory through the month of October.
In 2x4, we saw prices up modestly and moderately throughout the week. As we start this current week on the heels of the increase from print, mills will be looking to push numbers up slightly. Where they sell and what they attain will take a few days to shake out throughout the week, but look for relatively light inventories on ask lists across all mills.
There continues to be a strengthening of 2x6 to close the gap on 4”. Once again, we are seeing good demand on the 10’ and the 16’ lengths in particular. Expect 2x6 to continue to show strength as we roll through the fall.
2x8 & 2x10
The 8” and 10” markets were the also-rans yet again this week. We didn’t see too much inquiry or activity throughout the wide dimensions. Mills are continuing to move product in these dimensions as they hit lists, but we haven’t seen a buildup as it appears mills are pulling back and focusing more energy on the narrows that have better traction.
There remains lackluster takeaway on 2x12. Although we do not see tremendous volumes on mill lists, there is certainly more product available. As numbers continue to get pushed down from those who are interested in taking a position, we are looking at steeper counters at the mills to make those happen.
Persistent stud demand, amid limited supply, has presented purchasers with an ever-growing necessity to cover their prompt requirements. Double-digit increases across most available mill offerings have not dissuaded purchasers, especially in trims that are proving most difficult to source.
At this time, 2x6 and 2x4 9's continue to appear very limited and scarce, picked clean off most lists as quickly as they are shown available. This has been the case for weeks and will continue to be for weeks to come. Mills are presenting most order files as late October to early November availability, and sometimes further into mid-November, well into the Fall season. Prompt offerings are sporadic and very limited at this point.
Distribution will see increased interest as purchasers look to LTL coverage for more prompt availability. We can expect this persistent demand to hold and continue well into Fall, with pricing to push up in step as long as mills can maintain their 3-4 week order file. Look to cover any stud requirements you may have soon, and anticipate your needs in advance as availability is expected to remain sporadic.
The treated market didn’t garner much attention last week. It was reported that there was limited takeaway from the yards to end-users, with many projects really wrapping themselves up for the season. We continue to be faced with challenges in this sector, as most yards are saddled with higher than expected inventory levels to finish the season.
Again, the mills are looking for direction to ascertain what type of production levels will be required as we look to the upcoming season. With the uncertainty and much of the supply chain issues throughout the economy, many are starting to show some concern about making the right decision with respect to next year’s treated market takeaway. Only time will tell, and at this point, it is certainly anyone’s guess what the market is going to bear.
Following the lead of #2&btr, MSR sales were extremely strong last week, as 2x4 and 2x6 2100 were especially sought-after in both full and LTL quantities. Mills that had 2100 available sold quickly and pushed order files out 3 to 4 weeks.
Our inventory locations were also quite busy as agricultural sales seem to be picking up. There is more 2x4 1650 readily available, as most mills have the product over the next 1 to 2 weeks while there is still a significant premium of #2&btr. This gap is starting to narrow as #2&btr prices remain strong. We don’t expect a reprieve in MSR pricing in the short term, as mill order files continue to be pushed out weekly.
The panel market felt a little more subdued last week in the face of most of the activity surrounding dimensional lumber. We continue to see a relatively flat market with plywood and OSB both moving along without gaining a tremendous amount of momentum or any upward steam.
With plywood, we saw yet another week of flat print with mills reporting reasonable sales but certainly nothing to give them an opportunity to strengthen their numbers and positions. Plywood looks to remain flat, although many are scratching their heads over the strong continued activity in the lumber markets not pulling through into the plywood market.
OSB printed up slightly, as has been the case over the past several weeks. Mills continue to sight reasonable order files and have limited cash availability in the market. That said, the demand side of OSB has felt a little less pressure over the last couple of weeks, which is leading some to pause on stepping out much further.
We look for a little more guidance from the dimensional market and the market overall, but at this point in time, OSB looks to remain strong, with pricing creeping up again this week. Look for it to be flat or up a touch.
There have been a number of discussions and talks in the media about larger-scale supply chain issues at play, whether it’s a conversation about chip shortages, pricing of steel issues, or the price of energy creeping up.
There certainly seems to be much more information to digest that is having an effect on our marketplace than perhaps in the past. It definitely feels like many of these outside factors will continue having an effect on the lumber and building materials marketplace.
We would like to once again mention that we are here to have further discussions about what we see in the marketplace and how some of these external factors may influence our decision-making, and potentially yours as well. As always, please feel free to reach out to us if you have any questions.
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