Supply and Demand Balance Remains a Struggle in the Lumber Market
We are quickly approaching the final week of September, and although the market hasn't felt as robust or buoyant, the month seems to be passing by at what feels like just as rapid a pace as the summer months.
The markets through September have been quite somber with respect to overall takeaway, and the general feeling is that we continue to struggle with achieving a balance between supply and demand.
As we start this current week, the news from Canfor will certainly have an effect in the short term, as most continue to try to decipher whether we are close to achieving a balance point. Late last week and into this week, there has been a bit more pushback from mills looking to hold a lot closer to their ask levels. This is giving some a feeling that we are perhaps closer to a sense of balance. At the same time that the mills seem to be a little firmer on their pricing, there has been a sense that the secondary community throughout the wholesale and distribution market has perhaps been a little bit more open to continuing to move material that may have been previously purchased at levels that are slightly below mill replacement.
As we look forward, many will be trying to determine if this tiered system is going to evaporate and lead us to a bit of a balance as we hit the fall months. We are still uncertain if that is going to materialize in the wake of persistent negative sentiment in the overall marketplace.
Supply & Distribution Update
Throughout last week, and as has been the case in previous weeks, trading in #2&btr 2x4 remained the most active and trim was readily available to source, followed by #2&btr 2x6. Availability in #2&btr 2x8 through 2x12 improved although somewhat unevenly mill to mill.
We are finding success with LTL business as of late due to the mills firming up their pricing. With available lumber still on the market and the mills sticking to their posted numbers, customers have shown trends towards filling only their immediate needs. With the tone of the market, customers do not feel the need to purchase in truckloads at this time.
Broad availability remained in 2x4 1650 and 1800 MSR while 2x4 2100 was once again in high demand with tight availability.
Plywood mill order files are currently into October. Order files on OSB from western mills are ranging from prompt availability to delivery mid to late October, depending on the mill.
Transportation of material by truck continued to generally meet quoted delivery timelines. While base rates have firmed, the fuel surcharge continues to fluctuate. The reports of the disruption of rail shipments have since been settled, and the labour board has come to a conclusion with the union.
Distribution remains adequately supplied, save for some more difficult items to source in high demand, and is still a reliable option for those looking to plug holes in inventories without stepping out on larger volumes.
News We Are Following
Canfor Temporarily Reducing Production Capacity in B.C. Due to Market ConditionsCanadian Press - Nanaimo News Now
As of September 26th, Canfor is initiating a 2-week curtailment of most of its solid lumber mills resulting in an expected reduction of about 200 million board feet of production. The move is being made with current market conditions in mind. Those employed at the mills will continue to work on maintenance and other site activities.
Lumber Prices Jump on a Surprise Rebound in New Home Construction Last MonthBrian Evans - Markets Insider
August new home construction jumped 12.2% unexpectedly, leading lumber prices to push higher by about 6%. However, new building permits did drop by 10% during this time which may be a sign that this was merely a one-off spike and the downtrend could continue.
The dimensional market seems to be a little more balanced overall across all widths. As we finished last week, we did see print higher on the back of some of the activity, but again, there was a bit of confusion between perhaps what print numbers were doing and what was happening in the market overall, with numbers showing variances in several instances.
We are seeing that variance gap shrink as we move into the current week, and the hope from many is that with the Canfor announcement perhaps leading to a little bit of activity from those that were on the sidelines with pent-up demand, we will see more signs of balance in the market.
Pricing on 2x4 seemed to be relatively flat even in the face of the uptick on print. Again, there was certainly a tiered feeling to the market as we finished last week with mills above some of the positions that wholesale and distribution were perhaps willing to take on to move prompt wood that was purchased earlier.
It was definitely obvious that 6" was one that did not follow print levels for the most part in the market. We've seen 6" continue to lag on print. However, there seemed to be more of a scarcity of availability in the marketplace, and mills did push numbers up above print levels and were successful in achieving sales at elevated prices. This is leading many to feel that 6" will continue to show moderate strength as it tries to climb out of the basement.
It seemed that 2x8 was a little more scarce last week again, leading to some of the larger mills being more bullish on their numbers, not so much trying to increase their pricing levels aggressively but really holding firm to ask levels.
It does look like 8", although pricing overall has come down over the last few weeks with the uptick in print and a little less availability overall, is showing more firmness.
As we have seen recently, 2x10 continues to be a little more interesting, with the strength from 10” carrying over longer than other dimensions. We are seeing a little more downside pressure on 2x10, with numbers being offered in many cases below print levels. However, 2x10 is continuing to trade at a reasonable level from a mill return standpoint, perhaps leading some to be comfortable taking on further business in that dimension.
There was not much attention on 2x12 and there does seem to be availability on mill lists while pricing is softer overall. There have certainly been reports of numbers for business being put together under print and list levels. With that said, some mills that are showing 2x12 do continue to be a little reluctant to move too far away from their tallies or their ask levels on smaller volumes.
The stud market continues to see modest interest, albeit more muted than weeks prior. Purchasers continue to express caution amid much more measured demand, again leaning heavily on LTL supply for fill-in stock, and covering only what is needed.
Mills are maintaining order files into early October on all 2x4 trims, with the more scarce 2x6 lengths appearing mid-to-late October. Mills have quietly and steadily worked down a lot of their prompt volume over the last two weeks, and now appear much more firm with what is being offered on current lists.
Current supply certainly appears more in line with demand, as the market continues to search for more viable interest. As long as mills are holding to a consistent 3-4 week order file, we can expect current pricing will be sustained through the end of September.
Mill sales of MSR last week were quite strong, especially with regards to 2x4 and 2x6 2100. Mills are extremely tight on tallies and currently quoting out 3-4 weeks. Longs remain extremely tight across all MSR items, but 2x4/2x6 2100 are especially difficult to source. If mills are able to quote longs, they will only look at 2-3 longs per truck. Because of this, the demand for LTL MSR longs out of our inventory locations are in extremely high demand. We are encouraging our truss customers to look at their next 3-4 week needs on MSR as we don't expect availability or prices to get better over the month of October.
Truss plants continue to report that they are quite busy and expect the 'fall rush' to be strong over the next month or so. Most plants are also nervous about the winter, and as such, are only looking at purchasing for the orders that they have on the books. We are cautioning our truss manufacturers to be diligent about quoting jobs to their customers if possible and look at when material will arrive before agreeing to shipment dates. Please feel free to reach out to us if you have any questions, and we will do our best to meet your shipment needs.
The panel market was off on print to finish the week in both OSB and plywood. This wasn't really a surprise, as numbers on both throughout last week were reported below print levels, and order file really hasn't done much to push out further than what we had seen over the past several weeks.
The plywood market was down on print, and again, this was no surprise, as cash numbers throughout the week were certainly being traded at lower levels than what mills were quoting.
As we begin our current week, order files in the west are struggling to maintain a 1 to 2-week lead. Although, trucking, in some instances, does continue to be a little bit more hit and miss, leading to some shipments being slightly delayed.
We still don't see plywood finding a level yet, as there is not enough takeaway to satisfy pushing order files out at any of the mills.
We look for plywood to continue softening as we move through September.
OSB has fallen again for the 6th consecutive week on print. Takeaway was modest, with some smaller block buys being done in the early part of last week due to a possible rail strike coming out of the US over the weekend. Inquiries had backed off slightly in the back half of the week as news of an agreement had come through.
This week we have seen modest inquiries again with order files being pushed out a little further, in some cases to the end of October. It feels as though there will be a few days of price discovery as we move into next week.
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.
See what you've missed...