A Positive Market Outlook Is Here for the Near Term
As we begin a new month, the market has certainly given us a lot to discuss. Strength and positivity have replaced lethargy and apathy, and things are looking more positive as we begin to look further out toward spring.
Our week finished quite strong as a major announcement that was published late Wednesday seemed to have the desired effect and spurred on the powerful showing in activity Thursday, which rolled into Friday. The final two days of last week culminated with a significant amount of purchasing being done on both sides of the border, with mills selling off a lot of their prompt material, as well as pushing their order files out into the 2, 3, and sometimes 4-week periods.
We saw print up strong for the first time in quite a while, and this spanned across all dimensions. The sentiment from mills was that we had turned a corner, passed the bottom in the market, and there was much more stability, thus an appetite to increase prices more than we have seen in a long time.
Customers stepped in and covered needs for both the immediate term and the near term. However, we still get the sense that there was not much coverage being looked at further out than that.
There continues to be a level of skepticism from some, feeling that we may yet still see a pullback in numbers. However, when we start to look at the time of year, the order files, and the commitment that the mills have had to curtailments with the intent of steadying the ship, it's beginning to feel more and more like our balance point is very close and the downside risk has all but dissipated as we look toward spring.
A more positive mindset is certainly here in the near term, and a lot of eyes are watching both the cash market and the futures market, which is currently at quite a premium to cash, to determine how those markets will converge as we move through February.
Supply & Distribution Update
The announced shutdowns of the Canfor Chetwynd, BC mill and the indefinite closure of the Houston, BC mill, are estimated to remove 750 million board feet from the market, which will negatively affect the supply in the market. Mills have been firm on their quoted numbers as their offering lists have been reduced in this upward-trending market. Supply is becoming more challenging for a variety of items, and the items that are available are disappearing more rapidly than we have seen in the past several months. While there is a need to find a balance between pricing and supply, this has impacted the demand for distribution.
Distribution has seen and will continue to see more activity while there is uncertainty in the market. The market levels that were seen in late December were perceived as the bottom, and with current market trends, they might very well have been. Lumber mills are quoting out multiple weeks reflecting on end-users not receiving products until the start of the spring building season. There is no indication that this market will slow at this time, which will put a high demand on distribution. Inbound material levels will increase while end users will require more LTL servicing to fill their requirements due to the reduction in supply and uncertainty in the market. If distribution yards have yet to see an uptick in activity, this should soon change. Distribution will continue to be a large asset to the lumber industry.
While transportation remains strong in most areas, the annual trucking shortage has yet to occur, and finding trucks when and where they are needed is still coming at relative ease. There have been slowdowns in some regions forcing a few organizations to request higher rates as their headhaul/backhaul lanes have had limited products to move. Weather continues to minimally affect the transportation industry compared to 2022. With the supply of some items being difficult to come by, and the higher demands on distribution, transportation will soon see an uptick in activity. This is also reflected in the upward market trends we have seen over the past couple of weeks. Forecasting tools and sourcing products sooner than later will be beneficial to those with steady requirements.
News We Are Following
US Housing Market Full-Year 2022 & Softwood Lumber Prices January 2023Madison’s Lumber Reporter
Despite interest rates on the rise, December housing starts and new home sales ticked up slightly, although it still remains in negative territory with a decrease of only 1.4% from November. Building permits were almost flat as well, with a dip of 1.6% month-over-month. However, for the entire 2022 year, housing completions were up by 3.8% over 2021. And what bodes well for the lumber market is the December we had for single-family housing, which saw a surge of 909,000 units, or 11% over November numbers.
U.S. Tariffs on Canadian Softwood Lumber ‘Unjustified’: B.C. MinistersTodd Coyne - CTV News
The tariff battle continues as the British Columbia government shows frustration over US import duties on Canadian lumber imports. "At a time when we need to work together in the face of rising costs related to global inflation, these tariffs are making housing and lumber more expensive, hurting people on both sides of the border," said Forests Minister Bruce Ralston and Jobs Minister Brenda Bailey. Adding, “As we continue to build a more resilient, sustainable forest economy, what we need are partners across the border who work with us, not against us, in making a stronger forest sector for Canada and the United States."
New Forestry Program Will Expand Manufacturing, Create JobsBC Gov News
A new licensing program in BC will, for the first time, allow dedicated access to fibre supplies for small and medium-sized manufacturers. The initiative is called The BC Timber Sales (BCTS) Value-Added Manufacturing Program and Bruce Ralston, Minister of Forests explains, “Our government’s vision is to build a stronger, more resilient forestry industry through more value-added manufacturing. British Columbians expect that we get the most value from our forests and create more jobs for every tree harvested. That’s why we are taking action to ensure innovative, secondary manufacturers have access to the timber they need to invest and grow their operations.”
The dimensional market received all the attention to finish last week, as indicated, with strong upward movement and strong sales throughout all widths.
Activity levels have been quietly strengthening throughout most of January, but we had yet to see a real spike develop. That spike certainly arrived, and now, as we look towards our current week, the followthrough is going to be what everyone will be looking for.
Mills, again, are certainly going to be more bullish with their quotes. The opportunities for counters have all but disappeared. We see a bit of a range in pricing as some have positions they purchased over the last few weeks and have an advantage over current mill replacement, where some mills are raising prices modestly, and others still are taking quite an aggressive approach in pushing numbers up. The reality is that the numbers are going to have to settle somewhere in that mix. It is a little tough to tell exactly where that will be at this point in time.
There was certainly a lot of activity in 2x4 to finish the week, and we did see the disappearance of the undervalued loads, as pricing firmed up quite quickly to end the week, and is currently up to start this week.
Availability has tightened, and we continue to see a lack of availability on straight lengths, particularly in 16’. With that said, there is still material on lists and between wholesale distribution. And with mill availability, you can still find what you need, but you may just feel like you're now paying a higher premium than if you had looked at it the week prior.
In 2x6, we find that it has remained scarce, and this latest rush of activity has certainly not helped the situation.
We continue to see limited 6” availability. Those that are showing 6” are certainly pushing numbers up after this round of activity. Again, we are seeing a bit of a range there, which is adding to some confusion as to what the real number is. However, 2x6 does continue to show strength over 4” and we don’t see that changing at this point.
2x8 & 2xx10
Both 2x8 and 2x10 did participate in the activity last week, but we are not seeing the same strong push up on numbers. Prices are up modestly, and in some cases, slightly more.
Availability has become more spotty for both. However, some mills are still showing a reasonable amount in both dimensions.
Look for firmness to continue in 2x8 and 2x10 going forward.
The 2x12 market seemed to have a strong week as well. Prior to this, there was a reasonable amount of 2x12 availability on lists. We have seen thinner inventories to start the week with takeaway, and 2x12 pricing continues to hold firm.
Flat and stable would be our comment on 12’ at this moment, with a bit of a mix on availability.
Studs maintained their upward trajectory in both pricing and demand, mirroring much the same stance from last week.
Prompt and near-term availability still remains key in all facets of the market. Purchasers that had held out looking for clear market direction to develop stepped in late last week after it became apparent just how limited stud availability had become. This quickly had mills pushing order files further into mid to late February, as offer lists have remained sparse to start the week.
Purchasers looking to replenish immediate needs through distribution yards will again find coverage limited, as interest in mixed loads and LTL coverage remains rampant amid depleted inventories. The most scarce and most in-demand remains 2x6 trims, but we can expect all stud lengths to see varying levels of interest amid sporadic supply.
As we continue to build on newly established levels, expect to see the current takeaway maintained and pricing hold its own for the next few weeks.
We have seen the treated community, most notably treated producers, look to replenish inventories throughout the latter part of January. With this uptick in activity recently, there continues to be a bit of urgency in the treated market to cover more products as they look to supply the contract business that was put together in the fall.
From a takeaway standpoint, the season really still hasn't begun. Most yards are beginning to fill up with their inventory positions from their bookings and are looking with a little anticipation to start moving some of that into the hands of consumers.
There continues to be a feeling of relative positivity for treated lumber as we move into the upcoming season.
Following on the heels of #2&btr, MSR sales were quite active last week. With mills selling well last week and raising their #2&btr ask prices, the same was the case for MSR. Most mills were able to add to their order files and are now quoting material out 2-4 weeks (with some exceptions). We saw 2x8 MSR remain sparse with very little availability. The demand for 2x4 and 2x6 2100 continues to be strong, and most mills are currently quoting out approximately 3 weeks, depending on the tally. Mill curtailment and closure announcements over the past few months aren't helping availability either and may continue to be an issue going forward.
Most truss plants are reporting to be quite busy quoting and slowly adding to their order files. With the increase in pricing over the last week, some looked at covering their immediate needs, but most remain reluctant to purchase for anything longer than their order files. With mill order files out 3-4 weeks on most items, we feel that any potential reduction in pricing over that time isn't likely.
If you have any full or LTL needs over the next month, we feel that getting those orders in sooner rather than later is a relatively low risk. Please reach out if you require an update.
Douglas Fir & Larch MSR
The DF/L MSR market found additional footing last week on the heels of curtailment and Canadian mill closure announcements, as well as ongoing inventory replenishment in the field. Downside risk continues to be limited, and modest price increases have been seen across grades and dimensions. A healthier balance of supply and demand appears to be developing.
As 2x4 1800 remains broadly available for prompt shipment, custom tallies with short delivery windows in 2x4 2400, 2x6 1800/2400 & 2x8/2x10 2250 remained a challenge to source, particularly tallies heavier in longs. Prices range upwards from the previous week's numbers and order files on less widely available material range between 3-4 weeks.
The general mood of the market has lightened as we begin to see tentative reports of economic positivity, and there is growing optimism that a steady spring building season lies ahead. Manufacturers are noting an encouraging amount of job quoting being done.
Look to CEWP to aid in covering your short-term needs, as pricing and availability remain generally advantageous with minimal downside risk.
Sales in both OSB and plywood continued to lag this past week. Most buyers have wood on the ground to cover the near term or have wood pointed at them for early February ship. The long-term outlook still feels uncertain for both at this time as buyers look for more direction.
Buyers continue to remain cautious as we have seen a 13% drop in plywood print since January 6th. Discounts from mills were more evident in the Western Canadian market late last week and have firmed early this week. Buys were being reported for shipments into late February and early March. That said, the market in Western Canada remains underbought, and LTL pricing is at a premium to T/L. Transportation issues in Eastern Canada remain.
Sales continued to be stronger on the US side than the Canadian side this past week, as most wood was bought early to mid-January, and yards are covered off in the near term.
We have yet to see the same inquiry on OSB amidst the news of lumber curtailments and buyers look for solid direction as to where the market will go long term,
Trading levels in the Western Canadian market feel undetermined, with numbers spread between 20-40 of each other. Mill order files range from prompt to end of February ship with a firming on ask levels hovering closer to print.
Please keep in mind that we have well-priced weekly lumber, plywood and OSB contracts. We also have fully stocked inventories with LTL options to cover any necessary requirements.
See what you've missed...