Market Numbers to Hold Steady over the Coming Weeks
As we approach the end of October, we've seen a market that has continued to show strength and have legs, leading many to feel that we are going to see these lumber prices hold through November and push deep into December at the current pace.
We did see print up again to finish last week, and as the week begins, mill lists are populated with offerings that are slightly higher than where we saw them the week prior.
There does seem to be a little more availability showing up on some mill lists, and at the regional level, the ferocious takeaway seems to have pulled back a little as prices have crept up. There is a mixed sense and feelings in the market as to whether we are approaching a bit of a plateau, or if there is still more upside to be had.
In the retail contractor yard sector, there does seem to be a little more caution in the purchasing appetite. But that is also being balanced by what appears to be a really strong takeaway continuing at the manufacturing and truss level. Reports from that sector continue to be quite strong with order files well into November and December, leaving many of these plants to continue to purchase quite heavily to cover their needs.
A lot of focus will be on print this week to see if we are going to find a softening pattern, but again, the sense overall seems to be that numbers should be holding quite steady over the next several weeks to come.
Winter weather has yet to be a factor in many areas with unseasonably warm weather, so again, this could also be helping, as many projects that were pushed off due to higher prices are trying to get wrapped up before we see the snow fly.
Supply & Distribution Update
The markets remain active with steady sales from mills and out of distribution. Mill order files have continued to extend four to six weeks out, and availability of prompt mill direct loads are few and far between.
Curtailed production from mills due to high log costs is leading to challenges in sourcing material across species. A steady fall construction season, renewed activity on project sidelines during the previous runup, and impending increases in cross-border duties have added to demand.
Availability of material out of mills has continued to be thin in MSR, particularly in longs, and we expect that to carry on throughout the rest of 2021. We have seen more availability on J-grade items with exports overseas slowing due to port backlogs.
Movement of material out of distribution remains consistent with buyers covering targeted material requirements on an as-needed basis. LTL deliveries out of CEWP reloads are booking shipments into the beginning of next week and currently, shipping across North America is moving well with minimal reports of delays.
News We Are Following
Lumber Prices Feed into a Network of Seemingly Unrelated Goods. Here’s Why It Might Be Making Your Milk More ExpensiveNatasha Dailey - Markets Insider
Sawdust has a significant impact on the price of many products you didn’t think were related to lumber in any way. With the lumber supply shortage and supply chain issues persisting, sawdust is in short supply just like everything else. This is making everything else that relies on sawdust more expensive, including things like floor tiles, cleaning products, and even toilet seats. Yes, that carton of milk is included on the list.
Revamped Forest Policy Puts Environment, People FirstBC Gov News
The province of British Columbia has introduced legislation that will lead to more focus on sustainability, offer more benefits to local communities, and create a better environment for long-term planning to take advantage of future economic opportunities. Katrine Conroy, Minister of Forests, Lands, Natural Resource Operations and Rural Development, notes, “Forestry policies – put in place two decades ago – have limited our ability to fight climate change, protect old-growth forests and share the benefits with Indigenous and local communities. By increasing public control between government and First Nations, we’re committed to smarter management of our forests that prioritizes public benefits and engagement now and into the future.”
West Fraser to Acquire US South OSB MillWest Fraser Timber Co. Ltd
An agreement has been reached for West Fraser Timber to acquire Georgia Pacific’s OSB mill in Allendale South Carolina. The deal is worth nearly $280 million and is expected to close upon regulatory review and completion of certain conditions.
The OSB mill being acquired has been idle since 2019 and at full capacity can provide West Fraser with 780 million square feet of material on a 3/8 -inch basis. West Frasor intends to invest $70 million of capital to upgrade the facility.
The dimensional market had a strong week leading overall markets with takeaway. We saw the narrows continue the trend of being the leaders of the pack with wides moving but at a bit of a slower pace.
The leader overall remains 2x4 as it is pushing prices up and is the item that is attracting most of the focus. We've seen a relatively strong spread develop between 8', 10', and 12' material, and 14' and 16' are commanding a larger premium. The 16' in particular seems to be a little harder to source as demand has been strong and availability from mills has been more centered on random tallies. Look for this trend to persist in the near term.
In 2x6, there is continued movement on the path to close the gap with 4” and as in weeks prior, although print may be lagging a bit further behind, mills were not shy to quote slightly more bullish on their numbers if they had the tallies available.
There is still strong demand on 10s and 16s, and there appears to be a bit more of an abundance of 12’ in the marketplace, causing some downward pressure on that item if you were looking to entertain volume.
2x8 & 2x10
It was a decent week for both 8” and 10”. We saw print up on both, although, when you look at numbers and some of the business being done in the wides, depending on tallies, there seemed to be a bit more of a spread on sell prices. This is leading some of us to feel that there may be a bit more weakness in the wides. There is nothing to push numbers down, just more competitiveness overall, which consumers may be able to take advantage of.
Once again, we did see more availability of 2x12 on lists. The lack of takeaway on 2x12 continues to permeate the market. We are seeing strong availability and nothing to signal that we will see a strong takeaway in 2x12 shifting in the near term.
The stud market continued to see more modest gains over weeks prior. Mill order files are still pressing into mid-November or later with some availability beginning to develop sporadically through more regional mills.
Pricing remained firm to up throughout last week with gains most evident in 9’ trims, as it remains a challenge to source this length as a lack of availability persists, most notably in 2x6.
As order files press further into the fall season, mixed tallies and yard distribution should continue to see heavy interest in helping purchasers replenish yard stock and cover their most immediate needs. Extended availability and colder temps may begin to mute some interest but expect continued pricing gains to be established in the near term.
Reports from the field have not changed in the treated sector. Retail and contractor yards are sitting on fairly robust inventories at this point, with little chance of drawing those down prior to the close of the fall months.
This is leading many to report that they don't expect to see a large program being put together for new spring material. These reports are trickling into the mills and the primary producers, and in turn, they are causing a lot of internal discussions regarding what production levels should look like to satisfy demand for spring. If mills cannot establish some concrete takeaway levels, it will be difficult for many of them to produce product for a market that may not materialize.
This is something that many are going to be watching closely. If we do see an uptick in takeaway in the spring, with many yards choosing not to reestablish heavier inventories, it could lead to a supply crunch. That said, spring is a long way off, and there is still a reasonable amount of product in the pipeline.
Truss manufacturers continue to report strong sales, and as such, remain very active in purchasing MSR. Most manufacturers are hesitant about taking a large inventory position going into winter but are active in covering their needs with orders on the books until mid to late November.
We are doing the same with a focus on purchasing for our inventory locations. We are well-stocked for the next 4 to 6 weeks but cautious about purchasing out further. Mills remain firm on any material they are able to quote, touting large order files.
Material that is coming available is getting a marginal premium as mills are more interested in adding to their order files. We believe these calculated increases will continue for the next month or so.
Please contact us for any of your immediate or long-term MSR needs.
The panel market continues to move along in the shadows of the dimensional side of the sector. We saw another reasonable week with OSB and plywood sales being reported. Although, there was nothing robust to lead to any type of concerns of a pricing spike in the near term.
The plywood market printed flat again for yet another week. The flatness in the market has become the norm, with mills reporting decent sales that were enough to push the order files along, but it was really not enough to grow it in a meaningful way.
There was activity both in the east and the west last week, and it was actually one of the stronger weeks that the mills had for sales in some time. Shipping is being reported 1 week out if orders are centered around square-edge material, with T&G and Select pushing into the week of November 8th at this point in time.
Look for plywood to remain flat in the near term, but feelings are that we will see an uptick in demand as we roll into the new year. There is the potential for price increases as inventories in the field seem to be very low.
OSB had another relatively reasonable week from a sales standpoint. Mills are continuing to show limited or little availability in the cash market.
Contracts are all spoken for, and any that do come available seem to be snapped up fairly quickly, leading many to show some frustration with the lack of OSB supply, yet again.
We anticipate OSB strengthening again this week following this lockstep movement up with a continuation of limited cash availability rolling into late November and December.
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.