Most Mills Are Content to Hold Firm on Pricing
We rolled over the calendar and have a fresh month ahead of us to start finding our way through the remainder of this fall market and looking toward the upcoming winter season.
As the week begins, we find a market that is signalling the potential for a slowdown in the overall takeaway throughout North America. As we've seen over the past several weeks, with a steady upward climb on futures, as well as the pricing of lumber across all segments, we have now found a bit of a reversal in the futures market. On the back of print on Western SPF showing down this week, the sentiment has somewhat changed, leading many to feel that perhaps we've hit something of a top, and perhaps there could be a pullback in the short term.
At the present time, most mills are still content to hold their pricing firm, citing relatively strong order files. However, some of the smaller mills that may not have such strong order files might be enticed to lower pricing to try to bolster files and take advantage of a market that is still showing strong takeaway and liquidity.
There is certainly a cautious tone overall, and buyers are exercising judicious patience by focusing on their immediate needs only, sensing the potential for a downturn on numbers in November.
Supply & Distribution Update
We saw a somewhat slower takeaway out of mills and distribution this past week. Mill order files generally range between 3 to 6 weeks out, and the availability of prompt mill direct loads remains infrequent.
There has been a slight improvement in the volume of available MSR in the market, but mill lists remain somewhat thin, particularly longs, as will likely be the case over the coming weeks. We have seen moderately more availability on J-grade items, with exports overseas slowing due to port backlogs. Currently, #2btr dimensional availability is solid, but stud availability has remained thin.
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
High Lumber Prices Expected to Continue into 2022Larry Adams - Woodworking Network
Lumber prices are turning higher again and the expectation is for the rise to keep going into the new year. In a letter to US president Joe Biden, the National Home Builders Association of the United States explained, “When compounded by severe disruptions in the supply chain impacting all building materials and components, the housing sector and the economy cannot help but be negatively affected.” This projection is bad news for homebuyers, who will have to face elevated prices for much longer.
Bank of Canada Is Signaling Faster Rate Hikes. What That Means for Canada’s Housing MarketNichola Saminather - Reuters
Many Canadians took advantage of historically low-interest rates to take on new mortgages and loans through the pandemic. But now the Bank of Canada has signaled that rates will be increasing faster than expected. This spells higher payments for homeowners and loans that are not locked in. As a result, that could fuel another round of home sales by those who will no longer be able to afford those homes bought in a low-interest environment. Philip Cross, senior fellow at the Macdonald-Laurier Institute explains, “Once (investors) start seeing that rising interest rates and/or falling house prices makes it unprofitable to speculate on housing as an investment, that source of demand can disappear quite rapidly.”
Last week, the dimensional market felt a bit slower for takeaway. This was reflected in print reversing course to head downwards slightly to end the week. Although most of the larger national mills held firm on their prices and did report reasonable takeaway, it was certainly at lower volumes than in weeks prior.
Again, as noted previously, regional mills that did come up with lumber were still holding firm on pricing. But it felt like we were starting to see a two-tiered market develop with secondaries bringing products they may have owned from the previous several weeks at lower prices than current replacement. Perhaps this is an indication that some feel there may be downward pressure in the market and are looking to move off product accordingly.
It seemed to be a bit of a quieter week for 2x4 #2&btr overall. We have seen a little bit more availability hitting lists. Prices were firm throughout most of the week, with limited reports of pricing discounts. At this time, 14’ and 16’ remain priced at a premium over randoms, and the demand for 16’ specifically, did seem to continue to show the most strength.
The 2x6 market seemed to garner less attention last week, following suit with the slightly slower pace overall. We continue to see 2x6 10s showing value. There does appear to be more opportunity in the 12’ segment, and once again, 16s were robust in their demand overall across the 2x6 segment.
2x8 & 2x10
Both the 8” and 10” markets felt less buoyant last week, as takeaway seemed to be somewhat more lackluster than in the more narrow dimensions.
We continue to see pricing lag on both 8” and 10” compared to the 4” and 6” markets, so mills are really not incentivized to get aggressive in trying to increase supply output.
We anticipate mills will continue to hold 8” and 10” supplies in check trying to develop further order files.
The 2x12 market overall remains the quietest throughout the dimensional market at this point in time.
Mill lists have shown 2x12 availability for the last several weeks. Pricing has remained fairly flat, but there does seem to be an opportunity for price concession on 2x12 from motivated buyers.
The stud market had what felt like a quieter week last week after being one of the stronger products through this last 5 to 7-week run. Pricing and availability remain tight, specifically with 2x6 104s followed by 2x4 104s. However, we are starting to see more availability, which is leading some to feel that there should be, or could be, a bit of a price pullback in the 104 studs overall.
With 92 ⅝ both 2x4 and 2x6, remaining fairly flat, takeaway was quieter, and we anticipate seeing some softness in this stud market as well while we move toward the midpoint of November.
We have reached the tail end of the treated season for 2021. The attention will now shift to what type of programs customers will be looking to entertain for the upcoming season.
On the back of the very challenging treated market this year, much of what is to come is up in the air and in question. Looking toward the spring at this point in time is a challenge for most, trying to ascertain what pricing structure will look like and what the takeaway is going to end up being from the consumer level after a lackluster year in 2021 that followed an incredibly robust 2020. There are very mixed emotions about what to expect in 2022.
Although sales were slower last week, mills continued to lean heavily on their order files. Availability seems to be getting better for material out 3 to 4 weeks. The mills currently are not discounting any available material yet.
Truss plants remain busy, and the flavour of choice continues to be 2x4 and 2x6 2100. Availability on longs in both items have been easy to source, and the premiums remain strong. We don't expect that to change over the next month.
We are encouraging our customers to cover their next 3 to 4 week needs and be cautious about loading up on inventory further than that, as there is some uncertainty on duties/discounts being applied to Canadian mills in late November.
Please reach out to us regarding your MSR needs and ensure you have coverage heading throughout the month of November.
The plywood market printed flat for what seems like the 700th week straight, although it certainly has not been quite that long. Plywood continues to hold its footing as the mills report selling enough each week to push order files out 1 to 2 weeks, depending on the product.
Shipping has become a little bit of an issue in certain areas, but it has certainly not been enough to raise alarm bells or create a feeling that we may see this affect pricing and push things up. More so, it is just a bit more of a wait to get the product, so be sure not to run yourself overly lean, as there is little need to do so with pricing remaining flat as we roll through November.
Mills have indicated they will do all they can to hold pricing at these levels. We anticipate flatness rolling through November and into December at this point in time, as the pipeline remains fairly thin as it appears to be enough to keep things chugging along.
In much the same way, the OSB market continues to maintain its position. Price gains have become more muted, though the potential for downside over the next six weeks appears to be rather limited, as mills are quoting late November, early December shipment on new cash purchases.
There is not a tremendous amount of material available on the open market, leaving buyers to continue making the rounds buying up LTL wherever they can to keep them going.
We look for pricing to remain strong over the next six weeks. This will put mill order files within range of the mid-December shipments, where we have traditionally seen a moderate buying on the US side for those states that have a year-end inventory tax anticipating those shipments to arrive early January.
For the time being, OSB will likely remain in a relatively flat trading environment.
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.