Mills at the National Level Continue to Hold Pricing Firm
We've reached the halfway point of May, and it feels like it has gone by in a flash. Although markets have been challenging, to say the least, the pace of day-to-day activity does not seem to want to relent.
Before we touch on the lumber markets, it's worth pointing out that the overall financial markets have continued to draw a lot of attention and headlines. This, along with the volume of news regarding current interest rates, speculation on future interest rate hikes, the overall health of the economy, the potential increase in housing demand, as well as the potential for a housing demand decrease, is leaving many to feel like they are spinning in circles trying to make sense of where this market will end up as we move through 2022 and into 2023.
There is no way to tell exactly where this market is headed, but, as always, our guidance is grounded in mitigating risks and focusing on your individual needs, pushing away some of the noise that may not be completely relevant to your market decisions.
The lumber market had another soft week to finish with print down on a variety of items. We continued to see quite a range of pricing, which was predicated yet again on the national versus regional mill breakdown.
As this week begins, many of the larger mills are continuing to hold their list prices and ask prices close to print. There have been reports of some counter offers being entertained, but we are still not hearing about any major price reductions happening overtly. It appears that mills at the national level continue to attempt to hold as firm as possible, primarily on the back of continued supply chain issues and transportation, mainly rail.
It's a different situation when we focus more regionally. Looking at western mills, and more so the western distribution network, pricing is again ranging by hundreds of dollars per thousand at some points, when looking at a variety of products. This is leading to many purchasers showing frustration and much confusion in trying to ascertain where they should be purchasing rather than IF they should be purchasing for their short and medium-term needs.
This feeling of a market breaking into several tiers looks like what might be in front of us for the time being. It's hard to make a case for the market to find a bit of a balance and tighten things up in the short term, as there is just simply too much uncertainty across all product segments.
Supply & Distribution Update
Western Canadian mills continue to communicate difficulties in transportation via rail and truck and are quoting estimated times for deliveries. One major mill will not quote areas west of the US Rockies by rail. Deliveries by truck to areas near major population areas are generally moving well. However, deliveries continue to have difficulty reaching more remote locations by truck. As well, shipping from western and central Canada into the eastern provinces remains a challenge.
As has been the case in previous weeks, freight rates continue to fluctuate, and regional fuel surcharges remain. We continue to anticipate that rates will remain elevated and variable.
Dimensional availability out of Canadian regional and national mills is strong, with shipments listed two to four weeks out. Panel shipments are available for cash, and contracts are 2-3 weeks out.
Takeaway out of distribution has increased as secondaries work to liquidate inventory and buyers continue to fill holes and meet short-term needs.
We continue to suggest adding ample lead time to your purchasing to avoid ongoing delays in transportation.
News We Are Following
Madison’s Lumber Reporter Finds Slight Lull in Buying, Lowering PricesLarry Adams - Woodworking Network
A slowdown in purchasing in March and April gave lumber a chance to come back down to lower prices that are more comfortable for buyers. Madison’s Lumber Reporter notes, “Solid demand persisted in a confusing market this week as most commodity prices hovered around the previous week’s levels, and buyers were unsure whether they should make a move to purchase or wait longer.” Meanwhile, there are ongoing transportation issues that lumber suppliers continue to deal with as they take calls asking where buyer shipments are.
If You Thought Gas Prices Were High, Have You Checked Out Diesel?Kyle Bakx - CBC News
While gas prices hit record highs at the pumps, it’s the surge in diesel prices that has the cost of living rising throughout the economy. It is diesel that moves products and as the cost of fuel remains high, so too will those products as they hit the shelves. One reason for the record-high diesel prices is a shortage of much-needed fuel. "There's been a diesel shortage globally, meaning that inventories are [at an] all-time low. I've never seen such low inventories," Vijay Muralidharan, a senior consultant at Kalibrate, an analytics firm that tracks fuel prices.
Home Depot’s Strong Quarter Shows Housing Market Is Still BoomingPaul La Monica - CNN Business
After better than expected sales and earnings gains in Q1 reported by Home Depot, some believe that the slowdown in the housing market is not quite there yet. As Home Depot CEO, Tom Decker notes, “The medium- to longer-term underpinnings of demand for home improvement have never been stronger." The primary concern for housing remains the short supply and the expectation is for a gradual cooling off over the next year or two. But Home Depot’s earnings are currently not reflective of that expectation.
The dimensional market continues to feel soft. The week finished off with downward pressure on print and offerings coming from distribution and wholesale levels.
As we begin the week, there is quite a range in pricing, and we are seeing more offers coming to the table for dimensional loads across all of the widths.
The 4" market has certainly shown weakness from last week to this, as we try to pinpoint where pricing levels should be. The range is out there, and depending on the tally and quality level you're looking for, expect to see numbers all over the map.
Focusing on your specific needs and ship times will be your main concern. Although there is certainly product available, we still caution about waiting too long to cover needs, as transportation has improved overall, but there are still hiccups in the system.
The 2x6 market continues to show more weakness than 4" and we do believe that there is more downside pressure to come at this point from mills as well as the wholesale and distribution community. There doesn't seem to be a real sense of price discrepancy between lengths, as the key focus right now seems to be trying to find orders for 6" loads.
2x8 & 2x10
In 2x8 and 2x10, we once again find that there has been more inquiry for these items over the past several weeks, as many of the buyers of wides had been sitting firmly on the sidelines for quite some time.
This pattern has continued to start the week with reasonable inquiry levels. However, it does feel like there is an adequate supply of 8” and 10” supply in the market so pricing may slide here as well.
There has not been much attention on 2x12. There is certainly availability on lists, and we anticipate price weakness in 12” to continue at this point with a quieter market overall. The market segment for 2x12 is smaller, and we, therefore, expect to see a softening in this dimension.
Stud demand eased across the week, sapping any upward momentum evident in weeks prior. Sluggish interest over the last week held most purchasers firmly to the sidelines, apprehensive to cover much more than immediate needs.
Mill order files run the range of late May to mid-June or later, with 2x6 9' still seeing the most scarcity and highest premiums. In light of such meager demand, downward pressure was initiated late last week, with mills offering modest discounts on most all trims in the range of $20-$40/m. However, as this week progresses, expect mills to open up to steep counters in a bid to elicit stronger interest.
Purchasers are already placing heavier reliance on LTL supply and will continue holding for a more definite level to develop before stepping into more volume. Expect continued softness through the week as we're again presented with a timid and uncertain market tone.
The treated market thus far has been quieter than many had hoped. It is still early, but some of the reports from both sides of the border are indicating a bit of a slower takeaway, as we had cautioned may be the case earlier.
Looking forward, many eyes will be on the treated market to see if there is a gradual increase in the level of activity which will lead to needed replenishments.
Treated pricing thus far is flat and holding. Time will tell what the market provides as we run through the summer months.
MSR sales at most mills continued to be steady last week. Mills weren't extremely busy, but for the most part, they were able to continue to add to their order files and to quote 2-3 weeks out. We are seeing 2x4 1650 continue to be the exception, with production outpacing sales right now. Most customers are looking at alternatives as the premium over #2&btr remains too high to justify. The demand for 2x4 and 2x6 2100, however, continues to be very strong.
Truss manufacturers keep adding to their order files and remain busy quoting. Most are indicating that they have order files well into the summer, and some are taking orders for the fall. We are expecting the demand for 2x6 2100 as well as 2x8 MSR to increase as quite a few plants are indicating that they are quoting on more and more agricultural and commercial jobs for later in the summer. It is still tougher to source 18' and 20' lengths in both 2x4 and 2x6 2100, so if you have upcoming jobs, please allow for increased lead time on those lengths.
Availability on LTL MSR shipments out of our inventory locations is getting better. Most items are on the ground or for delivery over the next 10 days, so prompt shipments are now at around 3-5 days (in some cases 1-2 if the location is close to the reload).
Please reach out to us for updates on shipping, pricing, and availability.
The panel market is faced with much the same as the overall dimensional markets; relatively quiet activity. However, pricing on print at least is continuing to be near flat. Confusion, as was the case last week surrounding print levels versus the true market levels, remains.
Plywood printed flat yet again, and as was the case last week, this is a bit of a confusing print. We have two distinctly different markets when we focus on Super-B volumes into the west, which is essentially prompt, versus railcar and van shipments into the east, which are into mid-June. There is certainly discounting being done for Super-B loads at this point, and takeaway thus far has been fairly quiet. Look for this to continue for the immediate future.
A very cautious approach has been maintained by buyers over the past 2 weeks. Many are citing uncertainties in economic trends over the next few months, along with rising interest rates.
Prices on cash wood range from print levels to slightly below, with order files out early to mid-June.
Western Canadian mills are still facing some challenges in getting railcars into the US, while Canadian truck shipments are relatively on time.
Many anticipate a flat print for the next few weeks, so the market will find a footing coming into June.
We are in the market every day to understand and anticipate your business needs. We understand that a quality product goes beyond just wood and will work diligently to provide you with innovative products and service solutions.
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