We Encourage Adding Ample Lead Time to Your Purchasing Strategy
Another week begins, and another fit of what feels like constant uncertainty in the global marketplace.
We finished last week with a relatively flat print overall. However, there continues to be a deluge of negative news press that seems to be weighing on the minds of many across our industry.
Stepping away from lumber for a moment, the broader financial markets had an extremely poor week, finishing off with massive losses that seemed to reverberate across all industries. The lumber market itself couldn't shrug this off, and it seemed to drag down sentiment across North America.
As we start the week, we're trying to navigate the massive amount of information and focus on what's at hand in our lumber industry. It continues to feel like on the contractor side, and in the truss industry, there is a relatively positive outlook as takeaway continues to be on a fairly strong footing.
Shifting attention to the retail sector, that's where there's a little more skepticism about what the market is really holding in the short term. Some feel that with the improving weather here and looking forward, we will see an improvement in retail takeaway. However, there are many who feel that the retail sector may be poised for a slower start to spring as the larger market issues take hold and a shift in buying patterns perhaps become more prevalent.
It's a challenge to pinpoint what will truly happen, and as a result, many are taking a very cautious approach to their buying, keeping inventories relatively lean, buying on a hand-to-mouth basis, and trying to mitigate risk in the market overall.
Supply & Distribution Update
We've entered what's referred to as the US summer driving season, and diesel prices continue to rise above historical seasonal norms. As production struggles to keep up with increased demand worldwide, freight rates continue to fluctuate, and regional fuel surcharges are increasing. We continue to anticipate that rates to ship materials will remain elevated and variable while Western Canadian mills continue to communicate difficulties in transportation via rail and truck. Major mills are quoting estimated times for deliveries, with one mill not quoting areas west of the US Rockies by rail. Deliveries by truck to areas near major population centers are moving smoothly, but delivery difficulties in reaching more rural locations by truck remain.
Availability out of regional and national mills in Western Canada is strong, with shipments listed 2 to 5 weeks out. Plywood shipments are available for cash week of May 16th, OSB is available cash late May into June.
Distribution has continued to be active. Inventories are generally strong. Buyers are still filling holes in their inventories with prompt material.
As mentioned in previous weeks, we continue to suggest adding ample lead time to your purchasing strategy to avoid ongoing delays in transportation.
News We Are Following
Lumber Prices Fall to Their Lowest Level in 2022 as the Highest Mortgage Rates in 13 Years Dent Housing DemandMatthew Fox - Markets Insider
Lumber prices took a 6% hit on Monday, bringing the commodity down to lows of $780 per thousand board feet. Over the past week alone, lumber prices have fallen 13%, and year-to-date they are off by 30%. These drops are a result of rising interest rates that have put a screeching halt on home buying as mortgage rates are riding higher. As one Houston homebuilder put it, "many first-time buyers simply no longer qualify with the increase in interest rates, as their debt-to-income ratio gets out of whack." The downturn in lumber prices could last as the often busy spring season for building is not supporting lumber prices at this moment.
Construction Industry Faces High Inflation, Job Action From WorkersTom Yun - CTV News
Residential construction costs have risen by 25% over this time last year which is putting significant pressure on the construction industry. Chris Gower, COO of buildings for PCL Construction explains, "Some of these increases are making projects too expensive. We're seeing projects deferred or cancelled. And in some cases, that means that projects aren't coming to market like in the residential, where the needs are, or in hospitals." While lumber prices have been off since the start of the year, they remain double what they were in November of 2021. Add in the high price of fuel brought on by the Russian invasion of Ukraine, and prices are out of control for shipping forcing builders to have to be “creative.”
Meanwhile, workers in the construction industry are trying to find ways to get higher wages causing unions to walk off the job. This is leading to more delays, higher costs, and greater unpredictability, says Chris Gower.
The Increasing Cost of DieselGlobal News
Whether you need diesel for your vehicle or not, the rising cost of this fuel is affecting us all. The imbalance in supply and demand is keeping fuel prices high. In the case of diesel, supplies are down 22% while consumer and commercial demand remains very high. The situation in Ukraine has led to the US shipping more fuel out from their reserves, including diesel, keeping domestic supplies lower in the US, which brings prices up in Canada. As it now costs a transport truck about $1500 to fill the tank with diesel, where it was $900 a year ago, that inflationary cost increase is being passed down to the consumer.
The dimensional market continues to give mixed signals as we begin the week. Print, as mentioned earlier, came across relatively flat, and reports to finish last week were mixed, with pricing being cited at levels that were very close to or at print in certain sectors. However, others were reporting pricing levels that were much lower, depending on the region of interest.
Transportation seems to be playing a part in this, as there is a marked difference between the potential availability for truck material into the Western Canadian marketplace versus rail and truck availability on dimensional rolling toward some of the US sectors.
The range in pricing, as we start the week, looks to be continuing as we are seeing reports that perhaps the distribution level is a little more aggressive in certain instances on prompt material, causing some confusion about the overall health of the dimensional market.
Once again, our comments are to focus on your immediate needs, keeping your buying patterns within a 3 to 5-week range to alleviate any stress you may have with respect to market movement.
The 4" market was relatively balanced in supply and demand. There were loads being moved and mills reporting decent sales, although there was a range in pricing. The premium for 14’ and 16' on print continues to be present, but that's not always the case looking at what was being offered in the marketplace.
Look for 2x4 to remain relatively balanced over the next couple of weeks. We anticipate more competition to move 2x4 in the market which could push pricing down, however, the larger mills will most likely look to keep pricing close to print levels.
The 2x6 market does continue to lag overall. We’re seeing a bit more of a spread between 4” and 6” pricing, and there does appear to be more price concession available in the 6” marketplace.
Although there is not a robust volume being shown on lists, there does seem to be ample 6” to satisfy market demand in the immediate term.
2x8 & 2x10
The 8” and 10” market seemed to be a little quieter in the west last week, although there did appear to be more of an uptick in demand coming from Eastern Canada.
Once again, prices seemed to find a range, and there were reports of some species substitutions taking place in the east with the potential for SYP to make its way into some of those markets with attractive pricing versus SPF.
Pricing and takeaway look to be flat yet again, so we believe there is an opportunity with firm offers if someone is inclined to cover supply needs.
The stud market has seen more muted interest in the last few days as purchasers appear apprehensive to cover more than just near-term needs. A prevailing tone of caution has been renewed this week as buyers are again leaning heavier into LTL and mixed truckload offerings to cover their most immediate requirements.
Mills have largely tried to sustain established pricing with order files bordering late May to early June, or further in some instances. However, if this quiet pace continues throughout the week, you can expect most producers will be enticed by a firm offer to spur on some needed interest this week.
As this week progresses, we can expect to see continued pressure for prompt LTL coverage. With less volatility of late and a perception of downside risk, purchasers are again timid and looking for a clearer market direction to develop before stepping in. Watch for mills to soften pricing on most available offerings throughout the week.
The treated sector is also giving mixed signals at this point. There continues to be a feeling that on the takeaway side, there hasn't been that uptick that many were hoping for just yet. However, there was increased activity and interest from the treaters to cover additional volume, so perhaps there is a bit of replenishment taking place.
Spreads on treated pricing continue to be in the market as well, leading to some confusion as to where sell prices truly should be. We are looking to watch the treated market very closely as we get into the latter part of May since this could give an indication of what to expect for the remainder of the season.
Mill sales remained steady last week. The demand for prompt material (1-2 week shipment) is what most are still concerned with. Most truss plants continue to be busy and are struggling to decide if they should take a position and cover all of their needs over fears of another pricing jump or just a portion of them. With pricing staying flat over the last week, this has caused most to stay on the fence and only look after their immediate needs.
With regards to mill supply, there is more flexibility on the tally the further you can accept delivery, but likely more flexibility on the price if they have the stock available to ship. Mills have order files that are out approximately 2 weeks, but they are willing to put orders on for further out and are accepting marginal counters on material that they can ship out over the next 2 to 3 weeks.
If there is a specific tally that you require, we still feel that it is best to give as much of a heads-up as possible. However, if you have some flexibility on your tally, there are options for quick delivery and in most cases an opportunity for reduced pricing.
LTL demand out of our inventory locations continues to be extremely busy. Shipping has improved over the past month or so, and in most cases, if material is on the ground, we can ship within 2-4 days, not weeks like it was previously. There is still a tight supply of 2x4/2x6 2100 longs, but other than that, our inventories are well-stocked and available for prompt deliveries.
Please feel free to contact us if you have any questions or if you need an update.
The panel market gave us another week of relative stability on print with plywood printing flat and OSB up modestly. The print pricing, however, doesn't tell the whole story, specifically with plywood, as there is certainly more going on than what would be let on by print.
Although plywood printed flat, there is certainly a gap that has developed between the east and the west, once again fueled by transportation and logistics.
The flat print is more indicative of the order file in the east, with rail and vans into mid-June. Once again, the Super-B order file is essentially prompt, with mills having cash-available material for the week of May 16th.
Pricing in the west is definitely a discount under print, and there is a sense in the market that further downside may be felt, which is keeping buyers out, save for looking after their most immediate needs to cover.
We'll be watching plywood closely over the next several weeks.
The week started out with light inquiry out of the Western Canadian market, which had completely dissipated come Thursday. LTL inquiry was far stronger over truckload as order files on wood into Western Canada ranged from late May to mid-June.
Concerns around the greater economic trends abound in conversations as buyers look only to quickly fill what they need to cover in the short term.
Transportation issues by rail into the south still persist, while trucking into the west has improved somewhat.
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.
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