Treated Market Positivity Showing Ahead of the Season

As the week begins, we’re once again wrapped up in a volatile and confusing market. As we finished off last week, we saw the futures market take centre stage with a reversal from the steady limit-down to a limit-up that has rolled into our current lead week. 

To finish off the sales week, print shifted downward but very minimally in reference to where some of the futures numbers were pointing, leading many to believe we would see a much stronger downside on the cash market. 

There seemed to be a two-tiered system developing last week, as mills continued to show firm numbers on their lists again, citing transportation issues and reasonable order files pushing into late February. At the same time, reports continue to arise about the wholesale and distribution community feeling that there was more downside pressure and offering out material far below mill replacement numbers. 

As we start this week, we seem to be sensing that the two-tiered market has disappeared as quickly as it developed. The aggressive shorting of numbers has gone away on the back of reports of strong sales activity at the mill level from the national mills, as well as regional mills that were looking to clean up some of the prompt material that was on the ground. 

We do believe there will still be a range of pricing out there. The tone, however, has certainly turned more positive. 

Depending on the area of interest, consumers are, in some cases, trepidacious to step in, but it does feel that the tone has improved and will pull more and more people into the market as the week progresses. 


Supply & Distribution Update

The spotlight that has been cast on the Canadian transportation industry by a small vocal minority has not aided in easing the challenges facing the timely distribution of lumber products. Mills continue to struggle in bringing materials to end-users via truck and rail, as delivery times remain the primary bottleneck in this week's market.

Mills show good availability on #2&btr 2x4, with wider trims being somewhat more challenging to acquire. Demand for MSR remains strong, with desirable trims, lengths, and mill openness to custom tallies being spotty. 

OSB and plywood products continue to be a significant challenge to acquire, with many late loads awaiting shipment. Mill order files continue to range from 2 to 6 weeks out, depending on the product and the mill. 

Takeaway out of distribution remained steady on available items as buyers look to fill holes in inventories left by late deliveries. We suggest adding 3 to 6 weeks lead time into your purchasing strategy when sourcing material to avoid problematically low inventory and potential interruptions of production schedules. 

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There have been wild swings in the lumber futures market. March lumber futures traded at a recent low of $515.50, while on January 14, 2022, the price was $1338.20. The incredible volatility will continue well into 2022 even though the February 4th low dipped below $1000 per 1000 board feet.

To begin this year alone, lumber’s price fluctuations have created a trading band that is wider than those seen for the whole of 2017 and 2019. As lumber offers a look at the overall economy being the vital material for construction and housing, it may be indicating a very unstable for all even outside of lumber futures.

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Rising prices are being felt throughout the economy with lumber, food, and energy leading the way. There have been surprises on both the upside and the downside in earnings for various companies in different sectors. Of the 278 companies that have already reported earnings on the S&P 500, 78.4% have beat analyst estimates, where the long-term average is at 65.9%.

Although high-flying energy accounts for a large portion of that with year-over-year growth of an astounding 11,180.4%. As for lumber, the futures market has shot up for 4 consecutive days, which has triggered limit-up events as it goes for a wild ride. Lumber has gone up about 20% from the February 1st lows. Currently, lumber sits at 30% off its May 2021 all-time high, but it has been on the rise since the August 2021 lows. Additional COVID-19 waves, more natural disasters, and an increase in demand may continue to lift lumber prices for the foreseeable future. 

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Dimensional Lumber

Summary

The dimensional market seems to find itself on stronger footing as we start the week. As mentioned earlier, the sense of a two-tiered market appears to have dissipated with the shorting that was occurring through distribution and wholesale, seemingly slowing down and stopping while witnessing the futures market push up yet again. 

Availability feels spotty overall, with transportation issues again leading the way. Even if we are able to source and find prompt available material that is on the ground to ship, there is still a sense that moving that to the end-user will take longer than anticipated. This is beginning to push people back into the market, feeling that the time to purchase may be upon them due to longer lead times to have that material hit the ground in their yards. 

2x4

The 2x4 market looks to have strengthened. We are seeing a stronger sales pace being reported by the larger mills, as well as the regional mills that are cleaning up some of the prompt material they may have had lingering from the week prior. 

The renewed activity tends to have a snowball effect, and we anticipate this pace to strengthen over the next couple of days to a week. 

There is still not complete comfort from many that the market will take off and run, but covering needs in the short term should be looked at, as we do believe this firming trend has taken hold.

2x6

The 2x6 market was not offered the same level of attention as the 4” market last week. However, the pace has picked up and has pulled 2x6 up.

We are seeing an uptick in demand for 6”, and mills that were previously looking a little less favourably on 2x6 are feeling a little more positive about it, looking to push numbers up ever so slightly. 

2x8 & 2x10

Although again not garnering the bulk of the attention, 2x8 and 2x10 are relatively scarce to find. With the renewed sense of optimism hitting the market to start the week, we get the sense that 8” and 10” are going to be a challenge to source. 

There was a relatively good sales pace, predominantly in 10” last week, and we anticipate these items becoming a little more challenging with an upward trend on numbers setting in as the week progresses.

2x12

There was not much attention on 2x12 last week, and with the fresh feeling of optimism in the market, it will most likely be pulled along ever so slightly. But as before, there is a little more 12” available on lists, and takeaway has not seemed as robust yet again.


Studs

During this last week, the stud market continued to see more modest demand despite a prevailing tone of caution. Last week kicked off quietly with muted interest, and though mill order files maintained a 3 to 4-week window, they were listening to offers and softening pricing to entice stronger interest. 

Purchasers were quick to jump on perceived market strength at the tail end of the week and appeared much less apprehensive to cover more than just their near-term needs, with mill offerings now firmly into March on most trims. 

Mills may still be enticed by a firm counter but are confident at these now-established levels. Purchasers looking to chase the 3 to 4-week order file should manage to find coverage on most items, though 2x6 104 still remains the one trim that is most scarce. 

This week we can expect more firmness throughout studs as mills continue to sell down lists, while current volatility and shipping woes will steadily draw more purchasers in for fear of missing coverage. 


Treated Lumber

The treated market, although still a couple of months away from getting into its full swing, did seem to have a bit of a renewed sense of optimism as last week rolled on. 

The feeling from contractor yards being more positive and that takeaway would be better than anticipated left some to start considering additional purchasing to bolster some of their upcoming inventory levels. Many did not purchase overly heavy, citing large volumes on the ground from last year's lackluster season. 

There seems to be more positivity being shown in the treated market ahead of the season really getting underway.


MSR Lumber

MSR sales at most mills started to pick up later last week as many truss manufacturers just couldn't wait any longer to buy with their inventories running quite low. Although mills have started showing more availability, shipping that material continues to be a struggle. Under normal circumstances, we likely would have seen prices drop over the last couple of weeks, but mills have been reluctant to lower prices on material they just can't ship. 

Due to these shipping constraints, mills continue to have stronger order files, and most are out 3 to 4 weeks with an additional week for shipping in most circumstances. Because of this, we are expecting prices to remain firm to up over the next few weeks at least.

With regard to truss plant usage, that continues to be strong, as most are reporting that quoting remains very busy. Most expect it to only get busier moving forward through February and into March. 

We are encouraging our customers to get their February needs covered as well as to start looking at their early to mid-March needs, as deliveries are consistently being adjusted. LTL MSR demand remains extremely strong and is currently out at least 10 days to 2 weeks on most shipments, so we urge you to look at your next 4 weeks to be safe. 


Panel Products

Summary

The panel market continued to have a very strong showing last week. Scarcity in supply remains the primary issue of focus, with very little to no cash available on the market in both OSB and Plywood. This led to a continuation of pricing being pushed higher through the distribution network for any material that was available to ship for prompt. 

Plywood

The plywood market printed up modestly to finish last week. Reported numbers in the field were significantly higher on sales from distribution if there was product available to ship. 

Ongoing freight and transportation issues plague the mills as those orders from January, in many cases, have still not found a way into the hands of the end-users. These issues look to remain for the foreseeable future, keeping plywood scarce.

The cash market does not look to improve at this point, and the scarcity of material in the hands of distribution and wholesale will continue to be a challenge for those looking to source material for upcoming projects.

We are still suggesting that if you have material needs and you can source product, pricing at this point is almost a secondary issue. This is a tough statement to make, but balancing the decision to have material at a higher price or miss out on material is one that will have to be made sooner rather than later.

OSB

Transportation issues have not resolved themselves, thus resulting in very little activity at Western mills over the past week. There have been no cash offerings, and contracts are being offered to select buyers on a price-time-of-ship basis.

In certain cases, some mills have reported lowering their contract volumes into distribution temporarily until the issues are resolved.

These transportation issues are reported to be the worst in history for railcar supply and truck. 


Lumber Quality

There are different needs for different applications. Lumber quality varies from grade to grade and mill to mill. If you’re unsure about something, please contact a trader and we will assist.

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