Little Has Improved in Transportation

A new month is upon us and with it, another renewed list of questions about the lumber market has followed. As February begins, we've seen a very pronounced shift in the futures market having now pulled back steadily for 2 and a half weeks. This continued downward trend in futures has pushed many to the sidelines with feelings that the cash market is soon to follow. 

The reality that faces us and what we've seen as futures have dropped is that the cash market hasn't reacted as strongly in most cases as of yet. 

The continued transportation problems, as well as the perceived order file, have kept many mills from discounting anything aggressively. There have been reports over the last week or so of mills starting to come around to counter offers and listening to small offers, as well as fairly large offers in some cases. However, this does seem to be happening with the thought of the ability to ship in mind. 

Many mills continue to feel that there is not really a point in piling on to an already challenging situation, looking to aggressively discount numbers to sell into areas that they are struggling to ship material they have already sold over the last weeks, and sometimes, months.  

As we turn our gaze forward into late February and early March, there continues to be a sentiment that many in the field are relatively under-bought and that there is a pent-up volume of demand that will need to be met sooner rather than later. The feeling is that there is certainly a standoff brewing between mills hoping to hold and prop numbers up as best they can, versus the consumer base that will eventually have to step in meaningfully. At this point, anyone that needs to purchase for prompt is stepping in and finding the best deal they can. Most others are prepared to side idly by and wait a bit longer. 


Supply & Distribution Update

Little has improved in transportation over this past week. Backlogs remain a fundamental challenge to the timely supply and distribution of lumber products.

Labour shortages resulting from COVID in both production and transportation have yet to show signs of improvement. Mills continue to struggle with bringing material into the market with reduced numbers of available railcars and trucks. 

Significant amounts of bought material continue to be unable to make their way to buyers. Mill availability on #2&btr has improved, but MSR is less so, with the more desirable lengths being hard to find in volume across species.

OSB and plywood products remain a challenge to acquire, with many late loads awaiting shipment. Mill order files range from prompt to 5 weeks out, depending on the product and the mill. 

Distribution takeaway remains strong as buyers continue to utilize this option to fill holes created by late deliveries direct from mills and for those willing to wager on the potential for better pricing before stepping out with larger purchases. We suggest adding 3 to 4 weeks of lead time to your purchase strategy when sourcing material. This will help to avoid problematically low inventory levels and potential interruption of production schedules. 

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Dimensional Lumber

Summary

The dimensional markets did have a quieter tone overall last week, again on the heels of the downward pressure in the futures market. 

There were reports of buying happening on both sides of the border from the regional and the larger mills. On those same reports, there was the opportunity to look at counters and discuss numbers centering around material that was going to ship in a relatively quick fashion (hopefully). 

As we begin the week, there is a continued sense that the opportunity to counter and look at numbers while taking firm offers to the mills is certainly available. We are seeing more aggressive numbers being quoted out as the days roll on. 

There certainly seems to be a pronounced two-tiered market developing as well between mills and the wholesale community.  There are reports that at the wholesale and distribution level a more aggressive approach is forming quicker, with either the thought of moving off inventory positions or possibly shorting the market with the prospects of holding to cover at a later date.

2x4

In 2x4, the market had a bit of a lax feeling last week. Availability certainly seems to be stronger and definitely more pronounced, specifically in the 8', 10', and 12' lengths. But 14' and 16' are a lot more challenging to find. Mills aren't necessarily going to get overly aggressive on price discounts, but it is very situational on a case-by-case basis. 

2x6

There seemed to be less interest in 6” material. There certainly are offerings, and again, a very wide range of numbers being reported. At times, the spread has been several hundred dollars per thousand, depending on who has what and what the motivations are to move it. 

2x8 & 2x10

The market for 2x8 and 2x10 has taken a bit of a back seat at this point in time. With the market softening, those items are not as heavy on movement as the more narrow dimensions, so we are not going to see the same interest in activity on the way down as we did on the way up. 

Interested buyers will certainly have an opportunity to source out the buy numbers they can find in the short term.

2x12

Last week 2x12 was sitting on the sidelines without attracting too much attention. Those who are interested in 2x12 should be able to have a strong discussion from the mill standpoint to ascertain what the best number will be to move product. There should be 2x12 available to ship relatively quickly. Once again, though, the actual transportation of material may be something you need to factor into your purchasing decisions. 


Studs

As with all things in the lumber market these days, purchasers have maintained a cautious approach in covering stud needs this week. Modest interest remains, but many purchasers are turning to secondary distribution hoping to hold and see if any downside risk will develop. 

Mills have maintained a consistent 3 to 4-week order file. Offering lists are starting to appear more robust. However, availability remains into late February on most trims. 

As higher levels have been posted week-over-week, current supply and more muted demand have seemingly found level ground. In contrast, mills have held to established pricing and can lean into a healthy order file before seeing much pressure to revisit pricing and take a hard look at counters. The one length that is most scarce remains 2x6 104, and it will continue to see a premium on most mill lists.

Much the same as last week, current volatility and perceived downside have created more fickle demand as many purchasers will continue to hold off just long enough to see if a clearer picture will develop.


MSR Lumber

Mills had steady inquiries over the past week and remained firm on most items, although items they could ship quickly saw slightly more flexibility on pricing. We are getting closer to the end of their order files, but they continue to have issues with shipping. Most are still late shipping current orders and are reluctant to add to those problems, so they continue to be selective about what and where they quote. 

As has been the case in previous weeks, 2x6 MSR, as well as 2x4 2100, continue to be in high demand with limited availability. We encourage our customers to look at their next 2 to 4 weeks on those items.  

With winter hitting many areas over the past week, orders are a little slower to come in from our customers, although quoting remains busy. With the uncertainty on pricing, we have had more customers looking to lower their risk with LTL material as opposed to full truckloads. This has caused our inventory shipments to remain extremely busy, and we expect that to continue for the next 3 to 4 weeks. 

Please allow at least 10 days to 2 weeks for shipments out of inventory locations as late shipments from the mills remain an issue, and although getting better, trucking is still tight. 


Panel Products

Summary

The panel market continues to move in very much the polar opposite direction as the overall lumber and dimensional markets. 

We saw another strong print on both OSB and plywood to finish last week, and this continues with the complete and total lack of available cash loads in both products. 

On top of the lack of cash loads, there were also a number of reports that some of the contractually obligated OSB loads were not finding their way to end-users, with mills citing continued shipping and transportation problems. This put further pressure on the market overall, leading to a continued scramble to find material with rampant substitution of plywood, if it was available, to try to meet some of the OSB supplies that were simply not there.

Plywood

Plywood had another strong upward shift on print, although some were a little bit surprised by this with a lack of available cash product. 

High numbers, elevated well over print continue to be reported for anyone that did have available plywood, be it prompt through distribution or anything out 2 to 3 weeks, even a month out, consumers frantically look to cover needs where possible. 

Challenges were reported at the contractor yard level, as job quotes were coming in for bids, and it was difficult to even look to quote numbers on these jobs with any type of concrete number as most were citing the inability to price any type of volume.

At this point, look for plywood to continue to remain tight and scarce. Transportation issues remain week-over-week and do not seem to be improving in any material fashion. We anticipate these challenges to remain well through February and into March.

OSB

Transportation issues caused by a shortage of railcars, trucks, and vans into the western mills have not subsided. These mills are not able to offer any open market wood for the interim, at least until this backlog clears and they are able to meet their contractual obligations. 

As a result, this kept trading volumes low. Sales in contract loads were predominantly to select buyers on a price-time-of-ship basis. 


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