A Cautious Tone Persists With a Sense of a Potential Market Bottom Not Far Off

Welcome to our first newsletter for February! We are optimistic that we will continue seeing this market improve from a material takeaway standpoint as we move closer to spring. At this point, however, there continues to be a bit of uncertainty in the overall lumber landscape.

We certainly started to feel slightly more of a sense of urgency in the hands of purchasers last week. Conversations about potential supply disruption and a little less availability as we see demand move up did cause some to feel like there was an opportunity for buying in our current market.

The relatively low risk of significant downside at this point has led some to feel like purchasing decisions being made now, will serve them well moving into the spring.

At the same time, however, we are still seeing consumers that continue to buy very cautiously, opting to stay mostly on the sidelines feeling that there could still be a little more pullback and there isn’t much to push the market up yet. This is giving them time to continue planning their best strategies.

Both sides of this are not surprising and we understand that confusion is being felt by many. Certainly, from a mill perspective, we continue to see a lack of a buildup of materials at the mills, even in the face of relatively quiet takeaway.

Again, we’ve mentioned that mills have done a necessary and relatively good job with supply curtailments on an ongoing basis to try to balance this market. That’s the main reason we are seeing this stability and not a continuous push down of market pricing.

The concern continues to be that if we do see enough takeaway materialize, we could tighten up the market fairly quickly. This is what’s leading some to feel like the opportunity to take a position now does make sense. It’s still up in the air and this cautious tone looks like it will continue, at least in the immediate term.

We saw a relatively flat print once again looking at Western SPF numbers, so again, this is going to help fuel additional uncertainty as we are not seeing much movement.


Supply & Distribution Update

The tepid pace from last week has carried over, and most prices are reported at or near last week’s levels. Some mills have cited healthy order files and a perception that field inventories were thinning in turning away counter offers on 2x4 and 2x6.

Buyers continue to fulfill their immediate needs through Just-In-Time deliveries and are less interested in bulk purchases. The direction of the market is relatively unknown, but it is evident that purchasers are currently working within a low-risk environment.

Distribution continues to be steady, filling inventory holes through LTL purchases. Customers have reported below-average takeaway while continuing to stay busy. Usage levels are in line with the market this time of year.

Full truckloads within Alberta have been strong to start the month. Many transport organizations are relieved to obtain steady business while competition begins to diminish. That being said there are still many trucks available looking for work and no driver shortages reported.

Transportation freight rates have stayed strong over the last couple of weeks, but a slight uptick in fuel was noted this week.

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News We Are Following

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Temporary Lay-Off at Tolko Impacts 60 in Williams Lake Feb. 19

Monica Lamb-Yorski - The Williams Lake Tribune

In what is hoped to be a very temporary move, Tolko Industries will be laying off 60 workers at its Lakeview mill in Williams Lake. Starting February 19th, the mill will go from two shifts down to just one 50-hour shift per week according to media spokesperson Chris Downey. “We are hoping it’s temporary,” he said last Friday.

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Almost 90 Active Wildfires in Northeast B.C. as Drought Lingers

David Carrigg - Vancouver Sun

Prince George Fire Centre is currently monitoring 87 active wildfires in B.C. with many of them linked to last year’s record-setting fire season. The northeast region of the province accounted for 80% of the province’s scorched land. By comparison, there is just 1 active wildfire in the other 5 regions within the province.

“As there are still areas that are under snow cover and areas where the fire has likely travelled underground, we cannot call additional fires ‘out’ or confirm where (or if) there are active hot spots.” Prince George Fire Centre spokeswoman Sharon Nickel said.

The continuing drought and the low snowpack over the winter do not bode well for the upcoming wildfire season.

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Hike to U.S. Softwood Lumber Duties 'Entirely Unwarranted,' Trade Minister Says

The Canadian Press - CBC News

With the U.S. planning to raise duties imposed on Canada’s softwood lumber from 8.05% to 13.86%, Trade Minister Mary Ng is taking Canada into the next phase of the duties dispute.

"We will continue to work closely with provinces, territories and industry to defend Canadian interests through all available avenues," Ng said.

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Dimensional Lumber

Summary

The dimensional market is certainly proving interesting as we start the month of February. As indicated, we’ve seen relatively flat print numbers across the board and mill lists are not spilling over with availability, but there is certainly material to review as lists come out each day. The numbers tend to be in a reasonable range overall.

What we have continued to see, however, is numbers outside of that range on the low end being bantered about on a case-by-case basis. Again, it still feels like this is mostly being led by wholesale and distribution, depending on their positions, as mills have softened their stance somewhat off of ask levels on lists and are listening. However, it is not significant in most cases and is dependent on the volumes available.

Mills are holding as firmly as they can with the anticipation that they believe demand will uptick and the numbers will improve as we get closer to March.

2x4

We saw 2x4 numbers trading over a range with a spread of potentially up and around $50/m top to bottom. It continues to be a little tighter for 16’ in the market and it continues to command a premium overall. As well, demand for 16” remains strong, so the premium over randoms looks to remain in the near term.

There were reports of some aggressive numbers being put together over the last week, as some consumers did come to market. It certainly was not widespread and at the same time, several mills would not come anywhere near those levels. It really is dependent on individual circumstances.

The way this week feels at this point, it appears that 4” should continue to move along at a fairly flat pace with maybe a little downside pressure but nothing overly significant.

2x6

It was much the same for 2x6 as it was for 4” this past week as again we’re seeing availability on lists but not an overabundance. We continue to see flat pricing in the 6” market with some numbers being reported below what many feel are attainable levels in the marketplace. However, it’s not widespread and we anticipate flatness to continue on 6” again this week.

2x8

It feels a little more stable for 2x8 over the past few weeks. Mills are not discounting significantly for 8” as we continue to see wides a little tighter.

There is still not enough activity to push numbers up, however, it’s certainly stable and coming back to the comments about an uptick in takeaway, in the wides, it does feel like it wouldn’t take much and we could be starting to source 8” needs.

2x10

We’re seeing 2x10 also a little firm, although perhaps not on the same footing as 8”. Stability is certainly built into the market, however, we don’t think there is much to strengthen 10” in the short-term from a demand standpoint.

2x12

There is not really much happening in the marketplace for 2x12 as we saw 12” positive the week before last, flat last week on print, and it’s stable at best but there is a lack of general interest in the 12” market at this point.


Studs

As with all things in the lumber market these days, purchasers have maintained a cautious approach in covering their stud needs this week. Modest interest remains, however, most purchasers are timid about reaching too far out, instead placing heavy reliance on prompt options and secondary distribution.

Mill offering lists are starting to appear more robust, with many currently maintaining a consistent 2-week order file on most trims, while 2x6 8’ again remain most scarce with availability into late February in most instances.

Supply and demand have presently found somewhat level ground, as mills have held close to established pricing for yet another week, with minimal pricing concessions. However, most firm counter offers continue to see some consideration, especially if stock is on the ground.

As this week progresses, we can expect to see continued pressure for prompt material and mixed-load varieties. Mills will continue to try and sustain pricing but are beginning to relent hoping to entice interest in the near term. As fickle as purchasers remain, most will continue to hold out for a perceived market bottom.


Treated Lumber

We’ve continued to see more treated material flowing out into yards to get the season underway. There have been some reports that early-season activity has been decent.

We anticipate stability in the treated market as some of the numbers have already been pushed up on a cash basis above the early booking program numbers, as mills look to capitalize on what they anticipate to be a stronger market than perhaps some were expecting.

Time will tell if the strengthening in treated numbers will hold firm. At this point, we still need some time for that market to materialize.


MSR Lumber

This past week saw lacklustre sales on MSR. Mills reported sporadic sales with most being in 2x4 and 2x6 2100 for delivery within 3 weeks. It continues to be 14’ and longer lengths that most truss plants are looking for. Those that were looking for 2x4 1650, however, had more options when it came to getting their desired tallies, and in some cases, were able to only pay a slight premium over NPS #2&btr.

Most mills still feel that demand is going to increase over the next few weeks and aren’t interested in selling further out than what they have on the ground. With the increase in demand, most sense that they will be able to achieve higher prices in the coming weeks/months.

Distribution sales continue to be quite strong. Truss plants, for the most part, remain busy quoting and orders are coming in slowly. As those quotes are turned into orders, most need to cover that material quite quickly as on-ground inventory at most plants remains light.

We are well stocked on most MSR items. Please don’t hesitate to call or email for an update on pricing/availability.

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Douglas Fir & Larch MSR

The DFL MSR market saw pockets of increased activity through the previous week, but overall sales volumes remained modest and focused on prompt loads for sold work. Mills have continued to hold as close to ask prices as possible. However, counters of $10-$30 have been needed to generate sales on the mills’ preferred tallies in many cases.

Availability out of mills continues to be somewhat unfocused and some accumulation has been seen, particularly in short-end heavy tallies. Tallies heavier in 14’ lengths and up remained in the tightest supply and of greatest interest to buyers, holding close to mill ask prices.

Favourable pricing on DFL 1800 in comparison to SPF 1650 saw some buyers swapping species. It was the end of an impressive 20-week run of printing flat to up on 2x4 2400, as it slid -$5 along with 2x6 2400 and 2x4 1800.

While mills and buyers alike anticipate increased demand in the coming weeks, both remained content to work in the prompt to 3-weeks out time frame. Manufacturers in the field report positive levels of job quoting on spring work and mills will continue to carefully weigh their ongoing production volumes against current takeaway. Meanwhile, they will assess upcoming demand through the coming weeks in an effort to maintain pricing levels as they wait for a spring runup.


Panel Products

Plywood

Slow plywood sales in the west persist as buyers are sensing a little more downside to come in forming a potential bottom.

Reports on inventory levels and upcoming needs are mixed across the west. No real direction in terms of demand has been established.

Orders files range from late February to early March. Mill production and order files have helped to keep the discounts being offered to a minimum.

OSB

OSB to start this week has remained somewhat quiet as the market watches to see what outcomes may develop in the coming weeks. Many have speculated prices will continue to erode over the short term in hopes of finding a bottom some time in the next month.

One producer in the west did take on some discounted business for early-mid March shipments in the early part of last week but activity was muted beyond a day or two.

Order files range from late February to early March with 2 producers in the west continuing to have no cash offerings into Western Canada.


Market Experts

Lumber is what we do! Our traders are in the market all day, every day. Let us share our knowledge with you, if you have any questions, please give us a call.

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