Cold Weather Cold Markets as the WRLA Looms With Consumers Waiting to See What the Show Brings
We’ve already reached the mid-point of January and it’s been a relatively quiet year thus far. Cold weather across a large swath of North America this week has put the brakes on consumption and the overall tone in the market has continued to be fairly cautious. At this point, we would suggest that the market is flat and stable.
Mills entered the current week once again falling back on reasonable order files and a moderate sales pace that has started 2024. There certainly hasn’t been robust takeaway, however, at the same time, we continue to see relatively light supplies coming from most producing mills. There really hasn’t been an issue with the buildup in inventories as we came out of the holiday season. However, a couple more weeks of this type of pace, along with slightly improved weather, and we could be setting up for the opportunity to start seeing a little bit more inventory for the first time in a while out of mills.
We do get the sense, however, that mills were anticipating trying to get through this slower period while consumers, as we get to the latter part of January, would no longer be able to hold off in beginning to look at replenishing inventories for upcoming February business.
We have yet to see a real push in this direction with inventory position-taking continuing to be relatively lean. However, the feeling continues to be that inventories in the field are quite thin at the store level.
This week’s upcoming WRLA in Western Canada is certainly also having an effect on takeaway as many are getting set up to travel and anticipating what opportunities they may see at the show itself. This is something we’ll be monitoring closely, as we will also be participating in the show. If you are going to be there, please come swing by to say “Hello!”
Print last week was flat across all dimensions for the most part, which also led some to feel that we may be in a situation where we could start to see numbers draw back somewhat.
Again, mills feel that they may be in a position where they do not have to pull back with lean inventories, but we have seen the market shift quicker than anticipated in the past over this time frame.
Supply & Distribution Update
Freezing temperatures experienced across the prairies last week effectively stalled the market. Mills lessened production and held firm on their listed pricing. Buyers had few immediate needs and largely stayed on the sidelines.
With little takeaway at the mill level, mill offering lists have grown ever so slightly while maintaining a respectable 3-week order file. Buyers continue to digest recent purchases while looking towards secondaries for market direction.
Distribution has proven beneficial for those covering their immediate needs but continues to operate with idle capacity. Although inbound and outbound shipments are less common, the challenges of managing freezing temperatures come with strife. Both equipment and employees have a difficult time working at the usual standards, resulting in extended lead times. As buyers continue to search for the direction of the market, it is increasingly more difficult to build full truckloads with modest takeaway.
Lead times have been extended as a direct result of the less-than-ideal road conditions and freezing temperatures. These weather conditions are very hard on heavy equipment and many distributors have had issues keeping their trucks warm. The availability of substitutes has been greatly beneficial in lessening the negative effects on lead times. Most are understanding of production and shipment delays due to weather and many buyers are extending contractual timelines as jobs get pushed back.
News We Are Following
Canadian Wood Product Sales Increased By 0.6% in NovemberLesprom
Resilience was seen in the Canadian wood product sector with a 0.6% increase in sales. Numbers reached C$3.281 billion in November 2023, as per Statistics Canada’s monthly manufacturing report. But year-over-year stats showed a decrease of 7.8% in total sales for wood products.
Did the Mild Winter Weather Result in an Extended Construction Season?Angela Gismondi - Daily Commercial News
The stretch of extreme freezing temperatures aside, this winter has been very mild to this point, allowing construction projects to continue into the new year.
“In an area of the country that can be so negatively impacted, any extended period of reasonable temperatures is a bonus,” said Bill Black, president and COO of the Calgary Construction Association. “We’ve gotten to the second week of January without temperatures which would require you to shut down a site. That’s six weeks or more of construction time that has allowed some folks to catch up where they may have been behind or even get a little bit of a head start on some other areas.” Although, there are other factors at play.
Economists See 'Turning Point' in Housing Market This Year as Interest Rate Cuts LoomThe Canadian Press
The Canadian housing market has been rife with cautious sentiment and shifting expectations centred around rising interest rates throughout the last year. But some economists believe 2024 is poised for a rebound with the Bank of Canada expected to begin cutting the key interest rate as early as the second quarter. “We’re obviously watching for a turning point in the market,” said TD Bank economist Rishi Sondhi. “We’ve had some, I would say, weaker sales and price activity over the past few months…We’re getting some indications that the market, at least from a demand perspective, is starting to turn around.”
We Need to Invest in B.C.’s Forestry Industry as it TransitionsLinda Coady - BIV
There are major concerns in the B.C. forestry sector, not the least of which is a serious timber shortage for mills. The province’s Premier, David Eby, and Forest Minister Bruce Ralston are committed to working through this transition period for the industry by cooperating with First Nations, labour, and local communities to establish a stable supply of fibre for a more sustainable future. The three strategies on the table include:
- The province committing to revenue sharing with First Nations
- Getting a better understanding of the causes of fibre supply disruption
- Coming together on climate change
The dimensional market certainly was quiet last week from start to finish. Again, we say relatively muted activity, mostly because of the extremely cold weather.
Those customers who were looking to purchase were shopping their needs quite aggressively on specific tallies. Although there continues to be limited availability in a meaningful way at mills on a national and regional level, there is product in the hands of wholesale distribution and there are mills that do have material readily available, so you can get your needs covered.
The price range tends to be relatively narrow, although if someone does have something purchased from some time ago, they could have a pricing edge and may look to take advantage of that to gain sales in an otherwise quiet market.
In 2x4, print was flat as we continued to see 16s command a premium over random. This conversation about whether 16s can continue this pattern has been happening for a number of months now and they are holding. If we do get an uptick in takeaway in the foreseeable future, we anticipate 16’s will continue to show good strength.
Pricing on 2x6 certainly felt stable yet again as 6” continues to be trading above print level at many of the regional mills that are showing some. There certainly continues to be limited availability for relatively prompt 6”.
2x8 & 2x10
Both 2x8 and 2x10 have been modestly sparse on lists, and again, we haven’t seen a tremendous amount of takeaway or demand over the last few weeks. Stable and flat with perhaps a little bit of softness in the numbers is expected if we don’t see an uptick in takeaway in the next few weeks.
Yet again, 2x12 continues to not play a big factor in the overall market. We are not seeing much on lists but demand simply is not there for large amounts of 2x12 at this point.
As with all things in the lumber market to begin the new year, purchasers have again maintained a cautious approach in covering their stud needs this week. Modest interest remains, however, purchasers are still timid in reaching too far out, instead placing heavy reliance on secondary distribution.
Mill offering lists continue to appear slightly less robust, with many mills currently maintaining a consistent 3-week order file in both 2x4 and 2x6 9’ trims, with prompt options focused on 2x4 8’. Current supply and demand have found a somewhat level ground, as mills have held well to established pricing for yet another week.
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, again bolstered by order files steadily creeping into the leading month. As fickle as most purchasers remain, this growing gap in availability, especially in both 9’ trims, should see demand hold steady through January.
With the deep freeze across Western Canada, we didn’t see a lot of change with regard to demand over the past week. Most plants had enough material to cover their short-term needs and were willing to wait for warmer weather before purchasing for their yards. What little that was purchased was filled mostly by LTL shipments out of inventory. We do expect the next 3-4 weeks to be busier as most truss plants are reporting more quoting and turning those quotes into orders.
Items to keep an eye out for continue to be 2x4 2100 (longs especially) and 2x6 2100 (16’ and longer). As well, 2x8 remains in tight supply, but we are well-stocked. A heads-up is always appreciated if there is a specific tally that you will require.
Please don’t hesitate to reach out if there is something that you would like an update on.
Douglas Fir & Larch MSR
Winter weather has come to us at last and with it, the seasonal slowing of material usage in the field, reduced takeaway from mills, transportation snarls, and delivery delays.
DFL MSR has continued to show overall price stability and has generally held its value. The exception is 2x4 1800, which once again slipped -$5 week to week and continues to reflect the volume of material available at mills and current demand for that product. As well, 2x4 2400 remains a stalwart item, and 2x6 1800 & 2400 saw an additional +$5 on the week, with notable spotty availability in 16’/18’/20’ mill to mill.
Mills continue to judiciously manage their production and are finding a balance between supply and demand. Mills lists are presenting a broad range of available material, however, volumes have slimmed in the previous week. Oversupply continues to be of little concern, and in fact, the contrary looks to be more likely.
Field inventories remain bought for short-term needs and require regular resupply. When the wood bought in late ’23 and early January has been worked through and the weather has improved somewhat, we may see additional tight spots in overall availability as well as upward price appreciation.
Currently, with the winter weather in mind, anticipate the likelihood of a week's delay in shipment when considering your needs.
As always, keep your eyes peeled and stay in regular touch with your trusted CEWP trader for opportunities as mills look to maintain healthy order files.
Plywood did gain some attention, albeit briefly, at the end of last week, as many distributors were speculative on buying blocks ahead of the WRLA buying show in Western Canada this week.
Small volumes were reported, as most stayed on the sidelines citing there wasn't enough of a discount being offered to warrant stepping in. Random lengths print did come off Friday more than most had anticipated. This was based on what discounts were being offered days prior, leaving buyers somewhat perplexed.
This week it has slowed right off with very little inquiry as buyers wait for the WRLA show to see what offerings may be had.
Cold temperatures in the prairies have staved off any inquiries or major purchases of OSB. Many buyers are also sitting on the sidelines as purchases for February have been covered.
Mill offerings on cash continue to be scarce as many use contract wood to cover immediate needs. Prices remain flat on print and cash continues to be at a modest premium to print.
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 services solutions.
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