Transportation Has Improved, but Backlogs Remain
As we wrap up our last update of March and look forward to April, there is certainly a market in front of us that is leading most people to exhibit a healthy amount of trepidation about where this is headed.
We saw March flatten, hitting a peak and then dropping with respect to print. Throughout the month, the continued uncertainty and gap in pricing only grew.
To start this week, mills came out with new numbers, dropping from the week prior, but again, we continue to see a very large gap in ask levels across various mills. In addition, there has been more reporting of counteroffers being entertained, and some of the larger mills that have been holding their positions are certainly starting to open up to larger counters if shipping is feasible.
At the same time, smaller mills, as well as the distribution community, seem to be also opening up as we are hearing lower numbers being put together on a case-by-case basis throughout all dimensions.
Looking forward, consumers are exercising extreme caution, feeling that there is more downside pressure to come as we roll into April.
The comments about impending purchasing that needs to be done continue to swirl. However, the timeline is in question. Will we see this come to market within the next 1 to 2 weeks to firm things up, or will it be more downward pressure as we get into the mid-point of the month?
Supply & Distribution Update
Slowly but surely, with the emphasis being on slowly, the delays, bottlenecks, slowdowns, and holdups we've experienced over the previous months are incrementally improving and the multitude of late deliveries are slowly creeping their way through to buyers. By no means are we in the clear of challenges the supply chain has thrown at us over the last 6 months, but there is hope that we may be through the worst of the difficulty in getting material delivered in a somewhat timely manner. However, balance that thought out with fuel prices and freight rates continuing to rise and likely remaining at high levels for the foreseeable future.
Regarding rail, we have reports of average rail velocities improving, approaching historical averages, and mills are seeing slightly more cars available. Trucking has improved, but we have seen an increase in the number of cancellations on the delivery of loads, likely to capitalize on more profitable loads and preferable lanes.
Mills, both regional and national, are currently showing strong levels of material on offer in #2&btr and MSR. Shipments are listed from prompt to 4 weeks out. In some cases, a growing amount of prompt material is available, primarily at regional mills.
Distribution has remained very busy as buyers continue to work to fill holes in inventories caused by late loads and high prices.
News We Are Following
Lumber Futures Fall 22% In March as Housing Market Cools on Soaring Mortgage RatesMatthew Fox - Markets Insider
March has been a path downward for lumber futures, losing 22% off its early-month highs amid rising interest rates and a housing market that has finally decided to take a breather, falling 6% itself year-over-year.
"We see a growing likelihood that the housing market will start to move from one of significant excess demand, which has fueled the house price and construction surge, to one where we are in better balance," ING's chief international economist James Knightley said.
Province of Alberta Aims to Recruit 600 New Commercial DriversJosh Aldrich - Calgary Sun
The pandemic has wreaked havoc on the supply chain over the last 2 years, and Alberta has felt the pinch, continuing to lose truckers amid an already tight trucker workforce. But the province's Driving Back to Work grant program is hoping to change that by helping to bring 600 truckers back to the roads to make a dent in the supply chain crunch.
Chris Nash, president of the Alberta Motor Transport Association says, "We need to get butts in the seats," he said. "We have to find a way to make this a career path and a long-term solution to how we can create that career pathway — recognized credentials, more efficient ways of getting the education — and this touches the bases on all of that."
New Old-Growth Logging Rules Threaten Nakusp Mill’s Viability, Owner WarnsJohn Boivin - The Valley Voice
Jobs in the Nakusap community are at risk, and the local mill owner and the mayor are urging the province to do something about it with the new old-growth rules hitting the community hard. Dan Wiebe, owner of Box Lake Lumber is looking for a 1-year deferral on the new rules, “We’re looking at a one-year window to do a transition. We have already set some things in place to work towards [relying] more on secondary wood.”
The dimensional market remains the focal point at this time. The downward pressure is being felt across all widths, with more scrutiny clearly focused on the narrows.
There is quite a range of pricing in the marketplace, which is leading to a lot of confusion from the consumer, the contractor yard, through distribution, and even to mills.
The 2x4 market garnered the most interest last week, as well as the most price variance. We expect to see this trend continuing while we roll forward as distributors and those that have a position look to keep moving material. Right now, the gap between print pricing and actual business remains very wide.
As for specific lengths, 16’ continues to be the most sought after and holds a premium through print and in the market. However, there have been some reports at the distribution levels looking to move material and getting aggressive even on this sought-after length.
The 6" market didn't garner the same attention last week as it was quieter overall. There does seem to be a bit of a buildup of 6" on mill lists, happening both regionally and nationally. We expect downward pressure on 2x6 to continue throughout the week.
2x8 & 2x10
On 8” and 10”, we saw a little less interest last week, but also less material showing up on lists. Once again, as it was when the market was moving up aggressively, the main focus was on the more narrows. There does seem to be reasonable amounts of 10” in the marketplace, while 2x8 seems a little more sparse. However, price concessions are probably in the cards there as well.
In similar downward-trending markets, 2x12 is not finding much attention. We anticipate 2x12 to be soft as we roll forward over the next short period of time. The market is going to have to really find some stability overall to help 2x12 approach a level.
Widespread caution continued to permeate the stud market this week as purchasers further entrenched their positions on the sidelines. Buyers remain apprehensive about covering much more than their near-term requirements.
Mill order files have been held to mid-to-late April for the second week in a row. Pricing decreases remain moderate, but with such meager interest, expect discounted offerings will develop across all trims as the week progresses. Purchasers looking to step in and replenish inventory will still find issues with shipments and prompt availability. However, they will find mills more open to listening on counters as they hope to elicit new interest and pin down elusive demand.
Expect another week of fickle demand as buyers remain determined to maintain their current stand-off of "wait-and-see". Many are woefully underbought and clearly hopeful for some pricing reprieve to develop in the coming weeks, pressuring mills to entice them back with deeper discounts. It's a tug-of-war we have been expecting for weeks and should provide ample opportunities for decisive purchasers to buy into the dip in the coming weeks.
Truss manufacturers continue to be busy quoting and adding to their order files. Most are still buying only for their immediate needs, as no one wants to be holding inventory at these prices.
Over the last week, mill availability has increased, MSR sales have remained strong, and some items are still difficult to find. Truck and rail availability, however, seem to be getting better.
Most mills are quoting out 2 to 3 weeks on most MSR items where previously, they were closer to 3 to 4 weeks. Because of this, we are seeing more flexibility on where mills will sell, but if they are able to ship and material is on the ground, mills are willing to sell below their list prices.
We remain extremely busy on LTL MSR shipments out of our inventory locations, but ship times are improving, especially on the shorter hauls.
The panel market is taking a bit of a back seat, as everyone's focus has been firmly in the dimensional sector over the last couple of weeks.
It was a flat week on print for OSB, although plywood, to the surprise of many, printed up 1%. This seems to be more of an anomaly, and we would suggest that plywood overall has remained flat.
The plywood market continues to be fairly tight, with mills remaining limited on their cash offerings. One of the major producers came back to market last week on all forms of shipment for the week of May 16th. This, we believe, is a combination of order file, as well as the shipping situation. However, with an order file into mid-May at this point, we are very hard-pressed to make a case that we will see a pullback on plywood as we move through April.
Shipping issues do continue, although we can say they have improved. Rail velocity reports have seemed better over the last 2 weeks, so they are working through the backlog on that end. Van shipments are probably one of the weakest spots out east right now. And Super-Bs are certainly better than where they were, but they are still spotty into certain areas with backlogs still being reported, trying to get through material that was sold quite a while ago.
Of note, there certainly has been a strong demand for ½” standard Fir, and that item, in particular, is certainly hard to come by at the mills and through distribution.
OSB continues to show signs of weakness in pricing, with print flat again for the third consecutive week. Pricing has become two-tiered with distribution offering at a significant discount to move off any on-ground inventory.
Dealers are reporting they are under-bought and expect to see an increase in demand come April. Mill offerings for open market wood that have been non-existent over the past 3 months are now readily available on a price time of ship basis and they have not been accepting the deep counters being offered through distribution.
CEWP Is Here for You
We acknowledge this market is providing many challenges to our customers. The risks associated with such a volatile market do not go unnoticed by our group. This is certainly going to be a difficult time to navigate, and as always, we ask that if you have any questions or you are looking for any further clarity, please reach out, and we would be more than happy to discuss further any of these market implications during these challenging times.
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