Balanced Supply and Demand Along with the Holidays Keep the Market Quietly Moving But Will There Be Flowthrough?
Happy New Year! Welcome to 2024 and our first newsletter of what we hope to be a prosperous year for all.
There was a bit of uncertainty as to whether we would have much to speak about in this opening newsletter coming on the heels of an abbreviated week on the Christmas break. However, the activity and strength in print the week prior was followed by another strong print last week, coming off a busier shortened week than many expected to finish the year.
Although overall there wasn’t much happening in the markets, there were pockets of activity and the mills that were open for business reported a continuation of interest in a variety of materials.
A lot of this could continue to be attributed to the fact that there was so much downtime and much supply has been pulled off the market, which has certainly helped to maintain a balanced supply and demand. We have certainly noticed that there has been an uptick in activity and now all eyes will be squarely focused on what kind of followthrough we see on the takeaway side in the first 2 weeks of January as we get back to business as usual.
The sales pace that mills experienced should keep supplies relatively tight. So if we do see consumers coming back to perhaps realize their inventories are thinner than anticipated, or there is a slight uptick in new business, the positive activity that we saw to finish 2023 could roll into 2024.
It certainly will be a time when the market will be watching for these signs.
Supply & Distribution Update
The usual holiday downtime contributed to a quieter pace in softwood lumber markets across North America last week. However, momentum from a late December flurry of activity fueled moderate gains that are expected to hold.
Mill supplies were thinned and many producers were off the market with mill offerings often limited to broken tallies and tighter supplies helping to keep prices on a more firm footing.
Buyers replenished as availability allowed, but many stayed on the sidelines while waiting for a market direction to emerge in early January. As supply continues to be limited, firm pricing will continue.
Distribution showed little activity over the holiday season. This was due to the uncertain market direction and previously purchased material allowing consumers to get through the holiday weeks. Customers continue to fulfill their near-term needs and the current week has already seen an uptick in activity. With the WRLA trade show two weeks away, some customers have opted to wait for the show before issuing any new purchase orders.
Transportation continues to operate above seasonal expectations. The continued warm weather provides ideal road conditions for transport organizations. The movement of materials comes with relative ease and lead times continue to be favorable for customers.
Fuel pricing has remained relatively unchanged in the past few weeks. The province of Alberta fuel tax has once again been implemented and all drivers are seeing pricing at the pumps increase. This will affect those organizations stationed in Alberta with increased operational costs.
News We Are Following
Bill Ackman Bets Fed Will Cut Interest Rates as Soon as First QuarterAmanda Cantrell, Bloomberg News
Billionaire investor and Pershing Square Capital Management founder, Bill Ackman, is predicting that interest rates may be cut as early as the first quarter of this new year. “We’re betting that the Federal Reserve is going to have to cut rates more quickly than people expect,” Ackman said in an upcoming episode of The David Rubenstein Show: Peer-to-Peer Conversations. “That’s the current macro bet that we have on.”
How the B.C. Wildfire Service is Preparing This Winter for the 2024 Wildfire SeasonAkshay Kulkarni - CBC News
With record wildfires seen in 2023, the province of British Columbia is taking steps to prepare for what’s to come in 2024. Pile burns, prescribed burns, and active fire monitoring are happening right now as we get into the deep winter cold and will progress through the spring. Wildfire destruction has stretched into the winter and with that, activities are being stepped up to deal with holdovers or “zombie fires” that remain dormant underground while waiting for the heat of summer to reignite.
North America Softwood Lumber Market New Year Projection: 2024Madison’s Lumber Reporter - Newswire
With the uncertainty seen in the market over the past few years, along with stumbling housing construction in the second half of 2023, the wait for price declines has prompted buyers to hold off from making purchases for more than what they have immediately needed for their inventories. But supply and demand remain balanced going into 2024 thanks to mill curtailments through limited demand.
The dimensional market finished 2023 with relative strength on a shortened week with a lot of downtime and mill closures.
We saw upward momentum through the latter half of December based mostly on continued reduction in capacity. However, there was a noticeable uptick in demand that helped to solidify pricing across the board.
The futures market was also a factor as we did see a continued strengthening approaching the end of December, which probably had a psychological effect on many, helping to push the cash market up.
The 2x4 market seems to be relatively balanced to start the new year. We’ve seen a lot of the smaller regional mills have success with selling production week by week, keeping numbers relatively stable with some slight upward momentum.
At the same time, with print moving up, the larger national mills crept their number up and found success selling at the higher levels, albeit on lesser volumes overall.
Look for 2x4 to remain stable with some potential continued upward momentum as we begin the new year.
The market on 2x6 remains scant from an availability standpoint, which was prevalent through most of December. Pricing has also eeked up over the last couple of weeks and those mills coming out with prompt 2x6 are looking to command a premium over the market.
Again, to start the year, we anticipate 6” to have a strong showing and remain firm into mid-January.
2x8 & 2x10
Both 8” and 10” are getting pulled along with the rest of the market. We saw an upward tick on print with a lesser availability.
What we did find at some mills was scant availability and firm to slightly upward pricing momentum.
The market for 2x12 remains flat and firm. There is not much availability from mills and we anticipate this to continue through January.
Strong stud demand is expected to remain this week, riding sustained momentum built over the week preceding the holiday break. Many producers have pushed order files out now 3 weeks on most trims, content to not extend much further than the third week of January.
Mill lists are again showing periodic gaps in both #2&btr and Stud-Grade. Most new offerings, especially in the ever-elusive 2x4 9’, won’t sit idle on lists as it is expected purchasers will be more comfortable tendering POs at these newly established levels.
Distribution channels will again continue to see greater interest, further taxing availability for prompt supply that was relied upon heavily leading up to the New Year. So looking at this recent trend, the market feels emboldened again with purchasing groups expected to cover near-term needs sooner rather than later.
Mill production has not been driven too far out of reach, but perpetual demand and firm pricing in the last two weeks of 2023, have certainly diminished most current downside risk.
Look for stud demand to continue to build up from the late run that closed out a subdued 2023.
The treated booking season is in its end stages as many buyers wrap up their purchases for spring shipments. Takeaway leading up to the holiday week continued to be modest but certainly more than we typically see this late in the season due to unseasonably warm weather in Western Canada. Buyers are forecasting another steady year for spring 2024.
There weren’t any significant changes to MSR over the Christmas break. Most mills continued to lean on order files and much like #2&btr, we did see a slight push upwards on pricing just before the break.
We are expecting to see availability remain tighter on 2x4/2x6 2100 and 2x8 MSR, especially the long lengths which continue to appear quite sparse. Most suppliers are quoting out 2-3 weeks at this time, so if there is material that you need to be covered for January, it’s best to look at covering those needs sooner rather than later.
Douglas Fir & Larch MSR
Again, there have been no major changes over the holiday season. Long lengths (18’ and 20’) remain spotty for availability. Some build-ups in specific lengths have presented buyers with value if able to make adjustments to maximize it. However, activity in the lead-up to Christmas eased some of the pressures at many mills resulting in more balanced tallies and less of a discount for straight lengths.
Plywood remained flat on price over the holiday week. It continues in its 7th week at the same sustained prices.
All order files are extended into mid-late January and contract loads for prompt continue to flow with little backlog.
Traders are sensing some underbought positions for January with the feeling that a good week or two of sales may push the needle.
OSB also remained fairly muted over the holiday. Many buyers had tried to scoop together loads for late January prior to last week and order files are now into early February. Western mills remain tight on cash wood offerings to start the year and prices are holding firm.
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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