Internally, we have spent a good deal of time assessing how coronavirus is affecting not only the global market but specifically the lumber market as a whole and regionally.
It feels like every conversation results in more questions than answers, and we are doing our best to try and make our way through a very challenging situation. As always, we would be very happy to discuss any concerns you may have about our outlook on the market. Feel free to reach out to us.
With that said, the market continues to have a great deal of uncertainty about the coronavirus and its impact. There are some that feel that reactions are being pushed too far, causing a pendulum swing in one direction. Others feel that there is more pain ahead with continued challenges. No one truly knows what is to come but it’s prudent to make the right decisions based on your specific company while trying to remove the emotion out of the equation.
Housing Starts Drop in February Raising Concerns for the Upcoming Building Season
The February housing starts numbers fell 1.9% from January’s seasonally adjusted total, coming in at 210,069 units. Urban starts were down in an identical fashion. The up and down movement from month to month has been ongoing for several months, and although much of the country was lower, Vancouver did see a slight uptick in their number. The big winner was Nova Scotia, with a 227% leap in housing start numbers month over month.
Lumber Markets Facing Challenges from Every Angle
From the beetle-infested forests in Europe and domestically, to the coronavirus outbreak, to a North American oversupply issue, the lumber markets are looking for answers on what’s next and how to handle it.
We are seeing a two-tiered market where most mills are continuing to fall back on strong order files as they hold firm at their numbers. At the same time, we have a volatile futures market that is being affected by the larger global market. Regional mill players are starting to look a little closer at their order files and moving some material.
As well, we have a secondary market that owns material and is looking to lighten their market exposure. Material is being offered out and moved well below mill ask levels. Volumes seem light in the secondary market but if softness continues we may see shorting begin to show up.
The market is fairly firm from the mill standpoint. Numbers are flat from last week at this point and it feels like customers are waiting things out to see where the market goes. There are offerings being made from secondaries well below replacement for those looking to cover short-term needs.
Certain mills are showing a little more availability but some of the larger players still do not have much volume to speak of. Numbers seem to be a little weaker than 2x4 in certain areas at the moment.
The market is spotty as it lacks the same level of production out of most mills. This has led to flat pricing ahead of an uncertain market.
The 10” ran up quite sharply with numbers holding firm. Print was flat last week. In trying to find 2x10 material, strong randoms may be a little more challenging in the marketplace, although demand has subsided from the peak seen a few weeks ago.
There is not much happening in 2x12 this week as the overall market demand is quieting down as a result of the general market downturn. The product is not a priority for many at the moment.
We saw some gains on 4” studs, based on the benchmark #2 stud list. 2x6 remains a little tougher at the moment. Although 2x4 104 still shows a premium, it does have the potential to slide off, yet mills continue to hold firm on their pricing at this point.
92” #2s are up $120/m from the start of the year, while 104s are up $200/m. 104s have been leading the way.
The gains on 6” have been more muted in comparison to 4” gains. 2x6-104s have seen more of a bump though than the 92” trim.
We have seen prices come off slightly, but due to the lack of availability on some items, mills are still able to hold on to their premiums a little longer than #2&btr.
Random print has come off on MSR, as is the case with #2&btr, but the difference in the exchange rate has roughly negated what little depreciation occurred. Mills still have decent order files (2-3 weeks on most items) and are holding firm on prices as best they can until they have prompt availability.
Demand remains strong on LTL MSR as more plants are looking to keep their inventory lean until their order file increases.
Please keep in mind that we have inventories across North America to cover your LTL MSR needs.
The panel market has been on a slightly better footing as we enter this period of uncertainty. Both OSB and plywood have been sitting fairly firm, however, there is also some caution creeping into these markets as a result of the current economic situation.
Mills are still sitting on an order file that is taking them out toward the end of March. With that said, activity has certainly slowed as mills are firm on their prices. We don’t anticipate a pullback in the short term on numbers. The hope from the sawmill perspective is that they will see consumers come back to the table prior to them having to start looking at price reductions to entice buying.
OSB is in a digestion period as a more moderate tone takes over from the frenzy of 3-4 weeks ago. Buyers are, in most cases, still waiting on purchases made on the way up and are now exercising some restraint. Order files are into the middle of April and in this environment, the pace of activity has slowed to a more moderate pace.
There is a two-tier market in place with mill ask levels quite a bit higher than Random Length Print. Buyers are able to grab contracts from distributors or out of distribution yards on an LTL basis at levels below mill cash levels. We seem to be on solid footing for about the next 4 weeks. If nothing major transpires, we may potentially see a pullback in mid to late April.
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, never hesitate to give us a call.
See what you've missed...