Will pricing begin to soften, and by how much?

As we enter the mid-point of September, the early back-to-school plans are well underway and most individuals are trying to balance their household obligations as they try to get back to some semblance of normalcy. At the same time, everyone is trying to take a look at the markets to assess what is going to happen as we roll through September into the fall months, where winter will loom in our minds and in the air.

We have seen a market that has slowed overall, with random print showing signs of a plateau and possibly a peak. Now the question on the minds of many is whether or not pricing begins to soften from here, how much we can expect, and how quickly it will happen. So many are trying to assess these very questions as they try to make their purchasing decisions for the fall and as prices remain at record-setting levels. This is all causing a lot of cautious feelings and confusion. 

The #2&btr market, as well as panels, continue to show much strength, and the anticipation is that we may see things start to soften but the hope is that it will be in a more measured manner than we saw in 2018.

 

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Dimensional Lumber

Summary

The dimensional lumber market is showing itself to be splitting into more of a tiered system. We are seeing some of the larger mills on the national scale still showing strong order files out to the mid-October range, whereas some of the smaller mills, that traditionally pop on and off the market with prompt material, are trying to find a level to move product quickly.

With that said, demand has certainly pulled back and we are starting to see more spread between mills and between mill systems, as well as distribution, and the wholesale community. We anticipate this to continue as we roll forward, but as noted previously, it still feels like there is a decent amount of demand to feed takeaway and keep the market from shutting right down.

2x4

In 2x4 #2&btr, prices are softening somewhat, depending on the tally. We are seeing the 2x4 8’ market show signs of weakness after a huge increase in the product through the summer months, as the cash and carry DYI market was so strong. This is one item we can see a pullback on sooner than some of the other lengths. As well, 2x4 16’ continue to hold a strong premium over randoms.

2x6

The 2x6 #2&btr market appears to be quieter over the past week to 10 days. Again, there is some prompt material being offered out, although at numbers that look quite strong. Mills with order files are content to sit on their levels at this point, but we do see a little bit of opportunity on 2x6, albeit to a lesser degree than some may be expecting.

2x8

It certainly is still more difficult to find 8” material. We are not seeing a tremendous amount of production at the moment and although the product is starting to appear on lists, it is not in large quantities. Those that are looking for 2x8 material, typically need it in a relatively prompt fashion, so mills that do have it, are able to put the business together, but not in large volumes.

2x10

In 2x10, we have seen more weakness than others and more availability, as we mentioned last week. Takeaway also appears to be very muted at this point in time. Look for price concessions for mills if they do have prompt material. But mills with a decent order file will not look at that option until they get closer to their ship dates.

2x12

The 2x12 market has been quiet over the last couple of weeks with little activity. There is some 2x12 popping up on lists with numbers that are firm to flat, and again, there definitely could be some room to negotiate for prompt material, but not in robust volumes.


Studs

Summary

Stud mills in the Pacific Northwest are sending employees home as a precautionary measure as wildfires work their way through the region causing air quality concerns as well as dangerous conditions in certain areas. As those stud mills remain down, it may put pressure on Canadian producers in the immediate to medium term.

The item of choice at the moment appears to be 9’ studs with 2x6 leading the way on demand. We are seeing a lack of availability on all 9’ studs and we can expect this to continue for the next four weeks or so.


Treated Lumber

The treated market remains a major challenge. In speaking with some of the producing mills, they are trying to play catchup, and they are somewhat succeeding but they remain a few weeks behind schedule in trying to meet demand that has been strong throughout the entire season. 

We anticipate the treated market to really be a challenge all the way through the rest of the season, through September and October, as it wraps up.

The bigger question for treated surrounds next year and what the market will look like. With current fibre prices being what they are and many of the treating mills needing to start making decisions on purchasing for next season’s demand, there is much confusion and uncertainty in trying to assess where pricing levels are, as well as where they will need to be to open next treated season.


MSR Lumber

Western mills are having difficulty acquiring 2x6 2100, and in turn, we are having trouble getting material into our reload, as the product remains extremely difficult to find, in fact, it’s almost impossible. With that said, please provide as much lead time as possible on 2x6 and 2x8 MSR, as we head into building season with agricultural builds starting to get the green light.


Panel Products

Plywood

The plywood market, after having a bit of a lull 2-weeks ago, has provided a surge of activity once again, which was led by the wildfire situation on the American west coast. 

Prior to the wildfires taking hold and spiking pricing up again, there was still the sentiment that demand was quite strong on plywood. Comments were noting that US takeaway was quite robust, and the anticipation was that there would be more takeaway even as we have already pushed order files into November. The fire situation has obviously exacerbated this and mills pushed prices up fairly aggressively last week and order files are now into the last week of November. So with mills continuing to be behind on shipments, the hope is that they will be caught up by that time, but if things do continue, we are already talking about December shipments and looking at having limited plywood left for 2020 very soon, which is a very interesting notion in mid-September.

OSB

OSB continues on its strong push upward in cost and out on delivery. Mills have established a production week now of mid-November, so we are seeing early December shipments for most producers. Prompt offerings remain almost nonexistent and many contracts have been spoken for on a PTS basis (Price Time of Shipment), as consumers look to cover off their needs through the fall. 

We should see Tolko back on the market and offering mid- to late-November production. It appears that the price will stabilize here but another few rounds of buying will inject continued upward pressure into the mix. 


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