January 28, 2022
CAUTION – BEAR CROSSING! As mentioned in last week’s report, the bears were swinging hard, and the bulls were placed on the defensive for the first time in nearly 4-months. So now the BIG QUESTION on everyone’s mind is: “Did the shifting tone of the lumber market follow through and take shape this week?” To find out the answer to that question and more, simply dive in and explore all the happenings that transpired this past week in the place I like to: ‘The Wonderful World of Wood.’ Enjoy…
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This week, a dose of reality hit the lumber market as the non-stop continual charge higher seemed to arrive at a stalling point. The aggressive purchase inquiries from just a few weeks back hit a digestion point this week, as buyers took a much more restrained approach. The combination of wintry weather, interest rates, inflationary concerns, and the severe pullback in lumber futures were but a few areas that helped bring out the bearish tone. A two-tiered market began to shape as wholesalers looked to move inventory ahead of a potential near-term correction. For the week, 2×4 2/Btr KDHF inched higher by a little over 1/3%, severely undercutting the previous week’s more than 2-3/4% rise. Over the past month, 2×4 2/Btr KDHF has posted gains of more than 12-3/4% while it stands more than 35-3/4% above its late-January 2021 level.
Concerns over a momentum shift brought forth caution in the eyes of buyers as January came to a close. For the week, 2×6 2/Btr KDHF finished unchanged in seemingly forever, a definite shift versus the previous weeks 5-3/4% gain. Looking back over the horizon, we see that 2×6 2/Btr KDHF is up nearly 13-3/4% over the past 4-weeks while positioned precisely 33% above the price point posted exactly one year ago.
The market’s downward shift transitioned into the wides, as a broad weakening trend seemed to infect all product lines. However, once the week was said and done, 2×10 2/Btr KDHF hit the pause button compared to previous weeks, as it coasted into Friday unchanged, after coming off of last week’s 3-2/3% gain. For the month, 2×10 2/Btr KDHF finishes up nearly 20-1/4% and closes almost 57% higher than where it stood one year ago.
A similar trend was present with 2×12 2/Btr KDHF, as it also saw a market pullback compared to the previous week’s activity. As the waning days of January passed, 2×12 2/Btr KDHF posted no gains, finishing unchanged, a complete price deceleration compared to the previous week’s 1-3/4% effort. As a result, 2×12 2/Btr KDHF closes out the last 4-weeks more than 15% above its late-December 2021 level while finding itself upwards of 40% above its trading level from one year ago.
In contrast to most lumber products, a carryover from last week’s price increases was present with Green DF Timbers. As a result, Green DF Timbers jumped more than 5%, adding to last week’s 8-1/3% surge. The past month has seen Green DF Timbers add upwards of 33-1/4% above its trading level from late December while remaining positioned nearly 10-3/4% above its late-January 2021 price point.
TWENTY-TWO AND COUNTING! This marks the total week count in which 2×4 Western S-P-F 1650fb MSR has posted gains since bottoming out last fall. As stated in last week’s update, the continuous streak may be nearing the end, but that week has yet to arrive. As a result, 2×4 Western S-P-F 1650fb MSR rose just shy of 3/4%, a sizeable drop compared to the previous week’s more than 3-1/3% gain. Additionally, the past month has pushed 2×4 Western S-P-F 1650fb MSR higher by more than 12%, while it stands 37-1/3% above its late-January 2021 level.
NO CHIRP, CHIRP YET! The canary in the coalmine has yet to sound off, as a soft rounding top seems to be forming. It is good news for all, as it looks as if prices will soon retreat, AND I will not have to reformat my stud graph after all. Yeah… Order files slowed as pricing rose, albeit at a minimal pace. As a result, 2x4x8′ PET KDHF Solid Studs added just over 3/4% for the week, dramatically slowing compared to last week’s 3-3/4% effort. The past month has seen 2x4x8′ PET KDHF Solid Studs surge by 15-3/4%, as they now stand 55-1/3% above their late-January 2021 trading level.
CAN YOU HEAR THE FAINT CHIRPING IN THE DISTANCE? As hinted last week, I had suspected that the canary was indeed the taller counterpart in the stud category. 2x4x9′ PET KDHF Solid Sawn Studs offered up a little pump fake this week, providing us a peek into what is to come. At mid-week, 2x4x9′ PET KDHF Solid Sawn Studs added a fractional gain, only to give it right back leading up to the conclusion of the week. 2x4x9′ PET KDHF Solid Sawn Studs eventually closed the week unchanged, coming off of the previous weeks more than 1-1/2% gain. So the retreat has commenced, even though we ended up showing no net price change over the past week. For the month, 2x4x9′ PET KDHF Solid Sawn Studs find themselves nearly 10-1/2% higher while standing more than 33-3/4% above their price posted exactly one year ago.
Hesitation was sensed this week in the plywood category, as existing order files helped to prop up pricing for the time being, as new sales inquiries waned compared to previous weeks. As a result, 4x8x1/2” CDX Plywood buttoned up the week unchanged, a stagnant effort at best compared to last week’s mere 2% gain. As noted last week, the drastic rise of OSB has severely hacked away on the premium of ½” CDX plywood vs. 7/16” OSB. This past week’s action drove the premium of ½” CDX vs. 7/16” OSB into the single digits for the first time since early November. Something I would encourage you to keep an eye on. 4x8x1/2” CDX Plywood now stands 5-2/3% higher over the past month, while it is positioned approximately 32% above its price from one year ago.
Similar slowing activity was seen with 4x8x3/4” T&G UDLX Plywood, as it experienced caution entering trading this week as well. 4x8x3/4″ T&G UDLX Plywood finished the final week of January with gains of 1/3%, a touch slower than the previous week’s 2/3% effort. Year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing more than nearly 21-1/2% above its trading price posted from this time in January 2021 while remaining more than 7-2/3% higher over the past 4-weeks.
ALL HAIL TO THE KING! Once again, the “Commodity King” dominated the headlines as panicked buyers scrambled to find products to meet current obligations. Pricing raced higher, at double-digit percentages, as buyers scoured the market in their attempts to cover needs. Logistics woes continued and even worsened, as trucking was nearly impossible to find, leaving many unable to fulfill contractual commitments. As a result, a large number of producers waved the white flag, opting to simply remain ‘off market’ this week to eliminate dealing with the ongoing triage. However, the producer to the secondary wholesale market in OSB pricing continued, as hefty premiums remained. This week’s continued unrest helped boost 4x8x7/16” OSB’s price by more than 13-1/2%, slightly outpacing the previous week’s 12% rise. The king ends the past 4-weeks more than 55-1/2% higher and now sits 23-1/4% above its mark from precisely one year ago.
For the second week, the wave in OSB pricing helped to ruthlessly cut into the DISCOUNT of 7/16″ OSB vs. 1/2″ CDX, as it ended the week at 6.7%, a massive downward push from the previous week’s 17.8% mark.
The OSB floor sheathing woes were not as prominent as their thinner counterparts, but momentum continued north. For the week, 4x8x23/32” T&G OSB managed to jump by more than 9-1/3%, further cushioning the previous week’s 8% rise. Additionally, the past month has seen 4x8x23/32″ T&G OSB gain more than 37-1/4% while leaving it roughly 23-1/3% above its price point from precisely one year ago.
The discrepancy of the price activity of plywood and OSB helped shrink the DISCOUNT of OSB vs. plywood, as it more than halved the previous week’s mark, finishing at 6.1%, compared to last week’s 13.9% mark.
The momentum shift in lumber prices helped pull the reigns back on the scorching hot market, while sheet goods did their best to run wild. As the final trading week of January came to a close, my composite climbed by $45mbf, rising over 3.91%, as it closes in on the $1200mbf mark, finishing at $1195.7mbf, its highest level since July 2, 2021.
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THE TABLES HAVE FINALLY TURNED! It only took 22 weeks of rising prices before it arrived, as we see red font hinting at a market shift. As noted last week, the precipice and resting place has indeed come. Buyers took a wait-and-see approach, opting to let things unfold. As a result, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill was pushed back on its heels for the first time in seemingly forever, as it slipped by 2%, refunding the previous week’s 2% gain. Over the past month, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill has jumped higher by more than 14-3/4% as it now stands more than 40-1/3% above its price point from precisely one year ago.
The lumber futures front-month of March was battered this week, as the contract dropped by the expanded limit, three of the five trading days. However, a late-week bounce helped minimize the punishment, as a piercing below the $970mbf level caused a mini-rally Thursday and Friday. The March 2022 contract closed out the rough week with a 14.59% discount, double compared to the previous week’s 6-2/3% mark.
THE TEMPERATURE HAS CHANGED FOR NOW! As we look out to spring, the May 2022 contract’s momentum pushed lower as well, ending the week with a 20.59% discount compared to the prior week’s 14.92% discounted mark. The July 2022 futures to cash premium continued eroding, finishing with a 25.48% discount, compared to the previous week’s more minor 18.42% mark. A significant downward push was seen with the September 2022 futures to cash mark, as it ended with a 30.34% discount compared to last week’s 23.37% mark. The November 2022 contract also experienced losses, closing the week with a 30.92% discount, further expanding the previous week’s 23.37% discounted mark. Finally, looking into next year, the January 2023 contract wrapped up the week with a futures-to-cash discount of 33.33%, compared to the previous week’s 23.37% mark, another substantial retreat. Until next week… Shoe out!