February 25, 2022

PROCEED WITH CAUTION! The market bulls maneuvered this week carefully, as a multitude of factors weighed on traders’ minds. Uncertainty of what lies ahead allowed for a slight momentum shift in the market’s aggressive nature as traders proceeded with caution. That was good news for buyers, as everyone is in search of a bit of relief from this year’s market pounding. On that note, I will cut my intro short, as this weekend marks the 28th wedding anniversary for my precious bride and I. So without further adieu, let’s cut straight to the chase and jump right into the place I like to: ‘The Wonderful World of Wood.” Enjoy..

This week, the bulls were out in force again, albeit at a lesser aggressive rate. Pricing continued to increase, as record highs for the year were posted again. Many factors caught traders’ attention this week, such as the Russian/Ukraine battle, rumblings of significant inventory build-ups at mills, and the ongoing logistics saga, were but a few that dominated the airwaves. The resurgence of bullish activity that restarted a few weeks back remained as pricing continued inching higher. As a result, 2×4 2/Btr KDHF climbed by more than 1-3/4%, a gentler rate compared to the previous week’s 4% effort. Over the past month has seen 2×4 2/Btr KDHF post gains totaling north of 6-2/3%, while it stands nearly 27-1/4% above its late-February 2021 level.

The market’s milder bullish effort was widespread as buyers took on a more cautious approach in the short term. The slower uptick in pricing brought some relief to buyers as the runaway market seemed to be catching its breath. For the week, 2×6 2/Btr KDHF added upwards of 1-2/3%, pulling back from the previous week’s 5% surge. Looking back, we see that 2×6 2/Btr KDHF is up north of 5-3/4% over the past 4-weeks while positioned 20% above its price point posted one year ago.

The market’s softer rise was seen in the wider dimensions, as they too joined in on the party. As a result, 2×10 2/Btr KDHF posted gains totaling 3% for the week, adding to last week’s 3-1/2% effort. For the month, 2×10 2/Btr KDHF finished up nearly 6-1/4% and arrived at the end of February 20% higher than it stood in late-February 2021 level.

2×12 2/Btr KDHF followed the market’s upwards moves, as buyers outnumbered sellers pushing prices higher. As a result, 2×12 2/Btr KDHF added 1-1/3% by Friday, virtually halving the previous week’s 2-3/4% effort. As a result, 2×12 2/Btr KDHF closes out the previous month higher by more than 1-3/4% than its late-January 2022 mark while finding itself 15-1/2% above its trading level from one year ago.

Shifting gears to Green DF Timbers, we see that demand continued to outpace available supplies, pushing numbers higher. As a result, Green DF Timbers rose by more than 2-3/4% by Friday, keeping pace with last week’s 2-1/2% effort. Over the past 4-week’s, Green DF Timbers have seen activity north of 5-1/3% while remaining positioned 8% above its late-February 2021 level posted one year ago.

This week, a continuation of limited supply kept buyers on the defensive as they scratched and clawed to cover needs. As a result, 2×4 Western S-P-F 1650fb MSR buttoned up the week higher by 2-1/3%, eclipsing the previous week’s 3-1/2% gain. Over the past month, we have seen 2×4 Western S-P-F 1650fb MSR increase by more than 8-1/2%, while it stands nearly 26-1/2% above its late-February 2021 level.

Digestion and caution were present in the stud category this week, as buyers pulled back a little on the issuance of purchase orders. Regardless of that, mills kept the pendulum pointing in their direction as pricing inched higher. For the week, 2x4x8′ PET KDHF Solid Studs crawled higher by more than 1%, a dramatic slowing to the previous week’s 5-1/2% jump. Hmmm. It could be something to read into here. As we digest the action over the past month, we find the 2x4x8′ PET KDHF Solid Studs find themselves upwards of 7-1/4% higher, as they now stand more than 37% above their late-February 2021 trading level.

Could there be a canary approaching? That very well could be the case, as a mid-week shuck-and-jive occurred in the stud category. This week brought a little juke move with 2x4x9′ PET KDHF Solid Sawn Studs as pricing rose by nearly ¾% during the week but refunded those gains to end the week-to-week effort flat. 2x4x9′ PET KDHF Solid Sawn Studs finished the week unchanged, a welcome site compared to last week’s near 4-2/3% effort. For the month, 2x4x9′ PET KDHF Solid Sawn Studs find themselves 3% higher while positioned more than 11% above their price posted exactly one year ago.

Demand in the plywood category followed the market shifting winds as pricing eased in lockstep with the lumber market. Thanks to the continued strong demand in OSB, plywood continues to benefit. Orders files extending out 3-4 weeks remain palatable, as I begin to get a little unsettled when we hit the 5+ week time frame, regardless of the time of year. For the week, 4x8x1/2” CDX Plywood edged higher by north of 4%, as it padded the previous week’s 5-2/3% move higher. As we turn the calendar page from February to March next week, 4x8x1/2” CDX Plywood now stands upwards of 13-1/3% higher over the past 4-weeks, while it remains positioned just nearly 22-2/3% above its price posted one year ago.

Similar action was seen in the plywood floor sheathing category, as it too inched higher during the week. 4x8x3/4″ T&G UDLX Plywood posed gains totaling over 3-1/4%, a slowing from the previous week’s 5-2/3% jump. As a result, year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing more than 25-1/3% above its trading price posted from this time in February 2021 while remaining nearly 12% higher over the past month.

ARE WE LISTENING TO A BROKEN RECORD? This week, a continuation of limited mill offerings was the story again as buyers were forced into the secondary market for prompt loads, adding upwards of 20%+ to the desperate ones. Like the lumber market, caution entered traders’ minds as inflation concerns, Russia’s invasion of Ukraine, and excessive transportation woes continued hampering the pipeline. Once President’s week was said and done, the “Commodity King” flexed its muscle as 4x8x7/16” OSB escalated by more than 5-1/2%, as it pulled the reigns back a bit compared with the previous week’s 8% surge. The king ends the past 4-weeks 35-3/4% higher and now sits roughly 50-1/2% above its mark from precisely one year ago.

The rise in prices helped inflate the OSB to Plywood premium even more, as the premium remains at its second-highest level in history. Nevertheless, we end this week less than 3% below the historical premium seen in late-October 2020 of 14.7%. Will that mark fall before spring arrives? Stay tuned to find out. As a result, we close out the week with 7/16″ OSB vs. 1/2″ CDX at a PREMIUM of 11.8%, a slight increase from the previous week’s 10.2% mark.

GOT FLOOR SHEATHING? Yes, I repeated that phrase from last week, but it only seems fitting amidst the current insanity. Dealers scrambled to be creative in keeping jobs moving forward, as inventories ran dry and deliveries were laden with backorders of floor sheathing. Especially enhanced resin panels. As a result, 4x8x23/32” T&G OSB added more than 5-1/2%, as momentum retreated compared to last week’s 7-1/2% rise. Over the past month, we have seen 4x8x23/32″ T&G OSB gain almost 31% while leaving it upwards of 49-1/4% above its price point from precisely one year ago.

PREMIUM INCREASES EVERYWHERE! The upwards price volatility of both plywood and OSB elevated the PREMIUM of OSB vs. plywood for the fifth consecutive week, as it finished at 9.8% compared to last week’s 7.4% mark. This week pushes the OSB premium over plywood to its highest level on record, eclipsing the previous mark of 7.7% posted way back in May 2010.

Caution and concern were front and center this week, as a combination of elements from rising fuel costs to war were one the forefront of traders’ minds. Nevertheless, as the final week of February came to a close, my composite managed a respectable gain of $42.9mbf, growing 3.24%, pushing above the $1360mbf mark to close at $1366.4mbf, its highest level since mid-June 2021.

  A special thanks to the team at IWP (International Wood Products) for their continued sponsorship in 2022. Their support (along with donations from readers like YOU) help to keep Shoe’s Lumber Report going strong. THANK YOU! Check out IWP’S line up of TREX decking by clicking the hyperlinked banner below to visit their website.

CAUTION ABOUND! Awareness of world events caught traders’ attention everywhere as buyers paused to assess the market’s next steps. This allowed traders to take a breath and recover from the recent upwards flurry. For the week, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill posted increases totaling a touch over 3%, lower than the previous week’s 4% rise. Over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill rise by more than 3-1/4% as it stands just under 31% above its price point from precisely one year ago.

For the second week in a row, the spot-month of March hit resistance around the $1338mbf mark before retreating. Bearish sentiment was present both Monday and Tuesday and again on Friday before the trading week concluded. The March 2022 contract closed out the top-side resistance week with a 4.09% discount, fractionally lower than the previous week’s 4.52% mark.

The week’s volatility helped brighten the hopes of lower prices ahead, as the previous discounts received a little more cushion. The May 2022 contracts eased, closing the week with an 12.58% discount, more than the prior week’s 11.77% discounted mark. The July 2022 futures to cash discount increased as well, finishing at 22.34% versus the previous week’s 17.92% mark. The change was also seen with the September 2022 futures to cash mark, as it ended with a 27.69% discount compared to last week’s 25.06% mark. The November 2022 contract also experienced growth, closing the week with a 34.01% discount, escalating from the previous 27.25% mark. Looking to next year, the January 2023 contract wrapped up the week with a futures-to-cash discount of 32.15%, compared to last week’s 27.6% mark. And finally, the March 2023 contract left us with a 32.89% discount, solidly above the previous week’s 28.05% discount. Until next week… Shoe out!

Jim Schumacher
Shoe’s Lumber Report
(425) 219-6118