February 4, 2022
SURPRISE! HAS THE MARKET TURNED? Across the nation, wintry weather brought forth more than falling temperatures, as the warning flags of a market top finally came to fruition this week. As hinted in my past couple updates, the bears had begun to poke their noses out from their winter slumbers, as a shift in font color was seen. The big question on everyone’s minds is: “How much easing occurred?” Well, you have come to the right place, as I will share all of that and more this week in the place I like to: ‘The Wonderful World of Wood.’ Enjoy..
According to Phil – Winter has been bleak and dark and bereft of hope. Yet winter is just another step in the cycle of life. As he looked out over the faces of the true believers from around the world, he basked in the warmth of your hearts. Phil couldn’t imagine a better fate than a long and lustrous six more weeks of winter with the shadow he has cast.
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After experiencing a fractional gain last week, producers were forced to discount pricing to attract buyers this week. Concerns of the market top were present as sales inquiries dried up and pricing fell for the first time since August. For the week, 2×4 2/Btr KDHF fell by more than 3-1/2%, a reversal compared to the previous week’s minuscule 1/3% rise. Over the past month, 2×4 2/Btr KDHF has posted gains of nearly 5-23/% while it stands more than 31% above its early-February 2021 level.
The momentum shift placed buyers and sellers in a tug-of-war, as buyers demanded deep discounts, which producers did their best to reject. As a result, 2×6 2/Btr KDHF finished down more than 3-3/4%, confirming the shifting sentiment senses last week when prices closed out the week unchanged. As we peer back over the horizon, we see that 2×6 2/Btr KDHF is up over 5% over the past 4-weeks while positioned precisely 27.9% above the price point posted exactly one year ago.
The market’s descending tone impacted the wide stock, as font colors aligned with their narrow counterparts. As a result, 2×10 2/Btr KDHF pulled its foot off of the brakes, refunding 2-2/3% this week, slipping compared to last week’s unchanged effort. For the month, 2×10 2/Btr KDHF finishes up more than 7-3/4% and starts the new month more than 58-3/4% higher than it stood in early February 2021.
2×12 2/Btr KDHF followed suit, as it too saw buyers leverage the market shift and red font return for the first time since last summer. Producers did their best to fight off aggressive counters from buyers early in the week, as those pressures eased as the week progressed. A bounce in the lumber futures market helped the producer’s position, as a late-week rally seemingly proved a near-term bottom was found. Nevertheless, as the early days of February arrived, 2×12 2/Btr KDHF posted a slight loss, dipping 2-3/4%, a predictable reversal compared to the previous week’s unchanged effort. As a result, 2×12 2/Btr KDHF closes out the last 4-weeks more than 4-3/4% above its early-January 2021 level while finding itself north of 34% above its trading level from one year ago.
After last week’s sizeable surge, Green DF Timbers entered a digestion phase, as this week was uneventful. As a result, Green DF Timbers applied the parking brake to end the week unchanged, a welcome sight after last week’s 5% jump. Over the past 4-week’s, Green DF Timbers have seen activity of 25% upwards while remaining positioned roughly 10-3/4% above its early-February 2021 price point from one year ago.
TWENTY-THREE AND HOLDING! This week presented a welcome sight, as the charge higher has paused for the time being. This week marks twenty-three weeks of rising or flat pricing, as machine stress-rated material hung tough through Friday. As a result, 2×4 Western S-P-F 1650fb MSR closed out the week unchanged, a slight momentum shift compared to the previous week’s nearly 3/4% gain. Over the past month, 2×4 Western S-P-F 1650fb MSR has pressed higher by more than 6-1/3%, while it stands more than 38-1/4% above its early-February 2021 level.
CHIRP, CHIRP! CHIRP, CHIRP! The canary in the coalmine finally sounded off this week, as studs took a shot to the chin as the first trading week of February arrived. The soft rounding top pattern came to fruition, as red font was abundant. Buyers licked their chops for the first time in months, as they were the ones calling the shots, as they moved over into the driver’s seat. As a result, 2x4x8′ PET KDHF Solid Studs plummeted by nearly 5-2/3% for the week, dramatically reversing compared to last week’s 3/4% effort. After the downward pressure experienced this week, 2x4x8′ PET KDHF Solid Studs find themselves 3-1/2% higher over the past month, as they now stand roughly 46-2/3% above their early-February 2021 trading level.
CANARIES EVERYWHERE! As I suggested last week, the signals and turning point in the market left some evidence. Just how I had suspected, the trading action seen the previous week left the fingerprints of what to expect. And I was right! The tiny pump fake witnessed last week by 2x4x9′ PET KDHF Solid Sawn Studs moved into this week as the red font arrived. 2x4x9′ PET KDHF Solid Sawn Studs retreated, falling nearly 8%, as it took the gold medal for “biggest loser” of the week, a sizeable shift compared to last week’s unchanged effort. 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.
Last week’s pause and hesitation transitioned into a more bearish outlook as pricing eased for the first time since September. Producers scrambled to bolster order files amidst the OSB insanity, as they seemed to be hooked on the preference of oriented strand board versus plywood, like drug addicts. As a result, 4x8x1/2” CDX Plywood ended up closing out the week off upwards of 1%, as it experienced a turning point compared to last week’s mere unchanged stagnant effort. As you will see a bit later in my report, the extreme surge in OSB has now chopped away all plywood premium of ½” CDX plywood vs. 7/16” OSB, to now offer a discount. The wintry Puget Sound weather is not optimal to convert OSB to plywood, but very well should be considered amidst the current supply struggles underway. More on that later. As we begin February, 4x8x1/2” CDX Plywood now stands 1-1/3% higher over the past 4-weeks, while it is positioned just roughly 31% above its price from one year ago.
Shifting gears to the plywood flooring category, similar activity was witnessed this week compared to last. Small incremental gains were again posted, as buying interest lacked any conviction from either direction. As a result, 4x8x3/4″ T&G UDLX Plywood finished the first week of February with gains of 1/3%, mirroring the previous week’s 1/3% effort. Year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing more than nearly 22% above its trading price posted from this time in February 2021 while remaining more than 4-1/3% higher over the past 4-weeks.
BOW DOWN TO THE KING! Many of my newer followers may not know exactly WHY I refer to 7/16” OSB as the “Commodity King.” Well, if you haven’t noticed by now, 7/16” OSB is the most volatile product I follow, by leaps and bounds. And this week is no exception. Scarcity would be the perfect word this week to describe the OSB market, as logistics headaches are the worst I have seen in my 30+ year career in this business. Previously purchased products (many on contract) have yet to arrive at dealer facilities, as extreme delays are still in play. This puts lumberyards and wholesalers alike in a tough spot. They all need the product on the ground now to meet client obligations, but the extreme premiums in the secondary market are enormous. We are talking upwards of 40% (or more) if you can even find someone with it to sell. Activity this week helped to push 4x8x7/16” OSB’s price higher by more than 9-1/2%, underperforming the previous week’s 13-1/2% jump. The king ends the past 4-weeks more than 58-2/3% higher and now sits 35% above its mark from precisely one year ago. Ouch!
For the second week, the surge in OSB pricing helped slash the previous discount and turn it into a premium. As a result, we close out the week with 7/16″ OSB vs. 1/2″ CDX at a PREMIUM of 3.1%, a massive reversal effort from the previous week’s 6.7% discounted mark.
The headaches invaded the OSB floor sheathing space this week, as the availability of enhanced resin floor sheathing panels was virtually impossible. In addition, logistics issues continued to torment all levels of the supply chain, as unprecedented would be the best descriptor for the week. 4x8x23/32” T&G OSB popped by more than 9-1/2%, as it added to the previous week’s 9-1/3% upswing. The past month has seen 4x8x23/32″ T&G OSB gain more than 40% while leaving it roughly 31.8% above its price point from precisely one year ago.
The inconsistency of the price volatility of plywood and OSB helped evaporate the previous week’s DISCOUNT of OSB vs. plywood, as it finished this week EVEN STEVEN, ending at 0% compared to last week’s 6.1% discounted mark.
The red font seen in lumber prices tried its best to turn the overall tide, but the surge in OSB helped prop up the composite another week. As the first week of February came into play, my composite managed a minuscule gain of $1.4mbf, rising a measly 0.12%, as it inched a bit closer to the $1200mbf mark, finishing at $1197.1mbf, its highest level in 7-months.

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WEEK TWO AND COUNTING! We start counting again, as this week marked the second in a row of softening prices for 2×4 2/Btr Kiln Dried Spruce-Pine-Fir Western Mill. The red font that arrived last week remained, as weakness was experienced early, while firmer footing was reported during the trading week’s second half. As a result, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill was pushed back again, dipping 1-2/3%, a touch softer than the previous week’s 2% drop. Over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill jump higher by more than 5-1/3% as it now stands more than 38% above its price point from precisely one year ago.
The lumber futures spot-month of March went through a whiplashing ride this week, as the early weakness of two expanded limit-down days was experienced Monday and Tuesday. However, the tone took an about-face as Wednesday arrived, as the contract dipped as low as $900.9mbf early in the day before sky-rocketing higher to close out the day expanded limit-up. The upwards momentum continued into Thursday and Friday, as prices have recovered virtually all of the losses experienced over the past two weeks.  The March 2022 contract closed out the topsy-turvey week with a 9.33% discount, as it eroded into the previous week’s 14.59% mark.
THE TEMPERATURE SHIFT HAS CHANGED AGAIN! The late-week rally helped brighten the spring outlook, as the previous discounts received a little trimming. The May 2022 contract’s momentum swelled higher, ending the week with a 14.35% discount, compared to the prior week’s 20.59% discounted mark. The July 2022 futures to cash discount also eroded, finishing at 17.16% versus the previous week’s more significant 25.48% mark. The shift was also seen with the September 2022 futures to cash mark, as it ended with a 24.15% discount compared to last week’s more sizeable 30.34% mark. The November 2022 contract also experienced losses, closing the week with a 26.78% discount, slightly carving into the previous week’s 30.92% discounted mark. Looking to next year, the January 2023 contract wrapped up the week with a futures-to-cash discount of 26.78%, compared to the previous week’s 33.33% mark, another price retreat. And finally, the March 2023 contract comes into play, ending the week with a 27.29% discount, giving us a sign of what traders think next year’s market will offer up. Until next week… Shoe out!

 

Jim Schumacher
Shoe’s Lumber Report
(425) 219-6118
jim@shoeslumberreport.com