March 18, 2022

BEEN A LONG TIME GUYS – DO YOU REMEMBER ME? Finally, after what has seemed like an eternity, the lumber market bulls have some company. The softening tone from previous weeks gained momentum as traders caught a whiff of bear scent as they stumbled upon a few tracks. If the slightest hint of a market softening doesn’t catch your attention after this long cold winter, I am unsure what will. So with that, I will cut to the chase, jump right in, and share all that transpired this past week in the place I like to call: ‘The Wonderful World of Wood.” Enjoy.

The arrival of Saint Patrick’s Day provided a slew of GREEN and celebrate, as a bit of beer and corn beef and cabbage was consumed amidst the NCAA’s March Madness festivities. However, the green font that has been dominant as of late is getting a little faded, as the sense of a market shift is at hand. For the week, 2×4 2/Btr KDHF inched higher by a mere 1/3%, pulling back significantly compared to the previous week’s 3-2/3% effort. Over the past month, we have seen 2×4 2/Btr KDHF post gains totaling 7-1/2%, while it stands nearly 27-3/4% above its mid-March 2021 level.

2×6 2/Btr KDHF followed a similar slowing trend, as it took it to the next level and applied the parking brake. Once the week was said and done, 2×6 2/Btr KDHF finished unchanged, a severe shift compared to the prior week’s 3-1/2% jump. We see that 2×6 2/Btr KDHF is up nearly 7-1/4% over the past 4-weeks while it stands positioned almost 19-2/3% above its price point posted one year ago.

The softer tone seen a few weeks back returned, as 2×10 2/Btr KDHF posted gains totaling more than 1/3%, a sizeable slowing versus last week’s 2% effort. For the month, 2×10 2/Btr KDHF finished up more than 6-3/4%, arriving at the middle of March almost 16-1/2% higher than it stood one year ago.

2×12 2/Btr KDHF was the first to succumb to the market’s bearish sentiment, as it posted red ink for the first time since August. For the week, 2×12 2/Btr KDHF dipped by 1-1/3%, as it was the first of the dimensional products I track to bleed red in some time, after posting a minimal gain of 1/2% last week. As a result, 2×12 2/Btr KDHF closes out the previous 4-weeks higher by more than 1-1/3% than its mid-February 2022 mark while finding itself nearly 4-3/4% above its trading level from precisely one year ago.

Green DF Timbers flexed the most muscle this week as demand remained robust even with market shifting winds. Green DF Timbers added 3% by Friday, outpacing last week’s 3-1/4% effort. Over the past 4-week’s, Green DF Timbers have seen activity north of 13-1/3% while remaining positioned nearly 10-1/4% above its mid-March 2021 level from one year ago.

2×4 Western S-P-F 1650fb MSR rose 1% for the week, as it too fell victim to buyer’s cautious approach after adding 2-1/3% last week. Over the past month, we have seen 2×4 Western S-P-F 1650fb MSR increase by 5-2/3%, while it stands upwards of 24-1/2% above its early-March 2021 level.

The pause experienced last week by 2x4x8′ PET KDHF Solid Studs did not fully translate into a lower number this week, but it proved the market temperature is changing. As a result, 2x4x8′ PET KDHF Solid Studs ended the week up less than 1/6%, as it managed to barely edge gains after the previous week’s unchanged effort. However, over the past month, we see that 2x4x8′ PET KDHF Solid Studs find themselves upwards of 4-1/3% higher, as they now stand 36-1/4% above its mid-March 2021 trading level.

Is the canary back to stay? After last week’s pullback, we find that 2x4x9′ PET KDHF Solid Sawn Studs posted red ink again for their second week. The juke move experienced a few weeks ago that was muted was a teaser of things to come as back-to-back down weeks finally came to fruition. By Friday, 2x4x9′ PET KDHF Solid Sawn Studs lost 2-1/4%, a welcome continuation to last week’s 1-1/2% dip, hoping for a market downshift came to fruition. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs find themselves nearly down 3-1/3% from their mid-February level while positioned more than 2-1/3% above their price posted exactly one year ago.

A pullback in purchase inquiries was enough to catch the attention of manufacturers, as producers did their best to keep the sales pipeline full. However, buyers opted to sit on their hands and wait for delivery of previously purchased plywood, which set the stage for lower numbers. For the week, 4x8x1/2” CDX Plywood dipped by more than ¾%, a shot to the ribs compared to the previous week’s unchanged effort. As we cross the middle of March, 4x8x1/2” CDX Plywood finds itself 4% higher over the past 4-weeks, while it remains positioned just nearly 2-3/4% below its price posted one year ago.

A similar retraction was experienced in the plywood floor sheathing category, as it barely managed to keep its price afloat compared to last week’s finish. 4x8x3/4″ T&G UDLX Plywood ended the week unchanged, compared to the previous week’s 1/4% move, continuing its slowing pattern, which began a few short weeks back. Year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing more than 10-1/3% above its trading price posted from this time in March 2021 while remaining more than 5% higher over the past month.

IS THE MARKET TONE SOFTENING? Easing of upwards pricing pressure continued, as significant delays of previous purchases still frustrated buyers. In addition, production order files extended out 6+ weeks, which only added to buyers’ hesitancy, not wanting to get stuck holding the bag of high-priced inventory when the market cratered like last year. As Friday arrived, the “Commodity King” matched the previous week’s move, as 4x8x7/16” OSB closed the week unchanged after adding 2/3% the last. This marked the first week of non-upwards price escalation since mid-November before the torrential rains decimated British Columbia. The king ends the past 4-weeks more than 7-1/4% higher and now sits upwards of 44-1/2% above its mark from precisely one year ago.

The slowing trend seen from both products managed to edge the OSB to Plywood premium a little higher, as it slowly closes in on its historical high of 14.7% posted back in 2020. We finish the week with 7/16″ OSB vs. 1/2″ CDX at a PREMIUM of 14.1%, increasing the previous week’s 13.2% mark.

A pause from the upwards momentum was experienced in the OSB floor sheathing category, as the attentive ears of buyers resembled a gazelle on the watch of a stalking cheetah. Wary buyers kept the pricing of 4x8x23/32” T&G OSB in check number coasted into Friday unchanged, slightly contrasting last week’s 1/2% upswing. Over the past month, we have seen 4x8x23/32″ T&G OSB gain roughly 7-1/4% while leaving it nearly 45% above its price point from one year ago.

The mirroring inactivity of both plywood and OSB stagnated the PREMIUM of OSB vs. plywood as it finished at 9.6%, matching last week’s 9.6% mark.

Industry-wide awareness helped slow the upwards price grind down, as buyers and sellers alike could feel the reins of the market being pulled back. As a result, the Saint Patrick’s Day week offered some festive green font, as the composite added $6.7mbf, rising nearly 1/2%, to close out the week at $1423.9mbf.

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The significant cash-to-futures discount caught attention with the March futures contract expired and off the board as of Tuesday. This added uncertainty of downside risk was the dominant tone again this week, as 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill finished unchanged again, after closing the previous week unchanged. Over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill rise by more than 5-2/3% as it stands 28-3/4% above its price point from precisely one year ago.

The new spot-month contract posted a solid effort, as it capped off its first front-month week a touch stronger than last week. Once the trading week was all said and done, the May 2022 contract closed the week with a 14.31% discount, down slightly from the previous week’s 17.2% mark.

The July 2022 futures to cash discount improved slightly, finishing at 27.15% versus the previous week’s 28.9% mark. The shift was also attained with the September 2022 futures to cash mark, as it ended at a 31.76% discount compared to last week’s 34.29% mark. The November 2022 contract also softened, closing the week with a 37.5% discount, worsening from the previous 39.29% mark. Looking to next year, the January 2023 contract buttoned up the week with a futures-to-cash discount of 36.7%, compared to last week’s 37.23% mark. The March 2023 contract left us with a 37.41% discount, as it improved lightly over the previous week’s 38.4% discount. And the newest contract to arrive, the May 2023 contract, closed out its first trading week with a bold 47.89% discount. Until next week… Shoe out!

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