March 25, 2022

TIMBER – HAS THE TIME FINALLY ARRIVED? Spring has sprung as the lumber market looks to have sprung a leak as the momentum shift has begun. The arrival of spring this past Sunday brings forth hopes of warmer days, budding flowers, and lower lumber prices. After the months of suffering through insanely high prices, if this news doesn’t put a little pep in your step, I don’t know what will. So pull up your bootstraps to follow along with me and explore all that transpired this past week, in the place I like to call: ‘The Wonderful World of Wood.” Enjoy..

Spring has sprung a leak for the lumber market, as pricing took a shot to the ribs virtually across the board. The chirping of the canaries I hinted at in previous weeks came to fruition, as red numbers were abundant as the end of March approached. Buyers opted to step aside and allow a market top to unfold as the color shades shifted from green to red. For the week, 2×4 2/Btr KDHF dipped by a mere 1/3%, as it refunded the previous week’s 1/3% effort. Over the past month, we have seen 2×4 2/Btr KDHF post gains totaling 5-1/4%, while it stands nearly 27-1/4% above its late-March 2021 level.
A retraction of sales interest forced producers to succumb to the reality of the market shift. As a result, 2×6 2/Btr KDHF participated in the market retreat, as pricing retreated from the previous week’s level. As a result, 2×6 2/Btr KDHF finished down 3/4%, a directional change compared to the prior week’s stagnant and unchanged activity. We now find 2×6 2/Btr KDHF is up nearly 4-3/4% over the past 4-weeks while remaining positioned almost 18-1/2% above its price point posted one year ago.
The softer tone invaded the wide dimensional stock category, as 2×10 2/Btr KDHF posted losses totaling more than 3/4%, an about-face compared to last week’s 1/3% effort. For the month, 2×10 2/Btr KDHF finished up nearly 3%, arriving at the end of March almost 15-1/2% higher than it stood one year ago.
After dipping slightly last week, 2×12 2/Btr KDHF added to the bearish sentiment experienced the previous week. As Friday arrived, 2×12 2/Btr KDHF edged lower more than 1-3/4%, adding to last week’s 1-1/3% drop. As a result, 2×12 2/Btr KDHF closes out the previous 4-weeks off by more than 1-3/4% than its late-February 2022 mark while finding itself more 2-3/4% above its trading level from precisely one year ago.
After flexing their muscles for several weeks, Green DF Timbers succumbed to the market shift as it altered direction from its previous upwards path. Green DF Timbers closed out this week unchanged, a momentum shift compared to the last week’s 3% effort. Over the past 4-week’s, Green DF Timbers are up nearly 10-1/4% while remaining positioned nearly 9-1/4% above its late-March 2021 level posted one year ago.
2×4 Western S-P-F 1650fb MSR dipped by 2/3% for the week, as it too was unable to escape the seasonal shift after adding 1% last week. However, we have seen 2×4 Western S-P-F 1650fb MSR increase by 2-2/3% over the past month, while it stands upwards of 24-2/3% above its late-March 2021 level.
A turning point was marked this week. Prices found a touch of upwards momentum early in the week, as pricing inched minimally higher Monday and Tuesday. Then, however, the tone changed, as the balance of the week brought forth discounts and lower numbers.  As a result, 2x4x8′ PET KDHF Solid Studs ended the week down nearly 1%, as it managed to turn the corner compared to the previous week’s 1/6% effort. Over the past month, we see that 2x4x8′ PET KDHF Solid Studs find themselves upwards of 2-1/4% higher, as they now stand 35-2/3% above their late-March 2021 trading level.
I will refer to my question posed last week: Is the canary back to stay? THAT WOULD BE YES! Red ink was a bit more abundant, as pricing posted its third consecutive down week. As Friday arrived, 2x4x9′ PET KDHF Solid Sawn Studs received a beating of 8%, as cheers from builders could be heard in the distance, adding to last week’s 2-1/4% drop. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs find themselves down 11% from their late-February level while positioned more than 4-1/3% below their price posted exactly one year ago.
Like last week, further retractions of inbound purchase inquiries forced producers to discount prices to attract interest. Purchasing was limited to small quantities, as caution spread across all levels. As a result, 4x8x1/2” CDX Plywood dipped nearly 4% for the week, a kidney punch as it added to the previous week’s ¾% loss. Arriving at the end of March, 4x8x1/2” CDX Plywood now finds itself nearly 4% lower over the past 4-weeks while remaining just almost 8% below its price posted one year ago.
Similar trading patterns were found in the plywood floor sheathing category, as it too crested the tippy-top trading level and retreated by Friday’s arrival. For the week,  4x8x3/4″ T&G UDLX Plywood edged lower by more than 1%, compared to the previous week’s unchanged effort. Year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing more than 5% above its trading price posted from this time in March 2021 while remaining a mere 1/2% higher over the past month.
HAS THE APEX BEEN FOUND? This could be the case as sales ground to a halt at the mill level, and price action in the secondary market began to retreat. Shipping remained a concern, causing headaches across the supply chain. As Friday arrived, the “Commodity King” matched the previous week’s effort, as 4x8x7/16” OSB closed the week unchanged after showing a similar stagnant and unchanged action the last week. The king ends the past 4-weeks more than 2% higher and now sits upwards of 34-3/4% above its mark from precisely one year ago.
Plywood’s price ease helped propel the OSB to Plywood premium to a record-setting high, as it rocketed higher, slicing through the previous high-water mark of 14.7% posted back in 2020. As a result, we finish the week with 7/16″ OSB vs. 1/2″ CDX at a PREMIUM of 18.8%, increasing the previous week’s 14.1% mark.
Similar action was seen with OSB floor sheathing, as it stood pat amidst the market’s general market shifting tone. Buyers remained hesitant as they absorbed information from all sides. For the week, 4x8x23/32” T&G OSB in check number coasted into Friday unchanged, mirroring the previous week’s stagnant and unchanged effort. Over the past month, we have seen 4x8x23/32″ T&G OSB gain over 1-1/2% while leaving it 34-3/4% above its price point from one year ago.
Weakness with plywood pushed the OSB PREMIUM over plywood higher, finishing at 10.9%, higher than last week’s 9.6% mark.
Even with the market’s shifting tone, traders were split about whether the current turning point had the staying power. Positions arguing both sides with conviction, as housing data supported strong sales. In contrast, others countered that previous purchases and delays of deliveries would provide sufficient material needs in the short term. Time will tell what side wins, but my gut tells me that we have adequate supplies in the pipeline, and prices will retreat more for the foreseeable future. Once the week was said and done, the weekly font shade shifted from green to red, as the composite dipped $5.3mbf, slipping more than 1/3%, to button up the week at $1418.6mbf.

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The cracking sound of the market could be both seen and heard as inbound purchase inquiries ground to a halt. Buyers sat on the sidelines, as producers were forced to take on a defensive position for the first time since late August. In addition, substantial weakness in the lumber futures market brought considerable cash-to-futures discounts, which caught traders’ attention. The uncertainty of downside risk was the dominant tone again, as 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill finished down 3-1/2%, after managing to end the previous week unchanged. Over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill dip by more than 1% as it stands roughly 31-3/4% above its price point from precisely one year ago.
This week, the May contract retreated four of the five trading days as Monday’s shellacking started the nose-dive. Once the red font dominant trading week was said and done, the May 2022 contract closed the week with a 25.2% discount, significantly down from the previous week’s 14.31% mark.
The July 2022 futures to cash discount magnified, finishing at 34.96% versus the previous week’s 27.15% mark. The downward swing was also realized with the September 2022 futures to cash mark, as it plummeted to a 39.18% discount compared to last week’s 31.76% mark. The November 2022 contract also worsened (or improved, based on your opinion), closing the week with a 41.11% discount, swelling from the previous 37.5% mark. Looking out to next year, the January 2023 contract buttoned up the week with a futures-to-cash discount of 41.21%, compared to last week’s 36.7% mark. The March 2023 contract left us with a 40.73% discount, as it improved lightly over the previous week’s 37.41% discount. And last but not least, the newest May 2023 contract closed out the week with a substantial 48.14% discount, edging higher versus last week’s impressive 47.89% discount. Until next week… Shoe out!
Jim Schumacher
Shoe’s Lumber Report
(425) 219-6118