April 22, 2022

MOVE ASIDE AND MAKE WAY, PLEASE! The bulls have reentered the room after being pushed aside by the bears just over one month ago. The lumber market’s recent spiral that began in mid-March looks to have run out of downward steam, as buyers perceive value in lower numbers and stepped in to cover needs. Enough for the small-talk; let’s jump in and check out all the happenings that transpired this week in the place I like to call: ‘The Wonderful World of Wood.” Enjoy..

The post-holiday trading week managed to add a little hop back into the market. The easing seen in the downward momentum experienced last week offered up a bit of comfort regarding the market’s near-term downside risk. In addition, the aggressive counter-offers between buyers and sellers from the previous week helped flush out trading levels buyers were comfortable with. As a result, 2×4 2/Btr KDHF closed out the week unchanged, an improvement compared to the last week’s 5-1/4% beating. Over the past month, losses have accumulated more than 22-3/4%, while 2×4 2/Btr KDHF now stands more than 16% below its late-April 2021 level.

2×6 2/Btr KDHF saw its decent to the near-term bottom ease, with pricing offering minimal gains this week. As the trading week concluded, 2×6 2/Btr KDHF dropped 1%, slowing its downward descent compared to the prior week’s 5-1/2% tumble. As a result, we now find 2×6 2/Btr KDHF is off more than 23% over the past 4-weeks while remaining positioned nearly 22-1/4% below its price point posted one year ago.

A similar market easing occurred in the wide dimensional stock category as the downward momentum slowed. As a result, 2×10 2/Btr KDHF dipped 1% by Friday, adding to the previous week’s losing 4-3/4% effort. For the month, 2×10 2/Btr KDHF is off more than 20-2/3%, as it crosses April late-point 22-1/2% lower than it stood one year ago.

Like last week, 2×12 2/Btr KDHF took the most robust shot to the ribs but slowed its downward descent. However, once the week was said and done, 2×12 2/Btr KDHF carved out losses totaling nearly 3%, adding to last week’s 8% falter. As a result, 2×12 2/Btr KDHF closes out the previous 4-weeks off 24-3/4% compared to its late-March 2022 mark while finding itself now down 33-1/3% below its trading level from precisely one year ago.

BACK ON THE RISE AGAIN. As the market entered a transition point, Green DF Timbers opted to shift out of neutral this week and continue its climb. For the week, Green DF Timbers ended the week up more than ¾% by the end of business Thursday, a minimal rise compared to the previous week’s unchanged action. Over the past 4 weeks, Green DF Timbers are up more than 6-3/4% while remaining positioned nearly 11% above its late-April 2021 level from one year ago.

2×4 Western S-P-F 1650fb MSR pulled back from the previous week’s losses, as declines of 1-3/4% were seen, reducing significantly compared to the last week’s 8% falter. As a result, 2×4 Western S-P-F 1650fb MSR now finds itself lower by more than 15-2/3% over the past month, while it stands upwards of 12-1/3% below the late-April 2021 level.

SAY GOODBYE TO THE DIVE-BOMBING CANARY FOR NOW. As the end of April came into view, the radical retreat in the stud category has finally found its near-term bottom. News that a BC stud mill was reducing production by 20% as a counter-measure to catch up on its delayed shipments also aided in the market shift. As a result, this week brought a tiny bounce higher as 2x4x8′ PET KDHF Solid Studs added over 1/2%, an improvement compared to the previous week’s substantial hit of 4-1/3%. Nevertheless, over the past month, we see that 2x4x8′ PET KDHF Solid Studs find themselves upwards of 27-3/4% lower, as they now stand nearly 19% below their mid-April 2021 trading level.

CAN YOU SAY: BOUNCE? After suffering substantial losses over the previous six weeks, 2x4x9′ PET KDHF Solid Sawn Studs bounced by nearly 3-1/4% as the recent retreat officially evaporated into thin air, as the bottom was found. This week’s rise of 2x4x9′ PET KDHF Solid Sawn Studs bettered the previous week’s 2-1/2% decline as traders stepped in, taking advantage of the recent market retreat. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs are down nearly 19-3/4% from their late-March level while positioned almost 36-3/4% below their price posted one year ago.

THE BEATING CONTINUES, ALBEIT MINOR! The price plunge in recent weeks in the plywood category slowed significantly as numbers dipped, albeit slightly. Producers did their best to fend off low-ball counter-offers as purchases inquiries were frequent as buyers sensed the immediate bottom had arrived. However, once Friday came, 4x8x1/2” CDX Plywood dipped by a touch over 1%, slowing considerably compared to the previous week’s 10-3/4% drop. As a result, 4x8x1/2” CDX Plywood now finds itself nearly 23-1/4% lower over the past 4-weeks while standing almost 39-1/2% below its price posted one year ago.

After suffering minimal losses in the past weeks, the plywood floor sheathing category continued down the same path. Skittish buyers hid in the hills as the losses added up as mills did their best to attract buyers. For the week,  4x8x3/4″ T&G UDLX Plywood edged lower by 3%, mirroring the previous week’s 3% losing effort. Year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing 10% below its trading price posted from this time in April 2021 while remaining just 8-1/4% lower over the past month.

IS THE BOTTOM UPON US? That could be the case, as trading took a more positive tone as the week progressed. Reports across multiple regions hinted that pricing had found its bottom, as the near 48-1/2% drop over the past month was enough to push traders off of the fence. Moreover, the quest producers were on last week and early this week to find attractive levels for buyers paid off, as buyers were receptive to current levels and jumped into the mix. As a result, this week, the “Commodity King” improved compared to last week’s 23-1/4% thrashing, tumbling only 9-2/3% by Friday as the trading week came to a close. Nevertheless, the king ends the past 4-weeks more than 48-1/2% lower and now sits upwards of 51-2/3% below its mark from precisely one year ago.

Continued severe weakness in OSB, compared to minimal easing with the plywood sector, helped expand the 7/16″ OSB vs. 1/2″ CDX DISCOUNT of 20.2%, plummeting further from the previous week’s 12.6% mark. It is hard to believe that OSB was positioned at an 18.8% premium over plywood only three weeks ago. Amazing!

Unfortunately for producers, the OSB floor sheathing category didn’t fare as well as its thinner OSB counterpart, as losses continue to mount up. As Friday arrived, 4x8x23/32” T&G OSB drifted lower by nearly 11-1/2%, as it added to the previous week’s 16% failing effort. Over the past month, we have seen 4x8x23/32″ T&G OSB slip more than 40% while leaving it more than 37% below its trading level from one year ago.

The weakening price imbalance of OSB versus plywood further added to the previous week’s plywood premium over OSB, as Oriented Strand Board floor sheathing finished with a 28.1% DISCOUNT, compared to last week’s 19.1% mark.

After a solid month of heavy downward pressure, the recent pessimistic tone of the market shifted into a more upbeat pattern as the week progressed. With business still booming, buyers were forced to step back into the market to replenish stock levels to get them through the early summer months. However, traders remained cautious as they eyed interest rates, knowing that higher rates would have an impact at some point. Once the week was said and done, the composite closed out the week lower once again as it fell, falling $33.6mbf, dropping north of 3%, as it closed the trading week at $1037.9mbf.

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Weakness from the previous week carried over into this week, as 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill dipped to its lowest level this year early. However, as buyers stepped in, the tone shifted as things perked up and moved higher. The recent chase to the market’s near-term bottom was found, as the previous May futures-to-cash discount totaling nearly 12-1/4% last week is now just a quarter that level. For the week, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill perked up by almost 3-1/2% after suffering a sizeable loss of close to 7-3/4% last week. Over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill dip by close to 23% as it stands more than 21-3/4% below its price point posted precisely one year ago.

Tuesday of last week proved to be the market’s near-term basement level for the time being, as numbers only moved higher from there. As noted last week, April 12th’s low-tick of $829.3mbf proved to be the market’s reversal point, as pricing only climbed higher from there. Trading this week printed up 4 of 5 trading days, as Friday provided the only rest, as sympathy from the stock markets retreat was to blame. As we inch closer to the expiration month, the May 2022 contract closed with a 3.6% discount to cash, improving significantly from the previous week’s 12.21% mark.

The July 2022 futures to cash discount dropped, closing at 10.04% versus the previous week’s 18.52% mark. The downward spiral invaded other contracts, with the September 2022 futures to the cash mark, as it settled at a 14.33% discount compared to last week’s 24.13% mark. The November 2022 contract also rose, closing out the week with a 15.38% discount, strengthening from the previous 22.89% mark. Looking out to next year, the January 2023 contract buttoned up the week with a futures-to-cash discount of 14.15%, compared to last week’s 21.09% mark. The March 2023 contract left us with a 13.63% discount, eroding compared to the previous week’s 20.46% mark. And last but not least, the May 2023 contract finished out the week with a 15.96% discount, moving higher versus the previous week’s 22.87% mark.

  • As noted last week, my canary (studs) proved themselves once again, sounding the alarm of the changing tide. Higher numbers from here.
  • HOMEBUILDER SENTIMENT. Watching builder confidence drop four consecutive months in a row should give you heartburn. However, with the April 2022 mark coming in at 77, compared to 83 in April 2021, the trend is not your friend here. Granted, any number above 50 is considered positive, but what is your gut telling you?
  • MORTGAGE RATES: The average 30-year fixed mortgage rate jump from 3.9% in early March 2022 to 5.15% this week is enough to give you night-terrors.
  • The OSB drop is done for now. This week’s 9-2/3% drop was enough to pull the buyers in and give producers what they needed. We will only see higher numbers from here through May, but don’t expect the upwards price rise to recoup 100% of the recent losses.
  • LUMBER FUTURES: The May contract perked up, touching its low last week of $829mbf on Tuesday, April 12th, and never returned. Watch for futures to find resistance around $1,100mbf or roughly another 10% to the upside. Expect lower highs and lower lows as the subsequent few months progress.
  • INFLATION, INFLATION, INFLATION. Do I need to say more?

 Enough for this now. Until next week, Shoe out!

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