April 8, 2022

DID YOU SEE THE SIGNS? I never claim to be a psychic, but even a blind squirrel finds a nut every once in a while. 😊 As March unfolded, you may recall that I hinted multiple times of a market turning point in my past reports. A few indicators I tracked showed signs of something fishy going on, which ended up coming to fruition. So, if you are rooting for lower lumber and panel prices, you will be joyous this week as we dive in and explore all the insanity that shook in the place I like to call: ‘The Wonderful World of Wood.” Enjoy…

This week, the spring leaking that arrived in late March transitioned to a broken pipe, as prices sank faster than a 12lb downrigger weight in Puget Sound. Aggressive discounts were required to attract buyers, and price cuts hit triple digits in many cases. The aggressive discounting by producers enticed buyers into the conversation, as the many stepped up to the plate to backfill depleting inventories. For the week, 2×4 2/Btr KDHF was hammered by nearly 14-3/4%, which added to the previous week’s 4-1/2% stumble. Over the past month, we have seen 2×4 2/Btr KDHF post falter nearly 18-2/3%, while it now stands a mere 1-1/3% above its early-April 2021 level.

2×6 2/Btr KDHF followed suit, as it too fell victim to the market drop. As a result, 2×6 2/Btr KDHF slumped more than 13-3/4%, as it hastened the prior week’s 4-1/2% drop. As a result, we now find 2×6 2/Btr KDHF is off nearly 18-1/2% over the past 4-weeks while remaining positioned more than 4-3/4% below its price point posted one year ago.

Similar weakness was experienced in the wide dimensional stock category, as 2×10 2/Btr KDHF posted losses totaling in excess of 11-3/4%, adding to the previous week’s losing 4-1/2% effort. For the month, 2×10 2/Btr KDHF is off more than 16%, as it begins April almost 8% lower than it stood one year ago.

2×12 2/Btr KDHF fell victim to the market blood bath, as the bears were out in force. Once the week was said and done, 2×12 2/Btr KDHF carved out losses totaling more than 11-3/4%, adding to last week’s 4-1/2% slip. As a result, 2×12 2/Btr KDHF closes out the previous 4-weeks off nearly 18-1/2% than its early-March 2022 mark while finding itself now down more 16-1/4% below its trading level from precisely one year ago.

ONCE AGAIN, THE LONE SOLDIER. As the rest of the market reeled in pain, Green DF Timbers kept their chins up and marched higher. Green DF Timbers rose by nearly 3/4% by Friday, a momentum slowdown compared to the previous week’s 5% effort. Over the past 4-week’s, Green DF Timbers are up more than 9% while remaining positioned nearly 14% above its early-April 2021 level from one year ago.

2×4 Western S-P-F 1650fb MSR mirrored the previous week’s action, as it declined 3-1/4%, adding to the previous week’s 3-1/4% retreat. As a result, 2×4 Western S-P-F 1650fb MSR now finds itself lower by more than 6% over the past month, while it stands upwards of 13-1/2% above its early-April 2021 level.

RAISE THE VOLUME AS THE CANARIES SING! Unfortunately, the cage door was left open this week as the stud category escaped and went into hiding. As noted last week, the item I track more than any other for a market shift proved itself again. This week brought severe bleeding, as 2x4x8′ PET KDHF Solid Studs went into triage mode, as they were pummeled by more than 17-2/3%, after already suffering a sizable hit of 8-3/4% last week. Over the past month, we see that 2x4x8′ PET KDHF Solid Studs find themselves upwards of 25-1/3% lower, as they now stand nearly 2% below their early-April 2021 trading level.

The screeching of the canaries spread far and wide again as the bleeding continued. For the week, 2x4x9′ PET KDHF Solid Sawn Studs suffered losses of more than 7-2/3% as the retreat continued, adding to the previous week’s 13-1/2% tumble. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs find themselves down 28% from their early-March level while positioned more than 27% below their price posted exactly one year ago.

Similar to last week, prices eroded faster than a rain-saturated hillside on a wet winter day, as prices close out the week lower. Buyers remained hesitant as the market retreat gained steam, as mill order files extended out just 2-3 weeks. For the week, 4x8x1/2” CDX Plywood dipped 9-1/3% by Friday, as it more than doubled the previous week’s 4% drop. 4x8x1/2” CDX Plywood now finds itself nearly 17-1/4% lower over the past 4-weeks while standing more than 23% below its price posted one year ago.

As the majority of the market suffered severe losses, a continuation of a gentler price deterioration occurred in the plywood floor sheathing category. For the week,  4x8x3/4″ T&G UDLX Plywood edged lower by nearly 3%, compared to the previous week’s 1-1/2% effort. Year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing more than 3.7% below its trading price posted from this time in April 2021 while remaining just 5-1/3% lower over the past month.

OUCH – THAT HURTS! The “Commodity King” nickname I have bestowed on 7/16” OSB rang true this week, as the price apex I had hinted at over the past few weeks proved true. Muted sales left producers at a massive disadvantage, as they were forced to discount prices at fire-sale levels to attract orders. As a result, 4x8x7/16” OSB plummeted a stunning 21-3/4% after finishing down just 5% the previous week. The king ends the past 4-weeks more than 25-3/4% lower and now sits upwards of 21-1/3% below its mark from precisely one year ago.

Severe weakness in the OSB market nearly balanced out the OSB to Plywood premium spread from the record-setting high seen two weeks ago. As a result, we closed out the week with 7/16″ OSB vs. 1/2″ CDX at a PREMIUM of 1.4%, falling from the previous week’s 17.4% mark.

A similar retreat was experienced with OSB floor sheathing as it too fell victim to the market’s pessimistic tone. As Friday arrived, 4x8x23/32” T&G OSB drifted lower by upwards of 16-1/4%, as builders breathed another sigh of relief after the previous week’s 3-3/4% effort. Over the past month, we have seen 4x8x23/32″ T&G OSB slip more than 19-1/3% while leaving it 4% below its price point from one year ago.

The severe imbalance of price erosion of plywood versus OSB inverted the previous OSB premium over plywood to a DISCOUNT, finishing at 6.6%, compared to last week’s 8.1% premium.

The market’s brutal price cuts attracted interest from buyers, as those desiring to add to inventories became a bit more receptive to taking action. However, once the week was said and done, the font shade turned an even deeper shade of red than last week, as the composite dipped to $189.3mbf, sliding more than 13-3/4%, as it wrapped up the week at $1,173.6mbf.

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As the chase to the market’s near-term bottom continued, severe price spreads between asking prices and seller’s offers created additional uncertainty. Additional uncertainty of additional downside risk left buyers in the driver’s seat, as the future-to-cash pricing spread remained north of 12-3/4% by Friday’s close. For the week, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill was pounded by more than 9% after suffering losses of 11% last week. Over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill dip by more than 22% as it stands north of 2-3/4% below its price point from precisely one year ago.

The May futures contract ended the week lower, as early weakness kept trades on the defensive. However, the tone shifted mid-week as the contract traded as low as $846.7mbf Thursday morning before moving higher. Once the trading week was said and done, the May 2022 contract closed the week with a 12.85% discount, improving amidst the cash market’s severe weakness, lower than the previous week’s 18.09% mark.

The July 2022 futures to cash discount lessened, closing at 20.76% versus the previous week’s 27.85% mark. The downward swing also softened with the September 2022 futures to the cash mark, as it settled at a 24.13% discount compared to last week’s 29.43% mark. The November 2022 contract also improved to close the week with a 27.52% discount, declining from the previous 32.5% mark. Looking out to next year, the January 2023 contract buttoned up the week with a futures-to-cash discount of 27.21%, compared to last week’s 33.86% mark. The March 2023 contract left us with a 26.62% discount, which eroded compared to the previous week’s 33.33% mark. And last but not least, the May 2023 contract closed out the week with a substantial 34.08% discount, edging lower compared to the previous week’s 41.66% discount. Until next week… Shoe out!

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