May 6, 2022

THE BEAR IS NAPPING – FOR NOW! After the lumber market’s recent retreat, the bears have laid down for an early spring nap. Instead of charging ahead, the bulls opted to meander and tip-toe around in a more steer-ish manner to ensure that the bears remained asleep. How steer-ish, you ask? Great questions. To find out those happenings and more, simply dive right in to find out all that transpired this week in the place I like to call: ‘The Wonderful World of Wood.” Enjoy…

As May commenced, little fanfare arrived as upwards trading momentum lacked the anticipated fervor. However, as the bulls re-entered the picture a few weeks ago, there was a lack of energy behind their efforts as prices were kept in check. As a result, 2×4 2/Btr KDHF rose more than 3/4% by the weekend, a slowing compared to the last week’s 2-1/4% increasing effort. Over the past month, 2×4 2/Btr KDHF finds nearly 2-1/4% lower while crouching more than 26-1/2% below its early-May 2021 level.

2×6 2/Btr KDHF fared a touch better than its narrow counterpart, as pricing moved higher at a slight robust pace. Traders sensed the market’s cautious tone but were forced to step in to replenish needs. As a result, once the trading week came to a close, 2×6 2/Btr KDHF gained nearly 2-3/4%, a touch better than the prior week’s 2-1/2% jump. As a result, we now find 2×6 2/Btr KDHF is off more than 1-1/3% over the past 4-weeks while remaining positioned 30-3/4% below its price point posted one year ago.

The wide dimensional stock categories saw a slight pull-back in upwards action as the price momentum ground slowly higher. For the week, 2×10 2/Btr KDHF added just 1/2% by Friday, cushioning the previous week’s 2% effort. For the month, 2×10 2/Btr KDHF is off more than 3-1/3%, as it begins, May more than 34% lower than it stood one year ago.

A similar upwards price easing was experienced with 2×12 2/Btr KDHF, as the momentum waned from the prior week’s action. 2×12 2/Btr KDHF inched higher by 1-3/4%, adding to last week’s 3% move. Looking in the rear-view mirror, we find 2×12 2/Btr KDHF closing out the previous 4-weeks down nearly 6-1/2% compared to its early-April 2022 mark and lower by almost 43% from its trading level from precisely one year ago.

WHOA, NELLY. As the balance of the market showed a slight pull-back on the reigns, Green DF Timbers also saw their recent momentum pause. Green DF Timbers ended the week unchanged, a subtle momentum shift compared to the previous week’s 1-1/4% action. Over the past 4 weeks, Green DF Timbers are up more than 2% while remaining positioned nearly 8% above its early-May 2021 level posted one year ago.

2×4 Western S-P-F 1650fb MSR did an about-face, as it reversed course from the previous week’s font color rotation. As a result, 2×4 Western S-P-F 1650fb MSR arrived on Friday with losses totaling 3/4%, neutralizing last week’s 3/4% increase. As a result, 2×4 Western S-P-F 1650fb MSR now finds itself lower by more than 9-3/4% over the past month, while it stands more than 23-1/4% below the early-May 2021 level.

As the calendar page was flipped from April to May,  2x4x8′ PET KDHF Solid Studs added nearly 2-1/2%, a slight decline compared to the previous week’s 4% gain. However, 2x4x8′ PET KDHF Solid Studs find themselves upwards of 2-1/4% higher over the past month, as they now stand nearly 28-1/2% below their early-May 2021 trading level.

IS THE CANARY’S WING BROKEN? Last week, the price surge experienced by 2x4x9′ PET KDHF Solid Sawn Studs lost strength as the momentum struggled to keep ascending as one canary in the coal mine was potentially sounding an early warning sign. 2x4x9′ PET KDHF Solid Sawn Studs rose just 3-1/4% for the week on mediocre demand compared to last week, adding to the previous week’s 11-3/4% burst. Over the past month, we have seen 2x4x9′ PET KDHF Solid Sawn Studs rise nearly 16% from their early-April level while positioned more than 36% below their price posted one year ago.

DANGER WILL ROGERS, DANGER! The challenging week in the finance world took a toll on the lumber market, as all eyes and ears were on the FED. Unfortunately, things didn’t turn out as rosy as many hoped, as concerns about the economy’s future put a damper on things. As a result, buyers became even more reluctant than in previous weeks, as producers reported softening sales. Once Friday arrived, 4x8x1/2” CDX Plywood coasted into Friday unchanged, stalling out compared to the last week’s 1-2/3% gain. As a result, 4x8x1/2” CDX Plywood now finds itself about 10-1/3% lower over the past 4-weeks while standing nearly 44-2/3% below its price posted one year ago.

This week further hesitation and doubt over a robust summer presented a slow and cautious approach to trading. As a result, 4x8x3/4″ T&G UDLX Plywood ended the week up just 1/3% after the previous week’s stagnant and unchanged effort. Year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing 19% below its trading price posted from this time in May 2021 while remaining over 3% lower over the past month.

IS A DEAD-CAT BOUNCE AROUND THE CORNER? Unfortunately, last week’s pricing uptick from the “Commodity King” lacked significant follow-through, as buyer hesitancy became more prevalent as the week progressed. As a result, 4x8x7/16” OSB posted gains near 2%, a minimal pull-back compared to last week’s 2-2/3% rise. Nevertheless, the king ends the past 4-weeks upwards of 27-1/3% lower and now sits upwards of 53% below its mark from precisely one year ago.

A stagnation in plywood pricing change compared to OSB helped close the 7/16″ OSB vs. 1/2″ CDX DISCOUNT gap, ending at 17.8% by Friday, declining slightly compared to the previous week’s 19.4% mark.

A concern echoed into the OSB floor sheathing category as 4x8x23/32” T&G OSB pressed higher by just 1-1/4%, more than halving the previous week’s 3% upwards effort. Over the past month, we have seen 4x8x23/32″ T&G OSB slip more than 22-1/3% while leaving it 42% below its trading level from one year ago.

The somewhat muted price action of OSB and plywood helped keep the previous week’s plywood premium over OSB near last week’s level. Oriented Strand Board floor sheathing finished with a 25.3% DISCOUNT, compared to the previous week’s 26.0% mark.

As traders watched the stock market crumble, concerns over the summer material needs brought the stark reality that the music will be stopping at some point. Exactly when is the ultimate wildcard. With business remaining healthy, buyers’ appetite to step back into the market was more subdued. Nevertheless, once the week was said and done, the composite closed out the week on a slow grind higher, rising $14.3mbf, adding 1-1/3%, closing out the trading week at $1077.9mbf.

  A special thanks to the team at IWP (International Wood Products) for their continued sponsorship in 2022. Their support (along with donations from readers like YOU) help to keep Shoe’s Lumber Report going strong. THANK YOU! Check out IWP’S line up of TREX decking by clicking the hyperlinked banner below to visit their website.

An erosionary week for lumber futures helped contain 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill, as pricing slightly increased. For the week, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill inched higher by less than 1% by Friday, adding to last week’s 3-3/4% effort. Over the past month, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill finishes unchanged, while it stands nearly 30% below its price point posted precisely one year ago.

The futures market found up-side resistance again this week, as it was rejected around the $1045mbf mark, lower than the previous week’s $1064mbf denial level. Prices held in a tight range early in the week, as they suffered their most significant losses on Friday. As we entered the expiration month of May, the May 2022 contract closed with an 8.35% discount to cash, more than doubling the previous week’s 3.02% mark.

The July 2022 futures to cash discount stumbled, plunging to 23.58% compared to the previous week’s 15.2% mark. The downward action continued as the September 2022 futures to the cash mark settled at a 27.06% discount from last week’s 20.36% mark. The November 2022 contract also grew, closing the week with a 27.61% discount, swelling from the previous 20.46% mark. Looking out to next year, the January 2023 contract buttoned up the week with a futures-to-cash discount of 26.38%, compared to last week’s 19.94% mark. The March 2023 contract left us with a 23.77% discount, dropping compared to the previous week’s 19.34% mark. And last but not least, the May 2023 contract finished the week with a 25.99% discount, moving higher than the previous week’s 21.58% mark.

  • 30-YEAR FIXED MORTGAGE RATE: Currently at 5.27%, housing affordability at current price levels is a problem.
  • GIVE IT A FEW WEEKS: Look for pricing to hold or slightly soften through Memorial Day. After that, I expect to see the market push lower as we move into the summer months.
  • KEEP YOUR EYES ON OSB: Yes, a repeat from last week. Keep an eye out for a dead-cat bounce. It could just happen before Memorial Day.
  • MAY LUMBER FUTURES: As suspected and noted last week, look for the spot month of May to continue finding resistance under $1100mbf (or lower).
  • 10-YEAR BOND, not JAMES BOND: After hitting 3.142% this week, we are now up from 1.957% on Feb 7th, up 62.3% in a mere 3-months ago. Need I say more?

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

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