June 24, 2022

BEAR MARKET BOUNCE? The signs proved accurate again as thirteen was the lucky number. As sheet goods missed the memo, the lumber market found its turning point. Nevertheless, this past week saw the bear market bounce, as the near-term bottom looks to have arrived. On that note, grab a cup of joe and spend a few to check out what transpired this past week in the place I like to call: ‘The Wonderful World of Wood.” Enjoy…

CAN YOU SAY “BOING”? Buyers sensed little to no short-term downside risk and stepped in, making purchases to increase inventories and fulfill mid-summer needs. As a result, 2×4 2/Btr KDHF rose by 1-2/3%, a significant directional shift compared to the previous week’s 5-1/2% plummet. Nevertheless, 2×4 2/Btr KDHF is lower by nearly 32-3/4% over the past month while positioned roughly 47-1/2% below its mid-June 2021 level.

Similar action was seen with 2×6 2/Btr KDHF, as it too saw losses early in the week, with stability during the second half. On the other hand, 2×6 2/Btr KDHF simply pulled the reigns back on previous weeks’ losses, closing unchanged, another sizeable shift from last week’s drop of 5-1/3%. As a result, we now find 2×6 2/Btr KDHF lower upwards of 35-3/4% over the past 4-weeks while remaining positioned nearly 54% below its price point posted one year ago.

As the pricing was mixed, the wide dimensional stock category (2×10-2×12) missed the market correction memo. For the week, 2×10 2/Btr KDHF slipped nearly 4-3/4% by Wednesday, easing from the previous week’s 5-1/4% falter. For the month, 2×10 2/Btr KDHF is left lower than 29-1/4% from where it began 4 weeks ago while standing nearly than 50-2/3% below its level from one year ago.

2×12 2/Btr KDHF, added more than 3/4% by Friday, as it put the brakes on its recent declines, improving from the previous week’s 1-2/3% drop. However, as we look into the rear-view mirror, we find 2×12 2/Btr KDHF closes out the last 4-weeks down nearly 24% compared to its late-May 2022 mark and lower by almost 52-1/4% from its trading level posted precisely one year ago.

Green DF Timbers stumbled by 2-3/4% by Friday, adding to the previous week’s 2% losing effort. However, over the past 4 weeks, Green DF Timbers are off nearly 4-1/4% while standing 2-1/3% compared to late-June 2021 levels posted one year ago.

2×4 Western S-P-F 1650fb MSR jumped onto the reversal bandwagon, accruing gains of nearly 2%, gaining back almost all of the previous week’s 3% drop. As a result, 2×4 Western S-P-F 1650fb MSR now finds itself lower by nearly 23-1/3% over the past month, while it stands almost 36-2/3% below the late-June 2021 level.

2x4x8′ PET KDHF Solid Studs found the bottom as buyers stepped in and covered needs. As a result, we saw gains of 3/4% by Friday, another improvement compared to the previous week’s 4% deteriorating effort. 2x4x8 PET KDHF Solid Sawn Studs now sit roughly 22-3/4% lower over the past month, positioned a shocking 50-3/4% below their late-June 2021 trading levels.

On the contrary, 2x4x9′ PET KDHF Solid Sawn Studs had a bit more pep in the step, as more significant gains were seen as the weeks progressed. 2x4x9′ PET KDHF Solid Sawn Studs jumped more than 4-3/4%, recouping all of the previous week’s 4-2/3% losses. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs are left nearly 19-3/4% lower than their late-May levels while positioned upwards of 52-3/4% below their price one year ago.

MISSED THE MEMO! Unfortunately, much of the same punishment was experienced in the plywood sheathing sector, as one could almost copy and paste the previous few week’s activities here. As a result, 4x8x1/2” CDX Plywood fell back nearly 6-1/2%, mirroring last week’s 6-3/4% losing effort. As a result, 4x8x1/2” CDX Plywood finds itself more than 24-3/4% lower over the past 4-weeks while positioned 69% below its price from one year ago.

The plywood floor sheathing category followed in its recent market woes, as prices remained slowly fading. 4x8x3/4″ T&G UDLX Plywood dipped 2-3/4% by Friday, nearly in lockstep with the previous week’s 2-2/3% drop. Nevertheless, year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing more than 43-3/4% below its trading price posted from this time in June 2021, while it is left 9-1/2% lower over the past month.

FEEL THE PAIN! Once again, double-digit losses were seen, as the “Commodity King” finds itself back to levels not seen in quite some time. For the week, 4x8x7/16” OSB suffered losses totaling more than 14%, adding to last week’s painful 19% drop. Nevertheless, the king ended the past 4-weeks off more than 43-3/4% as it now sits an astounding 79% below its price point from precisely one year ago.

OSB’s significant downward plummet significantly expanded the 7/16″ OSB vs. 1/2″ CDX DISCOUNT, which ended the week at 43.8%, compared to the previous 38.8% mark, as its most significant historical spread comes into view.

A similar, less painful price retreat was seen in the OSB floor sheathing category as 4x8x23/32” T&G OSB as it too continued its downward slide. As Friday arrived, 4x8x23/32” T&G OSB took a larger shot to the ribs, falling 10-1/3%, slower than the previous week’s 13-1/3% losing effort. Over the past month, we have seen 4x8x23/32″ T&G OSB fall more than 20% while leaving it 40-1/3% below its trading level from one year ago.

The more aggressive decrease in OSB compared to Plywood pushed the previous week’s plywood premium over OSB lower, as Oriented Strand Board floor sheathing finished at a 51.1% DISCOUNT, lower than the previous week’s 46.9% mark. As you can see on the chart below, we are continuing to inch closer and closer to its historical record of 52.4%, which was posted way back in the spring of 2007.

For the week, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill gained north of 7%, a substantial increase versus last week’s 1% rise. Over the past month, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill has dropped more than 20%, while it stands more than 44-1/3% below its price point posted precisely one year ago.

CALMER WATERS AHEAD! As you all know, it took quite some time to get here, but the severe market declines have flushed things out. As a result, the July 2022 futures finished the week at a 2.22% premium to cash, a considerable improvement versus the previous week’s 4.59% mark.

September 2022 futures to the cash mark, as it rose, settling the week at a 3.17% discount, compared to last week’s 1.79% premium mark. The November 2022 contract followed a similar path, closing the week with a 0.2% discount, compared to the previous 5.2% mark. As we peer into next year, the January 2023 contract buttoned up the week with a futures-to-cash premium of 7.97%, a slight dip compared to last week’s 11.77% premium. The March 2023 contract closed with a 13.8% premium to cash, a slight dip compared to the previous week’s 18.02% mark. The May 2023 contract finished the week with a 13.82% premium, a softening versus last week’s 18.04% premium mark. Last but not least, the July 2023 contract closed out the week with a 12.05% premium to cash, dropping slightly from the previous week’s 16.14% mark.

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