June 25, 2021
SNAP, CRACKLE, POP… As temperatures rose to blistering levels in the Pacific Northwest, the lumber market opted to choose an alternate path this week. Buyers sat back with ice-cold veins to watch in amazement as the lumber market unfolded. Fortunately, (or unfortunately) based on your perspective, the frailty experienced last week continued as the lumber market retreat remained in full force. Not all items participated in the retreat, as sheet goods had ideas of their own. If this news is not an attention-getter, piquing your interest, I don’t know what is. Without further adieu, let’s dive right in and see what transpired this past week in the place I like to call: ‘The Wonderful World of Wood.’ Enjoy…
DONATE TODAY. If you regularly read my weekly reports, become a supporter today. For more than 25 years, Shoe’s Lumber Report has been provided FREE to its follower dating back to the era of newspapers, fax machines, and long before the internet and emails became mainstream. Shoe’s Lumber Report has been going strong since the mid-1990s. Generous support from readers like you, in conjunction with sponsors, helps to keep Shoe’s Lumber Report alive and FREE. Click the button below to become a supporter today!
It is simply amazing what can happen in just 4-weeks. Just 1-month ago, the lumber market hit its apex as the short Memorial Day work week proved to be unforgettable. Comparable to last week, buyers remained in the driver’s seat, as many opted to watch from the passenger seat and observe the bloodbath unfold and work to exhaust existing built-up inventory levels. The market route continued, as 2×4 2/Btr KDHF suffered sizeable losses for the second week as producers scoured the market for bargain hunters willing to issue a purchase order. As a result, 2×4 2/Btr KDHF took another beating, dropping more than 17-1/3%, adding to last week’s 23-1/3% pummeling. The week’s significant drop helped push 2×4 2/Btr KDHF down further as it is now positioned a mere 95.9% below its late June 2020 level.
2×6 2/Btr KDHF succumbed to the market correction, as it too posted sizeable losses for the second straight week. Avoiding the high temperatures, buyers opted to hang out in the pool and play a game “Marco Polo,” avoiding inbound inquiries from producers looking to make deals. As a result, 2×6 2/Btr KDHF stumbled more than 17-1/3%, adding to last week’s more than 23-1/2% loss. As a result, 2×6 2/Btr KDHF closes out the final full week of June 106.5% above its late June 2020 level.
Wide dimensional stock (2×10-2×12) fared better than its narrow counterparts but could not escape the market massacre. As a result, 2×10 2/Btr KDHF was hit with losses totaling nearly 10-1/4%, almost halving last weeks near 21% drop. When all was said and done, 2×10 2/Btr KDHF was left positioned 155.8% above its trading level from precisely one year ago.
2×12 2/Btr KDHF followed the general market recoiling pattern as it ended the week in the red as well. 2×12 2/Btr KDHF dropped upwards of 10-2/3% this week, as it too halved last week’s nearly 21-1/4% drop. 2×12 2/Btr KDHF closed out the week 151.7% above its late-June 2020 level.
Surprisingly, Green DF Timbers kept their foothold, as prices avoided participating in the lumber market retreat. As a result, Green DF Timbers held their bold position, as they ended unchanged for the second straight week. As a result, Green DF Timbers ends the week just 101.6% above its late-June 2020 level.
2×4 Western S-P-F 1650fb MSR joined the crowd, as it too was victimized by the markets retracting prices. As a result, 2×4 Western S-P-F 1650fb MSR lost 11% by Friday, adding to last week’s more than 16-2/3% drop. This marks the fourth consecutive weekly downward move, as 2×4 Western S-P-F 1650fb MSR now site 86.8% above its late-June 2020 level.
Feel the pain! After suffering a solid kidney punch last week, 2x4x8′ PET KDHF Solid Studs were kicked when they were down. As a result, 2x4x8′ PET KDHF Solid Sawn Studs were thumped for losses totaling 25%, increasing from last week’s more than 21% thrashing. As we near the end of June, 2x4x8′ PET KDHF Solid Studs stand 104.5% above their late-June 2020 level.
Feel even more pain! After flexing some major muscles earlier in the year, posting massive weekly gains, leaving buyers begging for the product, paybacks are a b _ t c h. And that is precisely what transpired this week. 2x4x9′ PET KDHF Solid Sawn Studs fell victim to the lack of buying interest, as losses for the week totaled more than 30-3/4%, adding to last week’s sizeable drop of nearly 23-2/3. After the colossal 2-week plunge, 2x4x9′ PET KDHF Solid Sawn Studs are now left standing just 103.0% below their late June 2020 level, a GARGANTUAN difference compared to last week’s 205.6% year-on-year comparison.
Week two and holding… The shifting tone in the lumber market did nothing to affect the panel market for the time being. Instead, producers leaned on current order files as traders waited in anticipation for the market’s weakness to infect panels. As a result, 4x8x1/2″ CDX Plywood closed out the week unchanged once again, marking their second week of inactivity. Nevertheless, 4x8x½” CDX Plywood closes the week a solid 312.7% above its late-June 2020 level.
4x8x3/4″ T&G UDLX Plywood followed suit, as it too ended the week unchanged, as it too marked its second week of inactivity. This leaves 4x8x23/32″ T&G UDLX Plywood 223.7% above its late-June 2020 mark.
The king sat comfortably on the throne and managed to hang tough amidst the lumber market’s continuing retreat. Producers leaned on their current order files to defend their position, ranging between the 3-5 week time frame. 4x8x7/16″ OSB settled the week unchanged, hanging tough for its second week. The COMMODITY KING ends the week at an impressive 487.5% above its late-June 2020 level.
The DISCOUNT of 7/16″ OSB vs. 1/2″ CDX remained unchanged, matching last week’s 17.1% mark.
4x8x23/32″ T&G OSB offered up a neutral effort as well, as it coasted into Friday unchanged for the second week in a row. As a result, 4x8x23/32″ OSB ends the week 351.5% higher than where it stood precisely one year ago.
The stagnation in both items helped keep the OSB to plywood DISCOUNT intact at 13.3%, matching last week’s mark.
The bearish market helped push lumber pricing lower while panel products dug in their heels, fending off counteroffers. Skittishness among buyers helped the market retreat gain additional momentum as the race to the next support level was underway. My composite price fell for the fourth consecutive week, plunging by $117.9mbf, dropping nearly 8-1/3%, to end the week at $1302.1mbf. With market correction underway, budgetary relief is ahead. This abrupt market retraction will not resolve all of your pricing issues overnight. The much-needed relief will arrive in the coming weeks and is bound to further chew away at the severe price increases incurred during the historic run to the top.
After suffering significant losses last week, traders had high hopes that the July futures would take a page out of last Friday’s trading action, which bounced higher after finding support around the previous resistance level of $850.0mbf. That battle continued into Monday, Tuesday, and Wednesday and looked to hold those levels as the cash to futures market was close to even. That was until mid-day Thursday arrived, and the critical $850mbf support level was pierced. Subsequently, the bottom fell out as a combination of additional weakness in the cash market and the previous days’ New Home Sales miss further contributed to the bearish tone. The July contract proceeded to hit down limits Thursday and Friday, settling at its lowest level since March 18th’s closing price of $777.1mbf, roughly one week before the historic run to the top commenced. The July contract was pounded, closing out the week at $779.3mbf, falling by 13.21% compared to last Friday’s close. Once the beating was said and done, the July futures-to-cash discount grew slightly, ending at 10.94% compared to last Friday’s 10.37% mark.
Looking out to September, the futures-to-cash discount shrank to 11.54%, down from the previous week’s 14.66% mark. The November discount dwindled as the market’s weakness spread across the board, leaving November at 16.23%, lower than last week’s 24.93%. The January 2022 contract yielded to the board’s weakness as the discount remained, closing out the week at 14.86%, compared to last Friday’s 27.81% level. The March 2022 contract finished the week at 16.11%, down from the previous week’s 29.2% level. Looking deep into next year, the May 2022 contract closed the week at a 13.14% discount, shrinking from last week’s 32.24% mark. Looking out a year plus, the July 2022 contract came in with an 8.7% discount, shrinking from last week’s massive 32.24% mark, as the board looks to calibrate to more sensible spreads. Until next week… Shoe out!