June 3, 2022

CRASH!  DID YOU HEAR THAT? As the final days of May faded away, the panicked shrieks of MAYDAY could be heard loud and clear as June commenced. If you thought last week’s lumber market vulnerability was tantalizing, you will be salivating by what occurred this week. So, without further adieu, let’s jump right in to find out all the insanity that transpired this past week in the place I like to call: ‘The Wonderful World of Wood.” Enjoy…

Like last year, the week following Memorial Day was definitely a memorable one for both buyers and sellers. However, any hopes of a post-holiday sales burst were muted as further panic amidst the downside risk accelerated. As a result, traders opted to take a ‘wait-and-see’ approach and filled inventory needs from the discounted secondary market instead of loading up from producers. Nevertheless, the bear tracks continued to be present, as weakness was experienced far and wide. For the week, 2×4 2/Btr KDHF plunged, dropping a shocking 20% by week’s end, accelerating off of the previous week’s 14-2/3% loss. After this week’s hammering, 2×4 2/Btr KDHF is left lower by 36-1/2% over the past month while positioned nearly 57% below its early-June 2021 level.

As buyers took a more resistant stance, the post-holiday week was more severe for producers looking to unload 2×6 2/Btr KDHF. As a result, pricing fell the most of any item I track, as 2×6 2/Btr KDHF crumbled nearly 22-1/4%, adding to last week’s damage of the downward 16-1/4% move. As a result, we now find 2×6 2/Btr KDHF off over 40% over the past 4-weeks while remaining positioned nearly 62% below its price point posted one year ago.

This week, there was nowhere to escape the market’s wrath, as the wide dimensional stock category (2×10-2×12) succumbed to the generally pessimistic view. Thankfully for producers, the damage was a bit more subdued, as 2×10 2/Btr KDHF tapped the brakes coming off of the previous week’s losses, closing the week down more than 9-1/3%, slowing from last week’s 11-1/3% stumble. For the month, 2×10 2/Btr KDHF is now left down more than 22-3/4% from where it began 4-weeks ago while standing nearly 52-2/3% below its level from one year ago.

Like its counterpart, 2×12 2/Btr KDHF felt the market retraction, as buyer interest and purchase inquiries were sparse. For the week, 2×12 2/Btr KDHF lost ground as the week progressed, dropping 12-1/3% by Friday, accelerating off of the previous week’s 8-1/3% effort. Looking in the rear-view mirror, we find 2×12 2/Btr KDHF closing out the last 4-weeks down upwards of 22-1/2% compared to its early-May 2022 mark and lower by more than 58-3/4% from its trading level posted precisely one year ago.

CAN YOU SAY STUBBORN? That is precisely what Green DF Timbers are, as pricing shockingly followed the beat of their own drum. Green DF Timbers glided into Friday unchanged for the week after climbing ever so slightly last week, rising ¾%. Over the past 4 weeks, Green DF Timbers are up more than 1-1/2% while remaining positioned upwards of 2-3/4% above the early-June 2021 levels posted one year ago.

Like a copy and paste effort, the weakness seen with 2×4 Western S-P-F 1650fb MSR last week virtually mirrored the action. As Friday arrived, 2×4 Western S-P-F 1650fb MSR accrued 13-1/3% losses, a smidgen higher than the previous week’s 12-1/2% drop. As a result, 2×4 Western S-P-F 1650fb MSR now finds itself lower by more than 31-1/3% over the past month, while it stands nearly 47% below the early-June 2021 level.

THE CANARY CHIRPS SOFTENING. Last week’s sheer pummeling experienced in the KDHF Stud category subsided as the massive losses slowed. Additionally, deep discounting by manufacturers helped spark interest in buyers, sensing that the severe price declines are approaching a near-term bottom. For the week, 2x4x8′ PET KDHF Solid Studs deteriorated by 13-3/4% by Friday, a sizeable improvement compared to the previous week’s horrendous 22-3/4% losing effort. However, after this week’s move, 2x4x8 PET KDHF Solid Sawn Studs were again pushed down to their lowest mark of 2022, sitting nearly 37-1/2% lower over the past month, positioned a shocking 58-1/4% below their early-June 2021 trading level.

YOU KNEW IT WOULDN’T PLUMMETING FOREVER. Like their shorter counterparts, 2x4x9′ PET KDHF Solid Sawn Studs saw their downward trajectory ease, as pricing nearly halved the previous week’s nosedive. However, 2x4x9′ PET KDHF Solid Sawn Studs still fell 11-3/4%, even though it was a significant improvement compared to the previous week’s 24-2/3% tailspin. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs are left nearly 36-1/2% lower than their early-May levels while positioned upwards of 62% below their price one year ago.

The minor injuries continue piling up as the plywood sheathing sector continues drifting lower. Producers scrambled to find buying interest as the bearish tone that coated the market was prevalent. As the end of the week arrived, 4x8x1/2” CDX Plywood fell harder during the holiday-shortened week than the previous week, drifting lower 7-1/2%, adding a bit of downward momentum versus last week’s 6% losing effort. As a result, 4x8x1/2” CDX Plywood finds itself more than 16-1/4% lower over the past 4-weeks while positioned 61-3/4% below its price posted one year ago.

The plywood floor sheathing category fared the best of all the panel products I track, as slow and steady downward erosion remained. As a result, 4x8x3/4″ T&G UDLX Plywood slumped just over 2-1/2%, a virtual copy-and-paste from week’s near 2-1/2% losing effort. Nevertheless, year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing nearly 38-1/2% below its trading price posted from this time in June 2021, while it is left 5-1/2% lower over the past month.

THE KING HAS BEEN DETHRONED! As buyers countered mill offers with massive discounts, prices eroded quickly, coming off the Memorial Day weekend, pushing prices to their lowest level since mid-December. Some producers accepted offers well below published levels as buyers were unquestionably in control. Reports of a fire at LP’s Peace Valley facility had little to no impact on the falling market. Once the week was said and done, the “Commodity King” suffered another hefty loss, with 4x8x7/16” OSB closing down 7-2/3%, a slightly quicker pace than last week’s 7% drop. Nevertheless, the king ends the past 4-weeks off more than 23-1/2% as it now sits more than 65-1/2% below its mark from precisely one year ago.

The even downward momentum of both plywood and OSB helped keep the 7/16″ OSB vs. 1/2″ CDX DISCOUNT virtually the same, ending the week at 25%, compared to the previous 24.9% mark.

Similar action, yet less aggressive, was seen in the OSB floor sheathing category as 4x8x23/32” T&G OSB as pricing continued corroding. By week’s end, 4x8x23/32” T&G OSB took a smaller shot to the chin this week than last, dropping 5-2/3%, slightly better than the previous week’s 6-2/3% losing effort. Over the past month, we have seen 4x8x23/32″ T&G OSB fall more than 17-1/3% while leaving it 54% below its trading level from one year ago.

The more aggressive drop in OSB over Plywood pushed the previous week’s plywood premium over OSB lower, as Oriented Strand Board floor sheathing finished at a 34.6% DISCOUNT, compared to last week’s 32.5% mark.

WE ARE ALMOST THERE! Consecutive back-to-back weeks of severe losses of 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill finally brought the cash-to-futures imbalance in line. This week, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill tumbled by more than 16%, adding to last week’s 16-2/3% fall, as the massive cash market premium has now virtually evaporated. Over the past month, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill has fallen nearly 42-1/4%, while it stands more than 57% below its price point posted precisely one year ago.

CAN YOU SAY EVEN-MONEY? Slaughtered would be a good descriptor of how the July futures contract aired this week, as pricing was hammered three of the four tradings days. The contract began the week at $700mbf and was slammed hard with selling, hitting an intra-week low of $594mbf Thursday, before gaining its balance to close out the week on Friday at $616.6mbf. The July 2022 futures finished the week at a 2.13% discount to cash, an improvement over the previous week’s 6.57% mark.

WARNING FONT ALTERATIONS AHEAD! A slightly alternate shift was seen with the September 2022 futures to the cash mark, as it did an about-face, settling the week at a .32% premium, compared to last week’s 6.96% discounted mark. The November 2022 contract followed a similar path, closing the week with a 3.17% premium, reversing the previous 8.67% discounted mark. Looking out to next year, the January 2023 contract buttoned up the week with a futures-to-cash premium of 3.44%, a massive improvement compared to last week’s 5.33% discounted mark. The March 2023 contract closed with an 8.21% premium to cash, an enormous reversal from the previous week’s 4.15% mark. The May 2023 contract finished the week with an 8.22% premium, increasing from last week’s 4.15% discounted mark. Last but not least, the July 2023 contract ended the week with a 5.55% premium to cash, a significant drop versus the previous weeks with a 6.54% discount.

  • SLOWING NEW HOME SALES: April’s month supply came in at 9.0, from the previous month of March’s 6.9 mark. Ouch! Month to month new home sales fell across the board in every region, as many markets are now seeing price incentives and discounting to attract buyers. Hmmm… Sign of things to come?
  • SUPPLIER INVENTORY POSITIONS: Like last week, be aware of your supplier’s inventory levels coming into the recent crash. Don’t be stuck with pricing that does not reflect a softening market. Shop around if needed to ensure your supplier is on top of the market changes, IN BOTH DIRECTIONS!
  • LUMBER FUTURES: The week began at $700mbf and plummeted to a low of $594mbf on Thursday before bouncing higher to close Friday at $624.8mbf. I expect pricing to settle into a smoother pattern in the near term, as insane volatility should ease now that cash and futures are nearly even.
  • LUMBER CORRECTION IS COMPETE: The plunge of the lumber market cash market has now aligned with the July futures pricing. As a result, additional severe downside risk has now evaporated. Therefore, feel confident in considering a long position in the 60-90 days range to cover needs through August/September.

Until next week, Shoe out!

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