July 1, 2022

HAPPY 4TH OF JULY and GOD BLESS AMERICA! As we cross the half way point of the year and prepare to celebrate July 4th on Monday, are you left scratching your head curious if the lumber market offered up any fireworks leading into the long holiday weekend. If that is the case, then you are in the right place. Pull up a chair, sit back and relax to gaze upon all that transpired this past week in the place I like to call: ‘The Wonderful World of Wood.” Enjoy…

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The anticipated July 4th weekend pulled trades away from their offices, as sales volumes waned as traders’ minds were focused more on family than adding to inventories leading into July. As a result, 2×4 2/Btr KDHF rose by 3-1/3%, a significant directional shift compared to the previous week’s 1-2/3% jump. Nevertheless, 2×4 2/Btr KDHF is lower by nearly 13-1/4% over the past month while positioned roughly 29-1/2% below its early-July 2021 level.

Similar trading activity was found with 2×6 2/Btr KDHF, which ended its losing streak last week and moved higher off that effort. As the week came to a close, 2×6 2/Btr KDHF moved higher off of the previous week’s near-term basement level, closing 1-3/4% higher, as it looks to climb higher off last week’s unchanged activity. As a result, we now find 2×6 2/Btr KDHF lower upwards of 15-2/3% over the past 4 weeks while remaining positioned nearly 37-1/4% below its price point posted one year ago.

ABOUT-FACE! The weakness experienced last week with 2×10 succumbed to the market’s near-term reversal, as it too moved higher for the week. By Friday, 2×10 2/Btr KDHF added nearly 1-2/3%, a significant turn-around compared to the previous week’s 4-3/4% drop. However, over the past month, 2×10 2/Btr KDHF is left lower than 20-2/3% from where it began 4 weeks ago while standing nearly 40-2/3% below its early July 2021 levels.

2×12 2/Btr KDHF, added more than 3/4% by week’s end, as it did a virtual copy-and-paste virtually mirroring the previous week’s 3/4% jump. Looking in the rear-view mirror, we find 2×12 2/Btr KDHF closes out the last 4 weeks down nearly 12-1/2% compared to its late-May 2022 mark and lower by almost 43-1/3% from its trading level posted precisely one year ago.

Once again, Green DF Timbers stumbled during the week as they continued fading lower off of their historical all-time highs seen a few weeks ago. As Friday arrived, Green DF Timbers dipped by 4%, as they added to the previous week’s 2-3/4% deteriorating effort. Over the past 4 weeks, Green DF Timbers are off more than 8% while positioned roughly 6-1/3% below its early July 2021 levels posted one year ago.

2×4 Western S-P-F 1650fb MSR didn’t dare miss out on the summer rebound, as they too added to the previous week’s gains. 2×4 Western S-P-F 1650fb MSR rose just 1-1/4%, lower than last week’s 2% effort, but not unexpected as the long holiday weekend came into play. As a result, 2×4 Western S-P-F 1650fb MSR now finds itself lower by upwards of 10-1/4% over the past month, while it stands almost 19-3/4% below the early-July 2021 level.

As the market pulse shifted into another gear, my ‘canaries in the cole mine’ again led the way. After experiencing a slight bounce last week, 2x4x8′ PET KDHF Solid Studs moved farther off that bottom, adding more than 2-1/2% by Friday, as they continued moving higher off of the previous week’s 3/4% jump. As we begin July, 2x4x8 PET KDHF Solid Sawn Studs now sits roughly 8-1/3% lower over the past 4 weeks while positioned a shocking 25-3/4% below their late-June 2021 trading levels.

The canary that chirped the loudest was 2x4x9′ PET KDHF Solid Sawn Studs, as it added to the week’s impressive move. 2x4x9′ PET KDHF Solid Sawn Studs leaped more than 5-1/3% for the week, further cushioning the previous week’s 4-3/4% improvement. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs are left nearly 4-1/4% lower than their early-June levels while positioned upwards of 21-1/3% below their price one year ago.

A softening pattern remained in the plywood sheathing sector as buyers stepped in but lacked the fervor to push higher numbers. Additionally, buyers needing to cover summer needs helped improve the tone. As a result, 4x8x1/2” CDX Plywood dipped just 1-1/2%, a vast improvement compared to last week’s 6-1/2% losing effort. However, over the past month, 4x8x1/2” CDX Plywood finds itself 20% lower while positioned 68-1/2% below its price one year ago.

Bruce Lee’s distant cousin “UGG-LEE” was precisely what the plywood floor sheathing was this week, as market weakness remained. As a result, 4x8x3/4″ T&G UDLX Plywood fell more than 3-1/2% for the week, adding to the previous week’s 2-3/4% drop. 4x8x3/4” T&G UDLX Plywood stands more than 45-3/4% below its trading price posted in early-July 2021, while it is left 10-1/2% lower over the past month.

TURNED ON A DIME! After suffering yet another hammering last week, the “Commodity King” gained interest in traders in the back half of the week, as its near-term bottom was seemingly found. The recent sizeable price drops made most buyers feel that the further significant downside has waned as they stepped up to cover summer commitments. For the week, 4x8x7/16” OSB posted gains totaling 2-3/4%, reversing course from last week’s painful 14% drop. Nevertheless, the king ended the past 4-weeks off more than 37-1/2% as it now sits an astounding 78-1/2% below its price point from precisely one year ago.

Weakness in plywood combined with the directional shift in OSB helped to shrink the 7/16″ OSB vs. 1/2″ CDX DISCOUNT, which ended the week at 41.4%, compared to the previous 43.8% mark.

Similar bottom-fishing efforts were present in the OSB floor sheathing category as 4x8x23/32” T&G OSB hit its resistance point, managing to stop the bleeding in the short term. As Friday came into view, 4x8x23/32” T&G OSB coasted into the long holiday weekend unchanged, a sizeable difference compared to last week’s 10-1/3% drop. However, over the past month, we have seen 4x8x23/32″ T&G OSB fall more than 30-1/2% while leaving it 68-1/3% below its trading level from one year ago.

The softness in plywood, combined with stagnation in OSB, pushed the previous week’s plywood premium over OSB, as Oriented Strand Board floor sheathing finished with a 49.3% DISCOUNT, down from the last week’s 51.1% mark.

Lack-luster volumes were sufficient enough to keep the recovery effort for 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill intact. As a result, as the month of July commenced, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill gained 5%, a slight easing compared to last week’s 7% rise. However, over the past month, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill is now even-steven, finishing unchanged, while it stands more than 11-1/3% below its price point posted precisely one year ago.

THE BOTTOM HAS BEEN FOUND! Finally, after more than 3 months of declines, the bottom has been found. The July 2022 futures finished the week at a 7.92% premium to cash, a sizeable jump versus the previous week’s 2.22% mark.

September 2022 futures to the cash mark increased as trading action jumped considerably leading up to the 4th of July weekend, settling Friday with an 8.46% premium, compared to last week’s 3.17% discounted mark. The November 2022 contract followed a similar path, closing the week with a 5.03% premium compared to the previous 0.2% discounted level. Peering out to next year, the January 2023 contract buttoned up the week with a futures-to-cash premium of 6.35%, a slight drop compared to last week’s 7.97% premium. The March 2023 contract closed with an 11.9% premium to cash, a slipping compared to the previous week’s 13.8% mark. The May 2023 contract finished the week with an 11.92% premium, softening versus last week’s 13.82% premium. Lastly, the July 2023 contract closed out the week with a 10.24% premium to cash, dropping from the previous week’s 12.05% mark.

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