July 15, 2022

WELCOME TO THE SUMMER BEARISH BULL MARKET! So far, this summer feels more like the BEAR DAYS instead of the DOG DAYS of summer. Economic concerns threw everyone for a loop this week, as the stock market and the lumber resembled a pachinko machine as yet another topsy-turvey week concluded. I can understand why if you feel a little roughed up as the weekend approaches. The weekend is nearly here, so grab an ice-cold beverage and spend a few minutes catching up on all that transpired this past week in the place I like to call: ‘The Wonderful World of Wood.” Enjoy… 

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The summer doldrums played out as the middle of July came into view. Trading action softened as most of the needs of committed projects have now been covered. Multiple economic concerns intensified this week, as home buyer cancelation rates, CPI, and PPI were just a few items stirring about this week. The post-holiday trading week pushed 2×4 2/Btr KDHF up by nearly 4%, a bit more aggressive than the previous week’s 1-2/3% move. Nevertheless, 2×4 2/Btr KDHF has moved higher by more than 10-3/4% over the past month, while it stands at roughly 10-1/2% above its mid-July 2021 level.

2×6 2/Btr KDHF extended gains from last week, as upwards momentum slowed compared to the previous week. However, 2×6 2/Btr KDHF rose by less than 1/3% by Friday, as it slowed against last week’s 1% effort. As a result, 2×6 2/Btr KDHF finds itself up nearly 3-1/4% higher over the past 4 weeks while remaining positioned 8-3/4% below its price point one year ago.

Strength continued in the wide dimensional stock category as 2×10 continued its journey towards higher ground. By Friday, 2×10 2/Btr KDHF added upwards of 3-1/4%, doubling the previous week’s 1-2/3% effort. Over the past month, 2×10 2/Btr KDHF is now higher by more than 1-1/2% from where it was 4 weeks ago while standing nearly 15-3/4% below its mid-July 2021 levels.

2×12 2/Btr KDHF lost the pep in its step from last week, as it closed out the week unchanged, grinding to a halt compared to the previous week’s 2-1/2% rising effort. Over the past month, we find 2×12 2/Btr KDHF up more than 4-1/3% compared to its mid-June levels while positioned almost 21% below its trading level posted precisely one year ago.

The lashings keep coming as Green DF Timbers added to recent their losing streak. After peeking at their all-time historical high back in mid-June, timbers have now pulled back for the fifth consecutive week. As Friday arrived, Green DF Timbers dropped by more than 4-1/3%, adding last week’s 4% declining effort. Over the past 4 weeks, Green DF Timbers are off more than 14% while positioned, while coincidentally, that stands 14% below their early July 2021 levels.

INSERT YAWN HERE. 2×4 Western S-P-F 1650fb MSR paused this week as they remained in stall-out mode. As a result, 2×4 Western S-P-F 1650fb MSR closed out the week unchanged, mirroring last week’s unchanged effort. As a result, 2×4 Western S-P-F 1650fb MSR stands 3% higher over the past month, standing almost 3% above the mid-July 2021 level.

The chirps of the canaries were quieter this week than last, as the dog days of summer have arrived. 2x4x8′ PET KDHF Solid Studs posted small gains totaling more than 3/4% by week’s end, slowing compared to last week’s 2-1/2% pop. As the middle of July came into view, 2x4x8 PET KDHF Solid Sawn Studs now sit more than 3% higher over the past 4 weeks while positioned just 11-2/3% above their mid-July 2021 trading levels.

Once again, the loudest chirps could be heard from 2x4x9′ PET KDHF Solid Sawn Studs, as they added to last week’s gains. 2x4x9′ PET KDHF Solid Sawn Studs rose more than 1-1/3% by Friday, slowing from the previous week’s 3% leap. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs are nearly 15-1/3% higher than their mid-June levels while positioned upwards of 10% above their price one year ago.

Cautiousness was present as traders limited purchases to immediate needs, as the pendulum pointed in the direction of producers (albeit, ever so slightly). However, inbound inquiries were sufficient enough for producers to raise pricing, as 4x8x1/2” CDX Plywood added more than 3% for the week, an improvement compared to last week’s unchanged effort. Over the past month, 4x8x1/2” CDX Plywood finds itself more than 5% lower while positioned nearly 58-1/2% below its price one year ago.

Another losing effort was seen in the plywood floor sheathing category, as 4x8x3/4″ T&G UDLX Plywood dipped more than 1/3% by Friday, slowing compared to the previous week’s 3/4% decline. Nevertheless, 4x8x3/4” T&G UDLX Plywood stands upwards of 31-1/2% below its trading price posted in mid-July 2021, while it is left more than 7% lower over the past month.

THE KING IS BACK – well, sort of! After suffering significant losses since late March, the “Commodity King” has regained its footing and has three positive weeks under its belt. Buyers remained confident in the market’s near-term direction but were slightly apprehensive in the long term. For the week, 4x8x7/16” OSB posted gains of more than 7-1/2%, adding to last week’s 5-1/3% bounce. Nevertheless, the king ends the past 4-weeks off more than unchanged as it still stands a significant 69-3/4% below its price point from precisely one year ago.

Erosion in the plywood sector, combined with the strength in OSB, helped to diminish the 7/16″ OSB vs. 1/2″ CDX DISCOUNT, which ended the week at 35.6%, compared to the previous 38.3% mark.

A similar effort was seen in the OSB floor sheathing category as 4x8x23/32” T&G OSB continued moving off of its recent lows. As Friday arrived, 4x8x23/32” T&G OSB closed out the week up more than 4-1/4%, accelerating off of last week’s 2-3/4% jump. However, over the past month, we have seen 4x8x23/32″ T&G OSB fall more than 3-3/4% while leaving it more than 61-1/2% below its trading level from one year ago.

The softness in plywood, combined with the rise in OSB, drug the previous week’s plywood premium over OSB lower, as Oriented Strand Board floor sheathing finished with a 45.0% DISCOUNT, down from the last week’s 47.4% mark.

As expiration Friday arrived for July lumber futures, the convergence of 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill cash price and futures contract played out. As a result, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill gained ground during the week, rising to meet the swelling spot-month contract price as it ticked closer to expiration, adding more than 4-2/3%, further cushioning last week’s 1-1/2% climb. Over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill rise 19-2/3%, while it stands more than 38% above its price point posted precisely one year ago.

JULY IS NOW EXPIRED. The strength in the cash market helped push the expiring futures contract higher, as it expired and made way for September. The July 2022 futures trended lower four of five trading days, only to be saved by a strong up day on Friday. The July 2022 contract rose to end the week, finishing with a 1.79% premium to cash, a tick up from the previous week’s 1.58% mark.

September 2022 futures to the cash mark increased did the one-two-switcheroo as it crossed the mid-point of July, settling Friday with a 4.24% discount, flip-flopping compared to last week’s 8.98% premium mark. The November 2022 contract followed a similar path but strengthened, ending the week with a 5.13% discount compared to the previous week’s 9.41% mark. Peeking out next year, the January 2023 contract did an about-face as it turned on a dime to end the week with a futures-to-cash discount of 1.46%, a massive reversal versus last week’s 14.22% premium. The March 2023 followed suit, as it too reversed but managed to hold onto its premium to cash, ending at a 2.66% premium, plummeting from last week’s 17.28% mark. Last but not least, the May 2023 contract followed the pessimistic tone, as it faltered to close out the week with a 2.67% premium, reversing course compared to last week’s 17.3% premium mark.

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