July 16, 2021
WHAT CAN GO WRONG? It is incredible that the lumber market would experience such a severe correction in a matter of just seven weeks. Even for a 30+ year building veteran like me, the downward acceleration is shocking. Looking closer at the insane elevated levels, it is evident that the higher things rise, the farther they fall. With the lumber market now in perpetual free-fall, the bottom will arrive sooner than later. The even bigger question of the minds now is: Will the plywood and OSB market join in on the cliff dive? Well, to gain a bit of insight there, I would suggest that you dive in as well, (pun intended) to find out what transpired this past week in the place I like to call:‘The Wonderful World of Wood.’ Enjoy…
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Amidst prime family vacation season, the summer’s rising temperatures on the mercury did little to warm up the ‘ICE COLD” lumber, as weakness remained prevalent as we crossed the center point of July. As a result, 2×4 2/Btr KDHF was scorched again, losing 16-2/3%, decelerating slightly off last week’s more than 18-2/3% drop. Nevertheless, the seventh week of losses helped push 2×4 2/Btr KDHF down its basement trading level of 2021 even lower, as it is now positioned a mere 9.1% above its mid-July 2020 level.
2×6 2/Btr KDHF followed suit, as it too mirrored the market’s gloomy pattern. Buyers opted to sit back and wait for a bounce as they worked through existing inventories. As a result, volume purchases were sparse, and pricing suffered losses for the eighth straight week. As a result, 2×6 2/Btr KDHF sank by more than 16-2/3%, holding onto the current downward velocity equal to the previous week’s nearly 16-1/4% drop. Once the dust settled, 2×6 2/Btr KDHF ended the week at a new low-water mark of the year and now stands just 13.2% above its trading level from precisely one year ago.
The relentless correction continues. July has not been kind to wide dimensional stock, as both 2×10 and 2×12 were set reeling again. As a result, 2×10 2/Btr KDHF was hit by more than 14-1/2%, coming off the heels of last week’s 13-1/2% gut-punch. 2×10 2/Btr KDHF closes out the week positioned just 6.3% above its low of the calendar year and 50.0% above its mid-July 2020 trading level.
2×12 2/Btr KDHF surrendered to the market’s downward spiral, suffering its sixth straight weekly loss. As a result, 2×12 2/Btr KDHF dropped a smidgen more than 14-1/2%, similar to the previous week’s 13-3/4% loss. As July crosses its mid-point, 2×12 2/Btr KDHF settles in at its low-water mark of 2021 and 47.1% above its trading level from precisely one year ago.
FROZEN SOLID. Green DF Timbers have amazingly disregarded the market’s overall fragility for the sixth consecutive week as they dig in their heels and hold their ground. As a result, Green DF Timbers conclude the week unchanged yet again, marking their sixth week of price stagnation amidst their historical apex level. Green DF Timbers finish the week positioned 89.6% above its mid-July 2020 level.
After posting minor single-digit losses last week, the downward push regained steam as July crossed its mid-point. Most likely helped by severe weakness in the expiring July futures contract, 2×4 Western S-P-F 1650fb MSR was hit with losses totaling nearly 19%, accelerating five-fold off last week’s 3-3/4% falter. This marks the seventh consecutive weekly downward move, as 2×4 Western S-P-F 1650fb MSR now sits 12.9% above its trading level posted precisely one year ago.
A funny memory from my high school years came to mind that I thought was quite fitting to add to my report this week. One of my buddies, Ed, would joke around and quote the phrase: “I’m a stud because I told you so.” Ed’s quote would always be timely and bring forth deep belly laughs to its intended audience. Needless to say that phrase today brings about a very different meaning, as the studs that I deal with nowadays are far from impressive. For example, 2x4x8′ PET KDHF Solid Studs were embarrassed again this week, as they fell more than 13-3/4%, easing from the previous week’s 20-1/4% decline. The severe losses leave traders baffled as to when the bottom will arrive, especially since 2x4x8′ PET KDHF Solid Studs closed out the week a mere 6.7% above their mid-July 2020 level. We shall see.
2x4x9′ PET KDHF Solid Sawn Studs faired no better, as they too took a beating this week. 2x4x9′ PET KDHF Solid Sawn Studs tumbled more than 12%, slowing slightly from the previous weeks more than 15% decline. After their seventh week of declines, 2x4x9′ PET KDHF Solid Sawn Studs have now experienced a colossal downward correction and stand just 21.5% above their position posted precisely one year ago.
After being pushed off its historical apex posted during the final week of June, 4x8x1/2” CDX is slowly but surely succumbing to the lumber market’s overall weakening trend. As a result, 4x8x1/2″ CDX Plywood closed out the week down more than 7-3/4%, reflecting the previous weeks more than 7-3/4% stumble. 4x8x½” CDX Plywood closes out the week 171.8% above its mid-July 2020 level as it still has work to do to return to earth from its current stratospheric levels.
4x8x3/4″ T&G UDLX Plywood succumbed to the market’s overall pessimistic near-term sentiment, as prices accelerated downward off of last week’s initial move. As a result, 4x8x3/4” T&G UDLX Plywood dropped more than 13% after finishing down 9-3/4% during last week’s trading. However, with the historical high-water mark now in the rearview mirror, 4x8x3/4” T&G UDLX Plywood remains positioned 128.3% above its mid-July 2020 mark.
The resiliency of the COMMODITY KING’s strength could hold on no longer, as prices finally cracked amidst the lumbers overall weakening trend. Additionally, the timing of LP’s Peace Valley OSB mill in British Columbia opening added insurance to traders that supply constraints seen earlier in the year would only improve. As a result, the weakness that appeared last week became more prevalent as price declines accelerated. As a result, 4x8x7/16” OSB suffered a colossal plunge totaling more than 17-1/2%, greatly accelerating from last week’s mere 2-1/4% dip. This audacious move marks the king’s most significant downward dollar move in history, helped by the current elevated trading levels. However, even after its most significant weekly dollar drop in history, the COMMODITY KING closes out the week an impressive 263% above its mid-July 2020 level, a substantial improvement compared to last week’s mark.
The downward movement of both products pushed the DISCOUNT of 7/16″ OSB vs. 1/2″ CDX up considerably, landing at 11.6%, compared to last week’s mere 1.2% mark.
Compared to the punishment suffered by its thinner counterpart, 4x8x23/32″ T&G OSB was happy to close out the week with the losses it suffered. 4x8x23/32” T&G OSB fared the best of all the panel products I track, as losses totaled nearly 11-1/2%, greatly accelerating off last week’s ½% drop. As a result, 4x8x23/32″ OSB ended the week 235.7% higher than where it stood precisely one year ago.
The solid downward double-digit moves of plywood and OSB kept the OSB to plywood DISCOUNT inside a narrow range, closing out the week at 2.3%, compared to last week’s 4.2% mark.
Lack of desire among skittish buyers left more spectators than players, as watching and waiting dominated the scene. As a result, price erosion was substantial as all but one of the products I consistently follow suffered a below-the-belt punch. As a result, my composite price dipped for the seventh consecutive week, tumbling $144.3mbf, plunging more than 12-1/3%, to cross July’s mid-point at an even $1020.0mbf. With dimensional items and studs having pulled back significantly from their all-time highs, sheet goods are next up to be the downward market participant. With traders sensing near-term weakness, it would be safe to say that we will wave goodbye to a four-digit composite price next week as we begin the arduous chewing away of this year’s severely over-inflated prices.
Can you say WEAKNESS? The July futures contract expired on Thursday with severe weakness, as traders ran away like people fleeing a burning building. Red font was dominant all trading days, as Thursday’s expiration arrived. As a result, the July contract suffered more than a $310mbf plunge for the short trading week. OUCH! The July contract closed and left the board Thursday at $490.0mbf, down from last Friday’s $702.5mbf mark.
With the July contract expired, September is the next month to watch. The September contract will provide some clues as to what traders expect will arrive just over the horizon. As a result, September did little to impress, as red font dominated the scene all week. The September contract closed out the week at $536.0mbf, down from last Friday’s closing price of $754.9mbf. This marked a drop of 29.0%, as the contract fell an astounding $218.9mbf. Once the dust settled, the new front month of September ended the week’s futures to cash premium at 10.6%, hinting that the cash markets plummet could be nearing its end.
The final contract of 2021 managed to hold its own amidst the weakness seen. The November contract closed at a 10.95% premium, lower than last week’s 5.67% level. The 2022 contracts provided hope for some future stability, as the January 2022 contract closed out the week with a 17.53% premium, rising from last week’s 7.22% premium. The March 2022 contract finished with a 23.9% premium, rising more than three-fold compared to the previous week’s 6.98% level. Looking further into next year, the May 2022 contract finished with a 28.66% premium, bloated from last week’s 9.28% premium. Peering out to July 2022, it landed at a 25.61% premium versus the previous week’s 7.15% mark. This week brought the September 2022 contract to the board, as it ended at a 25.61% premium, mirroring the July 2022 mark. Until next week… Shoe out