July 29, 2022 ***** COMPLIMENTARY SUMMER EDITION *****
C O M P L I M E N T A R Y S U M M E R E D I T I O N
YEAH! WELL, SCREW YOU AND YOUR DATA! Unfortunately, this week did not fare well for anyone looking for a bright spot in the housing industry news, as more negative reports were released. Tuesday’s FHFA House Price index (HPI) release came in at 1.4%, below the consensus mark of 1.5%, while June New Home Sales posted a pathetic 590K, versus the consensus mark of 664K. Needless to say, the week did not start off well. Let’s just say it was downhill for the lumber market from there. After last week’s swing-and-misses with NAHB/Wells Fargo Housing Market Index (HMI), June Starts, and Permits, the market was expecting some more gut-wrenching news. But, once it was released, it took its toll. Uggg! If the lackluster housing news makes you curious about how the lumber market reacted, you are in the right place! So, kick back with a cold one as the Puget Sound “HEAT WAVE” hammers those of us in the Pacific Northwest and check out all that transpired this week in the place I like to call: ‘The Wonderful World of Wood” COMPLIMENTARY SUMMER EDITION. Enjoy…
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The recent abundance of lackluster housing news contributed to the market rotation, as the bullish run that started 5-weeks ago ended. Negativity dominated the scene as the bears reappeared as traders eyed recessionary data. As the end of the week came into view, 2×4 2/Btr KDHF dipped nearly 3/4%, reversing course versus the previous week’s 2-1/4% rise. As a result, 2×4 2/Btr KDHF has increased by almost 7-1/4% over the past month, while it stands roughly 47-1/3% above its late-July 2021 level.
2×6 2/Btr KDHF followed the beat of a similar drum, as it too turned south as traders took on a more bearish tone with the barrage of negative economic news. For the week, 2×6 2/Btr KDHF fell by 1%, flipping over compared to last week’s 1-1/2% effort. As July came to a close, 2×6 2/Btr KDHF buttoned up July higher by over 1-3/4% during the past 4 weeks while remaining 22-1/4% above its price point one year ago.
Strength continued to weaken in the wide dimensional stock category as pricing continued to further decelerate. As Friday arrived, 2×10 2/Btr KDHF coasted to close, to finish unchanged, slowing from the previous week’s 1/2% upwards effort. Over the past month, 2×10 2/Btr KDHF is now higher by more than 6-1/2% from where it was 4 weeks ago while standing nearly 24-3/4% above its late July 2021 levels.
2×12 2/Btr KDHF mirrored its narrower counterpart’s action, as it slowed compared to the previous week’s action. 2×12 2/Btr KDHF crawled along as the week progressed, as mills did their best to attract buyers with zero success, closing unchanged, as it too found its near-term tipping point after the previous week’s ¾% rise. Over the past month, we find 2×12 2/Btr KDHF up more than 3-1/3% compared to its mid-June levels while positioned more than 15% above its trading level posted precisely one year ago.
The downward acceleration intensified for Green DF Timbers as buyers became more aggressive with their counters. Producers were also pushed on their heels as they sensed the market’s deteriorating tone. Green DF Timbers marked their 7th week of downward action, plummeting 4-2/3%, further extending last week’s 2-3/4% lower effort. Over the past 4 weeks, Green DF Timbers are off more than 15% while standing nearly 18-3/4% under their late July 2021 levels.
After remaining stalled out for three weeks, week four was the breaking point for 2×4 Western S-P-F 1650fb MSR as it lost ground, falling 1-1/4% by week’s end, compared to last week’s unchanged effort. As a result, 2×4 Western S-P-F 1650fb MSR stands 1-1/4% lower over the past month, standing almost 9-1/2% above its late-July 2021 level.
THAT DIDN’T TAKE VERY LONG! After last week’s slowing for my market canary, the time arrived this week as buyers became skittish as cracks appeared at the producer level. 2x4x8′ PET KDHF Solid Studs peeled off 4% by week’s end after managing a minimal 3/4% gain last week. As the end of July arrived, 2x4x8 PET KDHF Solid Sawn Studs now sit unchanged over the past 4 weeks while positioned just 40-3/4% above their late-July 2021 trading levels.
Similar to its shorter stud counterpart, 2x4x9′ PET KDHF Solid Sawn Studs rotated font color this week as weakness prevailed. As a result, 2x4x9′ PET KDHF Solid Sawn Studs dipped by 1-1/3% by Friday, as they refunded all of the previous 1-1/3% gains. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs are more than 4-1/3% higher than their late-June level while positioned upwards of 30% above their price one year ago.
Amidst the weakness in the lumber sector, sheet goods managed to hold their own as the upwards price trajectory eased. At the same time, purchases remained similar to previous weeks, as 4x8x1/2” CDX Plywood added more than 2-1/4% by Friday, a minimal decline compared to last week’s 3% effort. Over the past month, 4x8x1/2” CDX Plywood finds itself more than 8-1/2% higher while positioned more than 13% below its price one year ago.
Demand remained solid in the plywood sheathing category as order files extended into the 3+ week range. However, consistent with the market tone, buyer’s remained cautious and purchased only what was needed to cover commitments, as skepticism of the future demand was uncertain. As a result, 4x8x3/4″ T&G UDLX Plywood inched higher by ¾%, turning positive compared to the previous week’s unchanged effort. 4x8x3/4” T&G UDLX Plywood currently stands upwards of 17-1/3% below its trading price from one year ago while positioned 1/3% lower over the past month.
GIMME FIVE! This marks the fifth week of gains for the “Commodity King,” as the tug-of-war between producers and buyers raged on. With order files extending deep into August, producers could dig in their heels a bit amidst the bearish signs of the rest of the markets. For the week, 4x8x7/16” OSB posted gains of just 2-1/4%, slowing from last week’s 4-3/4% rise. Nevertheless, the king ends the past month up more than 21-1/3% as it now sits 18% below its price point from precisely one year ago.
Similar activity in the OSB and plywood sheathing sector helped keep the 7/16″ OSB vs. 1/2″ CDX DISCOUNT close, ending the week at 34.5% versus the previous week’s 34.6% mark.
Similar deceleration was found in the OSB floor sheathing category as 4x8x23/32” T&G OSB moved a bit further off of its recent lows. As Friday arrived, 4x8x23/32” T&G OSB closed out the week up nearly 1-1/3%, slowing compared to last week’s 2-2/3% rise. Over the past month, we have seen 4x8x23/32″ T&G OSB rise more than 11-1/2% while leaving it nearly 28-1/4% below its trading level from one year ago.
With similar trading activity experienced in the plywood and Oriented Strand Board floor sheathing category, we finish the week down a touch, finishing with a 43.2% DISCOUNT, lower than last week’s 43.5% mark.
Weakening demand forced the hands of producers, as sluggish sales required pricing counter-measures as demand for 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill severely diminished. As a result, by Friday, pricing for 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill was uninspiring at best, as prices dropped by 4-1/2%, a significant change compared to the previous week’s unchanged effort. Nevertheless, over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill rise more than 1-1/2%, while it stands upwards of 22% above its price point posted precisely one year ago.
The September 2022 futures market took it on the chin for the second week in a row, suffering sizeable losses as the week progressed. Finally, as the end of July arrived, settling Friday with a 17.7% discount, adding to the previous week’s 12.91% discounted mark.
The November 2022 contract followed a similar path but managed to slip just slightly during the week, closing with a 14.47% discount compared to the previous week’s 12.54% mark. Peering out next year, the January 2023 contract weakened as well, dipping down to a discount of 10.05%, increasing versus last week’s 8.66% mark. The March 2023 followed suit, as it too eroded as the week progressed, ending at a 5.0% discount plunging from last week’s 0.39% mark. Last but not least, the May 2023 contract followed the market’s gloomy tone, as it wavered into the close to finish out the week with a 5.39% discount, further cushioning last week’s 0.37% level.