August 12, 2022
THUMP! HAS A BOTTOM ARRIVED? This week marked number seven of a deteriorating market, as seven may just be the lucky number for producers. Why you ask? This week, Canada’s top producer West Frasier announced they will be curtailing 170 million board feet from two sawmills. The Fraser Lake and Williams Lake sawmills reduction is equivalent to 2.5% of the total North American capacity. This was enough to send chills in the lumber market, sparking a significant surge in lumber futures to their highest levels since July 22nd. If August temperatures were not enough, having lumber futures prices spike was enough to catch everyone’s attention. If you are intrigued, I encourage you to dive in and check out all that transpired this week in the place I like to call: ‘The Wonderful World of Wood”. Enjoy…
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Last week’s market rotation helped spark interest in purchases as the futures market perked up amidst the arrival of the Canadian tariff curtailment announcement. As a result, inbound purchase inquiries increased after the previous week’s sluggish action. For the week, 2×4 2/Btr KDHF fell more than 3%, further padding the last week’s 2-1/4% drop. As a result, 2×4 2/Btr KDHF has dropped more than 3-3/4% over the past month, while it stands nearly 47-3/4% above its mid-August 2021 level.
A more optimistic tone persisted with 2×6 2/Btr KDHF, as it too felt the markets continued shifting mood. For the week, 2×6 2/Btr KDHF fell less than 1%, decelerating compared to the previous week’s 3-2/3% loss. With the second week of August in the books, 2×6 2/Btr KDHF finished down over 4% during the past 4 weeks while remaining nearly 31-1/3% above its price point one year ago.
The arrival of reduced Canadian tariffs and duties added life to the wide dimensional stock category as the previous week’s vulnerability subsided. As Friday arrived, 2×10 2/Btr KDHF retreated to close the week out unchanged, as it stopped the bleeding compared to the last week’s 2-1/4% effort. Over the past month, 2×10 2/Btr KDHF is now higher by nearly 2-1/2% from where it was 4 weeks ago while standing about 33-1/3% above its late July 2021 levels.
2×12 2/Btr KDHF missed the memo, as its narrower counterpart’s action was the dominant outperformer. As a result, 2×12 2/Btr KDHF continued to decline as the mid-point of August neared, falling 5%, further padding the previous week’s 1-2/3% drop. Over the past month, 2×12 2/Btr KDHF has dropped more than 5-3/4% compared to its mid-July levels while positioned more than 29-1/2% above its trading level posted precisely one year ago.
Green DF Timbers continued on the retreat, as they further distanced themselves from their all-time high posted back in mid-June. As a result, Green DF Timbers marked their 9th week of declines, plummeting 4%, doubling last week’s 2% drop. Over the past 4 weeks, Green DF Timbers are off more than 12-3/4% while standing coincidentally nearly 12-3/4% below their mid-August 2021 levels.
Lethargy continued in the S-P-F category in the cash market as an early week pop in the lumber futures contracts did little to lift prices by week’s end. As Friday arrived, 2×4 Western S-P-F 1650fb MSR dipped nearly 2-2/3%, almost halving last week’s 4-1/3% decline. As a result, 2×4 Western S-P-F 1650fb MSR stands 8% lower over the past month, standing more than 6-1/3% above its mid-August 2021 level.
THE FINAL CHIRP? The sound of the canaries last week could be heard echoing even louder this week, as the near-term basement may have been found. After last week’s stumble, studs accelerated the downward slide this week, but that looks to be ending as producers filled order files and turned the tables on buyers, going off-market as the week came to a close. For the week, 2x4x8′ PET KDHF Solid Studs dumped 7-3/4% by Friday, gaining downward momentum compared to the previous week’s 5-3/4% falter. As the first of August arrived, 2x4x8 PET KDHF Solid Sawn Studs now stand 8% lower over the past 4 weeks while positioned just 39% above their early-August 2021 trading levels.
Similar weakness was seen from 2x4x9′ PET KDHF Solid Sawn Studs, as the KD Stud category led the market’s charge to the bottom. As a result, 2x4x9′ PET KDHF Solid Sawn Studs plunged more than 6% by Friday, as they fell nearly seven-fold the previous week’s 9% drop. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs are now down more than 14-2/3% compared to their mid-July levels while positioned upwards of 17-1/3% above their price one year ago.
The slight uptick in positive momentum experienced last week was short-lived, as pricing found a stalling point this week. Buyers stepped in to make small purchases with the previous week’s discount, which was sufficient enough to put a quick end to the softening trend. Producers ran production under maximum capacity to ensure adequate availability without flooding the market with unwanted wood. For the week, 4x8x1/2” CDX Plywood coasted into Friday, unchanged, decelerating slightly compared to last week’s 1-1/3% upwards effort. Over the past month, 4x8x1/2” CDX Plywood finds itself more than 6-3/4% higher while positioned nearly 28-1/4% below its price one year ago.
Once again, demand remained uninspiring in the plywood sheathing category as order files remained in the 2-week range. As a result, 4x8x3/4″ T&G UDLX Plywood stood its ground, finishing the week unchanged, as the momentum slipped slightly from the previous week’s 1/3% rise. 4x8x3/4” T&G UDLX Plywood currently stands more than 1% below its trading price one month ago while positioned 1-1/2% higher than its mid-August 2021 levels.
SEVEN WAS THE LUCKY NUMBER! After six weeks of declines, the second week of August proved to be the tipping point for OSB, as the search for the next bottom has arrived. Mill order files extended out 3+ weeks, well within the comfortable time frame of most buyers, putting the advantage into buyer’s hands. For the week, 4x8x7/16” OSB, or the “Commodity King” as I refer, dipped by nearly 2-1/4%, stumbling after ending the previous week unchanged. Nevertheless, the king ends the past month up more than 4-3/4% as it now sits 14% above its price point from precisely one year ago.
Continued sluggish activity in the OSB and plywood sheathing sector kept the 7/16″ OSB vs. 1/2″ CDX DISCOUNT near previous levels, ending the week at 36.9% versus the previous week’s 35.5% mark.
This week, the reversal was in the cards for the OSB floor sheathing category as 4x8x23/32” T&G OSB followed the market braking pattern. As Friday arrived, 4x8x23/32” T&G OSB closed the week off more than 1-1/4%, easing compared to last week’s unchanged effort. However, over the past month, we have seen 4x8x23/32″ T&G OSB rise more than 2-2/3% while leaving it nearly 15-1/2% below its trading level from one year ago.
Minimal price fluctuation in the plywood and Oriented Strand Board floor sheathing categories left the spread close, finishing with a 44.2% DISCOUNT, a smidgen higher than last week’s 43.4% mark.
The weakness experienced last week evaporated as the futures market came to life, pushing the September contract up more than 34% during intra-day trading on Thursday before retracting solidly, finishing off those near-term highs. As the week concluded, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill regained its footing after last weeks beating, as it managed to rise more than 1-2/3%, as it did an about-face compared to the previous week’s 7-3/4% losing effort. Nevertheless, over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill rise nearly 10-1/2%, while it stands upwards of 43% above its price point posted precisely one year ago.
A sizeable upswing in the September 2022 futures market helped cut into the previous week’s huge discount, as the double-digit discount evaporated entirely. As a result, the September contract closed out the week with a 1.88% discount versus the previous week’s 16.66% mark.
The November 2022 contract followed a similar path but chewed into the previous week’s sizeable discount, closing the week at a 3.25% discount compared to the previous week’s enormous 16.66% mark. Looking out next year, the January 2023 contract strengthened, tilting the contract to the positive, ending the week with a 4.5% premium, a vast improvement compared to last week’s 11.44% mark. The March 2023 followed suit, as it too was battered as the week progressed, ending at a 5.42% premium, surging higher from last week’s 9.46% mark. Last but not least, the May 2023 contract followed the market’s upbeat attitude, as it too bettered itself, closing with a 6.38% premium, reversing course from last week’s 8.47% discounted level.