April 11, 2016
A busy building season is stirring up the wood products market, and Freres Lumber Company is on target to provide a steady supply of product during the coming months.
A Busy Building Sector is A Great Boost for Business
The western plywood market has been reasonably good and steady for the past month, with prices gaining back 30-35/m on most commodity sheathing items. Five weeks ago, prices on sheathing items were at four year lows, so the gain is certainly welcomed by us and other western mills.
Why the change? I would say two things in particular played a part in turning the corner to a more favorable market. The winter was, overall, quite mild across the country, allowing foundations to be completed and facilitating consistent product movement to jobsites countrywide. Secondly, it feels like the building activity is simply a bit better out there. Unlike in previous winters, where harsh weather thwarted business, builders across the country have been able to get a good jump on the year, which is a big factor for business so far this year. It almost seems like we are 60 days ahead of last year.
A Strong US Dollar Lends Support to International Producers
That said, some fundamental things are still in place. Production/supply probably still out paces demand, given the import factor. The strong US dollar continues to inhibit commodity export opportunities, and support a vast array of shipments of imported wood into this country, effectively taking away market share from domestic producers. We welcome the recently improved business for commodity plywood, but remain concerned of the long term effects of imports on our panel markets. For now, the supply / demand balance seems to be decent for both lumber and plywood, and we hope that balance continues.
SYP plywood commodity sheathing has been flat to slightly off this past week. Order files on pine are into w/o 4/18. OSB markets and prices are steady to up, currently, with late April order files.
Skittish Buyers Are Looking Towards A Busy Spring
Buyers in the field report steady business and optimistic reports for the spring – going into the first of summer business. However, most buyers are skittish because of the recent price increases, particularly in Western plywood and OSB. No one wants to get burned with extra wood if the market corrects. However, inventory levels remain light on the dealer side and unsold wholesale wood is minimal as well. Traders reported decent liquidity this week on most sheathing items, with many cleaning up positions with little fanfare. Building activity has been good and should improve even more as spring weather moderates further.
Buyers aren’t to blame in feeling skittish about the marketplace, but nearby business and active product shipments may trump this skepticism in the near term. Order files aren’t that long, but mills still have some cushion. And, there appears to be little excess wood in the pipeline as we approach mid-April. So, I guess we’ll see how good things are out there in the next couple weeks.