29 Jul Freres Lumber July Market Update: Commodity Plywood Markets Find Balance in Supply and Demand
July 29, 2019
Commodity plywood markets continued to march in place, with some semblance of balance out there between supply and demand. Though every week has some extreme price incidents, most of the bread and butter sheathing items are trading relatively “flat,” pricewise. Not a lot of changes there. Like much of the time during this current building season, we’re seeing trading in a very narrow price range. That’s good and bad, depending on your point of view. While prices seem to like to trade in these lower ranges (most customers don’t mind it), too much of the same thing (most of this year so far) restricts everyone’s ability to carve out much margin. That hurts all around when you can’t make money. The markets seem good enough to consume enough product each week to maintain prices, but not good enough to sustain much of any price increase. The culprits? Demand, while not tremendous is steady/decent in many areas. Unfortunately, the steadiness that could, under normal circumstances, result in more vibrant commodity markets has been largely squelched by the ample amount of products available in the marketplace, with special emphasis on the impact of massive, unchecked, panel imports into our country over the past few years. That unfortunate trend continues.
Cautious Lumber Buying Continues
Likewise, commodity lumber markets have also struggled mightily to gain much market momentum. Lumber has had a few strong pushes year to date, but they have been short duration and have failed to hold their price gains. Not exactly an affirming pattern for lumber buyers out there either.
So, almost all commodity buying is hand to mouth, just in time, needs-only based – whatever you want to call it, that’s what most buyers are doing to maintain the minimum level of inventory necessary to satisfy their customer base, while at the same time keeping their risk level low. Great for risk management, but bad for bottom-line sales dollars and margin. With many commodity prices almost half the price of where they were a year ago, that fact alone contributes to puny sales dollars for all companies in the distribution chain, compared to a year ago.
However, I always say that just when everyone decides its best to slide over to one side of the boat, keep your eyes and ears open for the sneaker wave. Only saying that these kinds of static markets are ones that can be affected by events, unforeseen disruptions in production, etc. Hardly seems likely? I agree. If all conditions remain the same, the expectation is that not much will change in the marketplace.
But, you never know.