14 Dec Freres Lumber December Market Report: Strong Plywood Demand Heading into New Year
December 14, 2020
Wood products markets fell from historical highs over the last month, but the decline was short-lived. Purchasers overcame their fears of further declines last week and bought in earnest. Plywood prices increased over 10% as we sold 150 truckloads in one week and saw strong wood products orders. The next week showed the same volume and another 10% increase in panel prices. With strong plywood demand, our order files now extend into the end January and we continue to book more orders with each passing day.
Veneer is as strong as the panel market. Engineered veneer purchasers continue to look for additional supplies but come up short. With plywood pricing as strong as it is, there is little interest in pulling additional G-grade material beyond established programs. Labor issues continue to limit veneer supplies across most manufacturers.
Housing starts and housing market
Has the housing market finally found its historical footing? Seasonally adjusted housing starts were 1.53 million starts last month and permits were at the same level. If the current conditions hold for the remainder of the year, we will have 1.38 million starts in 2020, a level we have not seen in over a decade. RISI, an industry trade publication, projections for 2021 indicate 1.4 million starts, a modest increase, although they indicate that there is significant upside risk.
The primary unknown is how Americans’ behavior has and will change as the COVID crisis progresses and how we will behave in the future. There are strong indications that there is an outflow from urban centers to the suburbs and rural communities as work from home has increased. The single-family home sector of the market is 77% of all starts, which we haven’t seen since 2010, as multi-family starts continue to decline. Mortgage rates are projected to be low through 2021, which also bodes well for the housing market.
This strong plywood demand brings more optimism for our markets than we have seen in a long time. We have never seen builder’s confidence at these levels. Everything is pointing to a strong 2021 and we are all looking forward to it. We plan to run a fairly full schedule in December. We plan to run half days on both Christmas Eve and New Year’s Eve. Freres’ operations will be down for Christmas day and for New Year’s day in observance of the holidays.
Tyler Freres, Vice President of Sales