09 Jul Freres Lumber July Market Report: The Starting Line of the Busy Buying Season
July 9, 2018
High Demand Predicts a Strong Buying Season
We are now into the summer building season. The strong buying season for wood products typically doesn’t start until July and runs until October when winter weather begins to dampen short-term expectations. This year has been a true aberration, producing strong markets far sooner than we are accustomed. In the Pacific Northwest this has been primarily due to increased demand along with dramatically escalating raw material prices. While the last couple of weeks have shown a lackluster period of purchasing for panel products, it looks like on the broader market these variables still hold. The housing market is still hot, with shortages of wood products being reported at distribution yards and log prices remaining stubbornly high.
Buyers Wait for Markets to Settle
Lumber and OSB led to price declines for other wood products last week. There was a feeling that plywood prices should sympathetically decline alongside other wood products. Panel prices have declined slightly over the last couple of weeks as a couple of large producers moved order files out through July. Purchasers are sitting on the sidelines a bit until they see where prices settle out. Panel and veneer prices are still hovering around all-time highs, even considering recent panel price declines, so it is hardly a surprise that purchasers don’t want to stick their necks out. It is a simple waiting game to see who breaks first.
Anticipating the 2018 Fire Season
We are now entering the fire season in the Northwest. Last fire season created significant disruption across wood products segments, and there is potential for the same disruptions this year as well. Reports from the USFS indicate that moisture levels in the forest are as dangerous as they were last year, even with a stretch of milder weather. We are currently on a Level I Precaution Level in our area which does not significantly limit forest operations. 90 degrees plus weather is heading our direction soon which can change things dramatically.
Product Alert from the International Market
The APA recently released a Product Advisory raising concerns about the performance of Brazilian plywood currently being imported into the US. After testing panels from 7 different Brazilian producers they found that NONE of the producers were able to meet the minimum design values for stiffness and deflection required under US Product Standard PS 1-09, which is the benchmark for all the structural panel products we produce. Some tested design values were up to 55 percent lower than the minimum standard! Last year the US imported over 721 million 3/8″ footage of panel products from Brazil which is equivalent to 4 plants of our size. This year imports from Brazil are already up 25%. There is no level playing field if foreign producers can circumvent our product standards by using inferior fiber quality to make “equivalent” panels. As consumers, we need to be aware that all products are not created equally and in many instances, USA made products are better made. We will have further updates about this issue because it has far-reaching implications.