11 Nov Freres Lumber November Market Report: Investments in New Products are Prudent
November 11, 2019
With plywood panels expected to stabilize at current levels and veneer sales showing recent improvement, Freres continues investments in new products.
Plywood, Veneer Markets
Recent industry data is reflecting what we have all been feeling for the last year. When interest rates spiked mid-2018, the housing market stalled considerably. Instead of the gradual increase in housing starts we experienced since the recession, the housing market retracted. Housing starts peaked at just under 1.3 million at the end of 2017 but have now settled at about 1.25 million. Projections from industry groups indicate starts maintaining 1.25 million through the next two years. Plywood panel prices and volumes are expected to stabilize at around current levels through 2020. This is not good news as pricing is currently at multi-year lows.
We have maintained order file at the plywood plant over the last few weeks and intend to match sales with production to keep the plants operating. Luckily, veneer sales have shown improvement over the last few weeks and indications are they will hold for the time being.
We have a press project at the plywood plant this month that will reduce our production for a two-week period. During this time, our typical 84 press opening capacity will reduce to 40 openings, and should be returning to 64 openings before Thanksgiving. By the beginning of 2020 we will have installed a new press, which will allow us a total of 124 press openings.
The new press is intended to allow us to more effectively produce panels for the new MPP facility. It will also allow us the capability of making 10’ and 9’ sheathing panels to complement our veneer production at Plant 2. We are also installing a new glue extrusion system at Plant 6 which should help us to hit the production levels the plant was designed for.
Investments in New Products
The good news is that we are finally gaining traction on the products we are making at the new MPP facility. A year and a half in project and customer development is finally starting to pay off. This November we will be delivering two multi-story projects, a roof for a single-family residence, a mockup for a modular multi-story building with the potential for repeatable structures, and A-frames for a girl scout camp in California.
We are finally making headway into the industrial matting markets that have eluded us so far. We will also be shipping large floor sections for temporary structures in the Prudhoe Bay oil fields very soon.
The importance of these new product lines cannot be understated. The new products will have the ability to help us weather market downturns while the residential markets falter. Our hope is that the product innovation will allow stable production schedules and diversification of sales. This will result in much less competition than our commodity products.
There is a bright future ahead of us and thank you all for being a part of it. These products aren’t possible without every link in our production chain. It takes every one of our facilities to make this product. Thank you all for your hard work, 2020 is shaping up to be a transformative year!
Tyler Freres, Vice President of Sales