Spring Market Update
Over the last six weeks lumber pricing has bumped up a level. I know, the last time we talked we didn’t think pricing would go too far one way or the other without intervention because there seems to be ample supply. Two factors are contributing to the upward trend. The first is better than anticipated weather hasn’t “cooled off” buying enough to let pricing subside. The second factor relates exactly to how the threat of governmental interaction pushed the futures upward.
I know I don’t’ need to talk much about the weather in the Midwest… everybody I talk to tells me they don’t feel like they got the break they typically do from a winter slowdown. The big news is Canada’s Prime Minister Justin Trudeau visited President Obama in Washington where they talked about a timeline for re-visiting the Softwood Lumber Agreement (SLA) which promptly scared the futures market. Cash wood is promptly rising right along with the futures pricing.
Analysts are on the fence as to where it is going. Technical analysis says it has a little more room to run but the data is mixed because there appears to be more sellers than buyers at the mill level with more buyers than sellers in the other reportable categories. There also appears to be a lot of wood with secondary suppliers at the moment. Regardless of the level you and I want or think pricing is headed, the stock charts suggest we simply moved up to around the five year average.
That all being said, this increase really reflects increases in narrow dimensional 2×4 and 2×6 product offerings like lineal and studs, but I still maintain that I don’t think pricing will go too far one way or the other. I think once we get past the spring push lumber will level off and there will be more opportunities for the “deals” we have received thus far this year. The OSB and Engineered wood markets are relatively stable, wide Western dimensional pricing is mixed, and SYP is mixed.
The only really noteworthy information regarding pricing involves treated lumber. Sometime this summer we can also expect to see slightly higher prices on some treated lumber as well. The American Wood Protection Association (AWPA) changed their standards to reflect higher treatment retention levels in specific applications like “ground level decks and walkways”, “decks and freshwater docks”, and “export products”. The reason for the change is cited as “common misuse by homeowners and contractors using Above Ground treated material in Ground Contact applications.” At this point the impact appears to mainly affect the 2×8, 2×10, and 2×12 materials as the new standards require “bond boards”, “joists”, and “beams” to be treated “Ground Contact” but spares many applications of 2×4 and 2×6 such as bottom plate. Stay tuned on this… the new AWPA standards reportedly take affect the end of May while ICC – ES standards for Micronized reportedly change sometime in July. Please look for more information to follow.