24 WESTERN PALLET
Madison’s Lumber Reporter, details a similar scenario for benchmark dimension softwood lumber products in western regions. While prices for these products surged in tandem with SYP, there are signs that demand is slowing and prices are flattening.
Madison’s recently wrote that “Prices continued to crash down in the Eastern S-P-F market last week. A large contingent of buyers participated, but the focus was on Less-Than-Truckload orders from the distribution network at wildly varying – but resoundingly lower – numbers. Overall sales volumes were strong but individual orders remained small as customers refused to take long positions in a falling market. Prompt wood became more common with each passing day as sawmills began to run into order files on a number of items, while production of bread and butter items were booked at around two weeks.”
Market View
“This pullback mostly reflects the unsustainable speculative peak that lumber futures experienced. While the series is volatile, the price surge that the futures saw was beyond anything we have seen before,” said Evercore ISI analyst Stephen Kim in a note to clients.
As we wrote earlier this year, the combination of strong (and surprising) lumber demand and pinched supplies from manufacturers resulted in a tremendous gap in the market, and the supply chain is just now beginning to rebalance. While we are more than five months removed from the onset of the lockdowns, the finished lumber sector is now facing a new challenge as production in the PNW has been impacted by devastating wildfires, which have claimed dozens of lives and inflicted significant damage to communities, homes and businesses, and timber resources in the region.
The damage has been so substantial to the accessible timber resource in many parts of the PNW that regional producers will likely be working through salvaged logs for the foreseeable future, which poses a number of potential headaches in itself.
As lumber producers across the continent continue to react to market signals and are better able to match production to current demand trends, the log supply issue in the PNW is likely to impact production capacity in the near term. As such, the US South will have to fill any gaps that result from capacity limitations. However, we’re also nearing the end of the traditional building season, which could lead to a dampening in demand and provide a bit of relief to manufacturers during a year marked by record levels of volatility.
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This article first appeared at Forest2Market, reprinted here with permission.