Market Update
UPDATED 9/20/2017
The frenzy around OSB has subsided slightly now that Irma is over. Mills are still firmly in control with demand out pacing supply. North Central (our area) and Denver specifically, are both up over last week $5 to $10/MSF.
Market Update
UPDATED 9/18/2017
“Choose a job you love, and you will never
have to work a day in your life.” – Confucius
The Market Update, in existence since 2012, is published on a weekly basis and is intended to be a source of lumber and commodities information for the present & future and pricing trend information. We appreciate receiving some of this information from Do It Best Corporation and from Random Lengths.
Builders values the opportunity to serve its customers in Colorado & Nebraska and provide you with Lumber & Panel price guidelines as well as Commodities information.
THE BOTTOM LINE:
Builders price motion this week:
Lumber:
The market has become increasingly unsettled. Futures went down and cash went up. Suppliers are firmly in control. No quotes should be out for more than 24 hours. Wild and crazy swings daily. This will settle down, until then make sure you are speaking with our customers daily.
Update your customers often as well as any unaccepted quotes.
Panels:
OSB print has caught up with the cash market. This emotional high is very real and is not going away anytime soon.
Prices are going to be quite a bit higher for the near future.
Update your customers often as well as any unaccepted quotes.
Drywall and Insulation:
Demand for drywall and insulation has been increasing over the past 12 months and Harvey and Irma will add additional fuel to the fire. Look for lead times to begin stretching and will probably hear about pricing. More news to follow.
Any quotes that have not been accepted yet should be void. Make sure our customers are aware of the moving market.
Price Change From Prior Week – 9/15/17 vs 9/8/17
OSB:
OSB supply, as reported last week, remains very tight. Not
only is the supply side thin, but transportation continues to be a major issue.
There just isn’t enough reliable equipment available to meet
demand. Most of the mills have come back on the market with limited supply and extended order files.
To say that prompt wood is at a premium would be a major understatement. The limited production available for sale will likely limit the changes reported on print.
Covering October needs would be a wise choice, as most mills are already well into October.
Southern Pine Plywood:
Irma created quite a stir in the panel market. Buyers were setting on the sidelines, waiting for a moment when they could take advantage of lower prices. Instead, the market decided to take double-digit increases, after order files went out as far as 10/23. Currently, there are only a few producers quoting any product at all. Things may get even tighter before they get any better.
Western Plywood:
Western Plywood has had a busy first part of the week, and then calmed down in the second half. Mills have moved numbers up and order files out. Inquiry level has slowed from this week’s earlier pace, but is still above normal. Order files are 10/2 to 10/9 with some mills as far as 10/23. Talk about natural disasters has helped push mills’ order files and prices, along with a lot of business on the books for October. Trucking is still an issue with fires closing some highways. Look for the positive market to continue for the next several weeks.
Western SPF:
Sales of Western Spruce continued to push order files and prices ahead of last week. Mills have sold out into mid October with very few offerings coming on each day. Wholesale and distribution continue to be the quickest fill in options, although many holes in the distribution centers have also shown up this week.
Expect prices to remain firm to higher again next week. Many buyers have failed to fully appreciate the record fire season’s effect on log supplies in B.C., resulting in lower output.
As of Thursday afternoon, 137 fires were currently burning in B.C. Year to date nearly 1,300 fires this season have burned close to 3,000,000 acres. The fire danger rating has improved slightly with smaller areas of extreme danger mixed with the moderate and high ratings.
Futures:
Activity was focused on the September contract yesterday ahead of expiration today. The November front month, and all the back months, saw narrow range trade all day. September spanned a wider range as it appears there were traders needing to exit the contract. September opened $2.50 higher at $400.90 making the low on the day. The balance of the session saw September move up and down depending on who was getting squeezed out of their contracts throughout the day. The high was made at $411.70, up $13.30. There are 7 open contracts in September. The focus today will be on the November contract, which is currently trading at a $37+ discount to quoted cash levels. This presents opportunity over the short term since most mills have an order file well into the first half of October. Traded months were mixed to unchanged on the day. Volume was light and moderately higher with Open Interest adding 73 contracts. There were 8 EFP’s posted yesterday in November. November call options are out-pacing put options, 338 to 258 in risk defined hedging strategies. Should you have questions concerning forward pricing, or basis trading for Q4 2017 inventory needs, contact your Do it Best trader.
Southern Pine – All Zones:
A very active week drove prices higher, again in all widths, grades, and zones. We have seen double-digit increases in all categories. The combination of storms and buyers trying to stay ahead of the price increases seems to be the driving factor. You might expect a strong market right up through the holidays. Trucking out of the South has become very tight, so don’t be taken off guard by slow shipping.
Dry Dimension:
Trading again this week was a typical Tuesday ~ Wednesday market, dimension was hit as well as studs. Business with the mills was tighter and there were little or no specials to offer. The mills were bullish and numbers moved up in baby steps. We are still not seeing a retreat in pricing at the mills and most are out of September with their order files.
Of note is 2×6 in all western species, and grade is extremely problematic!
We strongly suggest that you keep 45 days of inventory in your yard in order to preserve your profits and sell from full bins. If supply is an issue, see your Do it Best representative regarding programs for a guarantee of supply.
Generally prompt delivery service through the Do it Best reload channel continues for most LBM members. Hurricanes Harvey and Irma have significantly impacted trucking and rail transportation.
Many customers and shippers in affected areas are still unable to receive or ship merchandise, and truck lines are reluctant to accept loads destined to these areas until normal operations resume. Concurrently, dramatic inbound/outbound load imbalances loom, and freight rates to parts of TX and all of FL are increasing dramatically as a result. We expect capacity levels overall to be moderately impacted at least over the near term. Rail service is expected to resume more rapidly, and the railroads have lifted many embargoes put in place for cars destined to affected areas and port operations have largely resumed.
You are encouraged to communicate with your Do it Best LBM representative regarding expected delivery dates for current orders.
Railcar volume across industries decreased 1.9% this week compared to the same period a year ago, and year-to-date volume is currently 4.4% higher versus a year ago. Diesel fuel prices increased again this week, rising $0.044 to a national average retail price of $2.802 per gallon (source: U.S. EIA).