We hope everyone had a wonderful 4th of July and bountiful celebrations with family and friends! The 4th of July falling on a Tuesday always leads to production disruptions. This year we took extended downtime to allow us time to grind and repave areas around our facilities. All of our operations were down on July 5th and resumed operations on the 6th.
We are currently installing the second in-line Meinan green veneer composer at Plant 1, our small log veneer plant. We are hoping that the veneer line will be operational this week with both composers operational, composing random width veneer into 54’s. So far it is a beautiful installation, but we will know more when we flip the switch.
Plywood sales volumes have been good for the last three to four weeks. Prices are gradually escalating as well, which is a nice relief from the gradual and consistent declines we have seen since April 2022. There seems to be more optimism in the field. Canadian producers report extended order files through the end of July. Foreign panels imports are down 35% overall, but Brazilian and Chinese panels are leading the way with 48% and 52% reductions respectively. By volume this is a reduction of 252.4 million square feet 3/8” basis year to date, or the equivalent to the annual production of a medium-to-large size domestic plywood producer.
Consumption appears to be improving as we enter the peak building season. Housing starts surprised to the upside to 1.631 million starts seasonally adjusted. Retailer expectations are up after a full year of declining numbers in 2022. Sales of new homes increased 12% over 2022 and the supply of for-sale homes remain low by historical standards. It is always possible to look into the future and see dark economic indicators, but the current building season looks to be gaining momentum.
Veneer sales have improved consistently along with the plywood market over the last month. Green veneer volumes improve on a weekly basis and pricing is improved. LVL sales are still not at peak levels, but they are improving on a weekly basis. Customers report cleaning out on-hand LVL inventories and strength on current shifting, but reluctance to increase production by adding additional shifts due to the difficulty hiring employees and the potential of Fed rate hikes making future market conditions unpredictable.
Log prices are still stubbornly high and have shown only slight reductions in price during the decline in product prices. We picked up three large timber sales last week which added considerably to our volume under contract. A couple 3-year sales sold for eye-popping numbers, which would indicate that producers are more worried about future timber supply than they are about future product sales price.
MPP sales and production has been very good but was hampered last month with unexpected downtime on our CNC machine. Even with significant disruption, hand processing of panels, and shipment of material to 3rd party CNC operations we managed to set a shipment record in June. We are currently behind on production on several large projects and working hard to get into a production schedule that can more closely meet customer expectations.
After a year of declining panel prices, it is nice to have a touch of optimism again. Our hope is that this summer brings decent prices and good volumes to allow consistent operations.
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