Freres Lumber October Market Report: Progress in Claim Against Brazilian Plywood

October 19, 2020

After a difficult month of fires, production has resumed and increased with added personnel. After a year, we are seeing progress in the claim against Brazilian plywood, which could have a dramatic impact on markets.

The last month has been difficult for everyone. We grieve for those who have lost their homes or were displaced for a long period of time. Please know that we can put you in touch with resources which can alleviate difficulties. Abundant available resources can assist with utility payments, furnish new homes, or provide necessities for as long as you need them.

Production

Last month was particularly difficult for the company, but we are extremely thankful that all of our production facilities survived. We credit the spontaneous hard work of all the community who stepped out and helped protect our production facilities from serious harm. The fire was right on our doorstep and we recognize that it was your efforts that helped them to survive. However, our production facilities operated a grand total of two weeks last month. This was during a period where we had the highest product prices we have seen for two years. Since you can’t make money to pay for operating and wages unless product leaves the door, it has been a particularly difficult trial. We hope that markets will continue to be in our favor over the next few months so that we can also benefit from the elevated market conditions.

Plant 2 resumed Swing Shift Production this week and we hope that it can continue. All of the plants operate on a consistent level when running two shifts at each veneer plant, three shifts at the Plant 4 dryers, and two shifts at plywood production. We hope that markets will abide, and we can add personnel to run the plywood plant at three layup shifts production in the future. When possible, continue to refer people to us. We would like to hire good people for good work.

Claim Against Brazilian Plywood

Last year at this time we announced that we were filing a legal claim alleging counterfeiting against American certification agencies. These agencies were certifying Brazilian-made panels as compliant with the US Voluntary Product Standard PS1 for Structural Plywood. It has been a long year but we are happy to announce that at the time of this writing we are progressing through a hearing. It will be asking Judge Altman in Florida to provide a Preliminary Injunction prohibiting the import and sale of Brazilian plywood panels if they bear a PS1 stamp claiming compliance with the product standard.

While this process has been long, and the result currently unknown, we are hopeful and confident that the Judge will agree with us, the Plaintiffs, in this action. The impact on the markets will be dramatic if it is decided in our favor, as imports claiming equivalency with US products should evaporate. A full 10-15% of plywood market supply could disappear in a day and US manufactured products could again gain preference.

Plywood and Veneer

Plywood orders have dropped off the last couple of weeks primarily due to high prices, extended order files, and a softening in Southern Plywood prices. However, we have a good order file and believe the correction will be less than the market is hoping for. This is especially true considering the potential of the claim against Brazilian plywood, which can change the market in a heartbeat. Veneer is extremely strong due to log supply limitations, a strong Canadian market, and a very recent uptick in LVL demand. We expect little to no weakness in veneer prices in the short-term as producers evaluate log supply issues from salvaged timber and the markets show greater strength than they have in a long-time.

COVID not-withstanding, 2021 looks like a good year for housing starts and for our product markets. While nothing is certain and 2020 looks like it still has some curve balls to throw at us, we are looking forward to ending the craziness of this year and moving forward to prosperity in the future.