Freres Lumber June Market Update: Commodity Plywood and Panel Markets Remain Slow

The commodity plywood and panel markets, in general, have remained slow on the sales side this past month. This general market stance has been largely precipitated by the weak dimension lumber markets of the past month.

Commodity dimension lumber has seen severe price corrections in the past two to three weeks, approaching 50% in some cases. Of course, this kind of price correction gets everyone’s attention — particularly in other commodity areas, like panels. Panel buyers seeing the bloodbath in lumber have gone to the sidelines.
Interestingly, the panel markets — on paper, at least — have shown minimal price changes in recent weeks. The unchanged prices, up to now, do not necessarily reflect the real marketplace and more reflect the scarcity of sales in the past weeks. Suffice to say that panel buyers are waiting, thinking and believing that commodity plywood and panel markets should follow suit with the past several week’s rollback on lumber.

It seems certain that commodity panel prices will have to do some downward adjusting to entice new buyers at this juncture. But how much will they adjust? It’s hard to say right now.

During the spring runup on prices, structural panels in the U.S. seemed to be much more scarce in the marketplace pipeline than dimension lumber. For a few months, there seemed to be little to no quick structural panels available for sale anywhere. This situation fueled the big run-up to where we are now. And in some regions, that still seems to be the case, for now.

Overall demand in the field is still strong and, from all indications, should remain strong through Q3. We hear daily reports of solid business ahead through the end of summer. Most of the wood that is going to these committed jobs in the next 90 days has not been purchased. That should provide ample selling opportunities ahead for those at the mill and at distribution levels. Moreover, with lumber prices back at more reasonable levels, this should further goose sales into Q4. Attitudes among buyers will, as usual, rule the day on how our markets perform.

Buyers have had a lot to think about this spring and will have the same challenges this summer and fall. Buying decisions are not easy much of the time. My prediction is that buyers will keep things close and tight from here on in — buying their needs and not more than that. The extreme volatility this year has been unprecedented, and many buyers are likely taking a hit on at least a few of their purchases at the top of the market. But that can go with the territory in a market like the one we have witnessed this past spring.

Panel markets will be interesting to watch from here on in. Yes, they should adjust downward — if not to the extremes of commodity lumber — at least to more reasonable levels.

A lot of the building season remains. The strength of the market thus far, with the nearby demand pressure in the field, has allowed a liquid environment for most sellers. The recent quietness has driven traders to lighten long positions in the past month, but many distributors in the field have not had that issue — they are still operating from clean floors on panels. When it comes in, it goes out quickly.

This dynamic will be a factor in how the panel markets react going forward. Will demand in the field continue at a pace to keep pressure on buyers? We will see. We have most of the summer ahead of us, and potentially more volatility, as summers are apt to bring lately. The speed at which the lumber markets have adjusted downward makes me believe that some kind of a base may be building now under dimension lumber, as at least some buyers recognize it as a buying opportunity. Panels have yet to make any overt price changes, but that seems likely. Again, the big question is how much?