December Market Report: Wood Products Market Beginning to Slow for the Holidays

Wood Products Market

December 28, 2015

Industry Overview

As predicted, November saw a downturn for almost all Freres Lumber Company products due to seasonal factors. From the beginning of November to the start of December ½” 4-plywood, our primary product at the plywood plant, has slipped from $361 to $340 according to Random Lengths. We are currently fielding offers below $340. The Random Lengths Western Fir Plywood Composite indicates a drop of $110.00 year-over-year for structural panels, which is a decline of over 19% from last year. Veneer dropped $1.50 for 1/10 DF 54s so far this month, the first movement in pricing we have seen reported since Christmas of last year. The bleeding continued for 27s, Random Width, and Fishtails, which all declined up to $.75 across the board. Lumber hasn’t escaped the market difficulties, with the Framing Lumber Composite indicating a 20% decline in pricing from last year.

Competitive Wood Products Markets

The market decline can currently be attributed to factors we see every year at this time; there aren’t many customers who will risk purchasing larger volumes of product during declining winter usage. The strength of the US dollar compared to other world currencies seems to be the primary culprit. There is just too much wood entering from South America and Canada for US producers to compete against. We are approaching product prices where the weaker US market players may dial back a bit, or simply shutdown. In fact, OMAK Forest Products just gave 60-day notice of plant closure and Pacific States announced the indefinite closure of both their Springfield operations and their plywood plan in Hoquiam. The Canadians have a 35% currency advantage from the lows of last year, so you can be relatively certain that they won’t slow down at all.

Veneer stacked at Freres Lumber Co.

Veneer Outlook

Freres Lumber veneer sales have been consistently strong for the last month and we have every indication that they will continue to be strong through the end of the year. We did not see any of the price correction that was reported by Random Lengths. Laminated Veneer Lumber (LVL) producers do not show any sign of reducing their purchasing and several are asking to have committed volume through the end of the year. Long length orders and other dry orders are giving us the opportunity to run a full schedule while the plywood plant is down for refractory replacement in the EPI furnace.

Looking Forward

Housing starts are truly the most positive development in the market right now. The Seasonally Adjusted Annual Rate* of housing is currently at 1,206,000, which is a 20% increase over last year. There are some predictions of another 10% increase for next year up to 1,300,000. Multi-family starts in particular have increased 36% and are at almost 30-year highs. In an ideal world, housing starts would increase enough to give imports and domestic producers a market to share.

*Reference: Random Lengths Yardstick report, Volume 25 Issue 11 November 2015

Tyler Freres


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