Freres Lumber March Market Report: Continued Improvements in Plywood Markets

March 9, 2020

2020 is shaping up much better than 2019, cross your fingers that it continues! Recent improvements in plywood markets have continued. Prices began the year at $323 for our bench-mark product ½” 4-ply CDX and is now $462, a 43% increase in two months. Our plywood orders currently exceed all available inventory, which means we have an extended order file for at least March. This is a market position we have not experienced for a very long time. Panel products have increased across the board, so the market change is wide and significant.

Veneer order files have increased as well, although price increases have not been as abrupt according to industry trade publication Random Lengths. Veneer pricing is up 8% since the start of the year. As has been the norm for the last few years, veneer price increases have largely been driven by solid and increasing demand by the LVL markets for more metriguard grade veneer.

As is typical, the catalyst for market improvements can be difficult to determine and unexpected. We were still wondering how long the panel and veneer market downturn would last when demand returned with a vengeance. There are several positive developments that we can point to.

Housing starts posted a Seasonally Adjusted Annual Rate of 1.567 million starts in January. While this is a slight decrease from December, these are the best starts since 2007! Starts are expected to moderate for an anticipated rate of 1.34 million starts for 2020 but it is hard to complain about a steadily rising housing market. 30-year mortgage rates are down 13.3% year over year giving consumers additional buying power. Recent Federal interest rate changes should improve that outlook. The unemployment rate remains at a historically low rate of 3.5% and wages continue to increase.

Four large volume OSB manufacturing facilities were shuttered in 2019, two in Canada and two in the US South. This finally lead to more balance between supply and demand in the panel markets. Plywood is a beneficiary of rising OSB pricing due to reduced supply.

A labor dispute which led to log shortages in Canada was settled earlier this year. The hope for Canadian manufacturers was that log supply issues would be resolved in the BC region of Canada. They also hoped log supply and prices wouldn’t be an impediment to continued operations. Scuttlebutt and rumor suggest that the resolution didn’t occur fast enough to get workers back into the forest. They will face continued log shortages due to spring break up, a period of reduced operations for Canadian log suppliers. There is some discussion that log shortages could persist over the next two months however this remains to be seen.

Claims against US certification agencies by the US Coalition for Plywood Integrity, which we are a participating member, alleging the mislabeling of Brazilian plywood products as being compliant with US Product Standards are progressing. There is some discussion that imports are preemptively decreasing due to the claim. This is anecdotal, but if true gives an indication of the potential market effects of reduced Brazilian panel imports on the US plywood market.

Covid-19 has cast a slight cloud over markets in general as customers digest the potential impacts. There is very little indication that the coronavirus will derail the market improvements we have seen over the last two months, but we are doing what we can to monitor the effects. So far, we haven’t seen a dramatic effect on our markets.

Our glass is currently half full, not half empty. We are thankful that markets have improved from the dismal levels at which we entered 2020. The last 18 months have been some of the most difficult we have seen in the last 20 years. We hope for continued improvement.

Tyler Freres, Vice President of Sales