January Market Report: Holiday Curtailments Remain, but Spring Predictions are Positive

January 16, 2017

The expected end-of-year slowdown for plywood continues at Freres Lumber Company, but spring predictions look good for business.

Holiday production curtailments by multiple panel producers, including a maintenance curtailment at our own plywood facility, halted the steady decline in December plywood prices temporarily. Prices rose slightly as producers quoted shipment times into the week of January 11th. While trade journals suggest that plywood inventories in the field may be lean, there seems to be little buying urgency due to ample availability of Canadian and South American imports. The onset of winter weather doesn’t help matters as panel consumption slows with lower construction activity. The first quarter of 2017 may be a bit of a battle for panel producers.

The housing market is showing more signs of coming to life. Current projections by RISI indicate that housing starts should top 1.3 million at the start of the year, a figure more in line with historical averages. New home sales are up 17.6% year-to-date and new home prices are rising. Multi-family rents are rising as vacancies hover at 15-year lows. Optimists believe that the pent up demand will lead to the long anticipated building surge in 2017.

There are anecdotal signs that the optimism might be warranted. OSB prices have been rising and the spread between OSB and plywood has been shrinking. Plywood may very well become an attractive replacement for OSB if this trend continues. Demand for engineered wood products, which are used in both single family and multi-family homes, has not slowed at all.

Sales of our density graded veneers have been strong and consistent. Face grade veneer used in industrial panels and hardwood panels is still strong. However, even with the strong demand in specialty dry products, veneer prices have been dropping over the last three weeks. 1/10 Douglas Fir CD 54s have shed $2.00 from the stable printed price of $58.50 for the majority of last year. While we would attribute most of the price fluctuation as temporary due to end-of-year curtailments, we cannot deny the fact that Canadian producers have no incentive to hold pricing when they have a 40% exchange rate advantage to the US dollar.

Log supplies and projects will largely determine our run schedules for January. Our daily incoming log loads have fluctuated quite a bit with the inclement weather in the area. Many of our timber sales are operating on snow. The Plant 1 barker project should be finishing up mid-month, but we are going to be a little more pressed for conditioned blocks with only one barker running.

We wish you all the best in 2017.