July Market Report: Lagging Housing Starts Affecting Wood Products Markets

July 11, 2016

We’re seeing a lot of activity in the wood products market and here at Freres Lumber Company as the summer rolls on, some positive, others challenging.

Challenging Wood Products Markets

The plywood and veneer markets are overcoming significant hurdles on the way to stronger prices. Recent stats indicate that softwood panel imports from Canada and South America are up 61% so far in 2016 compared to this time last year. Canadian woodpanel products exported to the United States are up 83% while US exports to Canada are down 37%. Statistics are not compiled for veneer products crossing our Northern border into the US, but my personal opinion is that there may be more imported veneer flooding the US market than finished panels.

Housing Starts Affect the Wood Products Market

Housing starts have still continued to lag expectations. Predictions for the year ranged between 1.25 and 1.3 million housing starts seasonally adjusted. Through May, we have only hit 1.172 million seasonally adjusted starts in the United States. Available buildable land and labor have both been referenced as potential reasons for the lag. Our industry generally experiences the highs and lows prior to the actual numbers published in reports. The surge that we are seeing right now is an indicator that the market demand created by a more robust housing market has overcome the hurdles of imports and previously lagging housing starts. Ever since the Great Recession period of 2009 we have struggled to extend our order file longer than a week or two. Markets have forced short order files and prompt shipments. This is the first time in quite awhile that we have been able to sell wood for shipment 4-5 weeks out at prices we are willing to accept for that far into the future.

New Veneer Dryer

The new veneer dryer at the plywood plant is finally producing dry veneer. We will hopefully be approaching a more normal production period where we aren’t jumping through hoops to keep inventories and customers in balance. We will try to run extra hours when we can at the plywood plant while the plywood market is strong.

Abundance of Timber, Small Chance of Rain

We are generally affected by forest fire closures during this time of year. Thankfully, it looks like there is a little bit of rain in our future, which should push closure concerns to the future. We have a solid volume of timber to take in during our operating season, so we hope there won’t be too many logging restrictions this summer.

Veneer Follow Plywood in Strong Markets

The veneer markets are solid due to strong LVL demand and increasing demand for plywood veneer. Veneer should ride on the coattails of a strong plywood market. We hope markets will stay strong for all of our products and we will have a full schedule for the rest of the summer.

Thank you all for your hard work. Please have a safe and enjoyable summer.