The plywood market bottomed out the last week of June, and since then has had incremental price increases each week. The market is definitely on firmer ground, but buying throughout the distribution chain continues to be cautious and measured.
Inventories are light, by design. Current business in the field is steady-to-solid in most areas of the country, as robust commercial and multi-family demand has filled in for the slackening single family housing sector. Demand looks good for the next 30 to 60 days. After that period we anticipate some slowing in the fourth quarter due to the effects of rising interest rates and inflation inevitably taking their toll on the industry.
This measured approach to purchasing appears to be consistent across the commodity spectrum. Buyers are choosing to buy more frequently, but in smaller quantities. Downside risk is likely minimal at this point, for most commodities, given decent demand and more balanced inventories at both the mill and customer end.
Transportation continues to be challenging in the industry. Rail service has deteriorated significantly over the past 60 days. Normal car orders are difficult to fill and extra car orders are out of the question right now. Interestingly, rail demand is better now than at any other time in our current building season; as light field inventories, sketchy rail service, and steady demand has buyers replenishing frequently.
Unless we have disruptions in supply in our commodity groups, we will likely see this buying pattern persist for a while. It will remain a “prove-it-to-me” market. But, if recent history of our markets is any indicator, one can’t get comfortable thinking that what is in place will stay in place. Volatility may be subdued for now, but in our industry it can be lurking just around the corner — particularly when buyers are all, once again, crammed onto one side of the boat.
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