Structural panel sales volumes moderated over the last few weeks as purchasers absorbed the duration of order files, as well as the new high in sales price hit for ½” CDX panels. Last week, ½” 4-ply CDX hit an all-time high of $2090/msft. This surface price represents more than $66.75 per panel wholesale pricing. At the start of the COVID pandemic these panels were selling for less than $12 per panel. Our order file currently extends into late August. Considering it will be September before purchasers will be able to take possession of any panels purchased, it is no wonder why they do not have the stomach for locking in prices now.
It is not just the fact that wood products prices set new historical price records on a weekly basis that is causing purchasers to pause on purchasing, but also a drop in the lumber futures markets. The lumber futures market is on the Chicago Mercantile Exchange and exists as a way for commodity brokers to hedge future purchases of wood products so they can have more stable pricing. It is used by big retailers and over-the-counter purchasers to minimize their future risk. In the case of declining market futures, the market is making the bet that the future price for lumber products will be less than it is now. These market indications may or may not be correct, especially considering our current lofty highs, but they rarely reflect the current trades or markets manufacturers face daily. Case in point, the last time there was a significant drop in the lumber futures market was in September 2020 when the market sprang back quickly from a quick decline to reach all-time highs again.
In the real world there is a reduction in purchase volume over the last three weeks, but prompt loads garner higher prices. Housing starts have dropped from 1.733 million in April to 1.569 million in May, but this may be more of an indication of the lack of building materials in the marketplace than a correction. In actuality, 1.569 million starts is also a better start number than we have seen in the last decade. A bit ironically, housing permits continue to climb month over month, so there is plenty of desire in the marketplace to make use of low interest rates to purchase a new home. Thirty-year mortgage rates still hover below 3% which is an opportunity. The average sales price for a new home jumped from $400,000 to $430,000 from April to May.
Veneer sales have continued to be steady and veneer prices continue to escalate. There is ample margin between veneer prices and finished panel prices for additional price increases over time. LVL producers, typically the highest margin products manufactured in the veneer market, have suffered in comparison to commodity panel producers over the last year due to longer term contracts. The rumor is that most LVL producers were able to push contract prices higher over the last couple quarters to more adequately reflect price increases in raw materials.
On the mass timber front, last week Katerra, a CLT manufacturer funded by $2 billion, announced that it is closing its doors and filing Chapter 11. We do not believe that this is reflective of mass timber’s future potential, rather, it is part of the creative destruction of new markets and products as the marketplace determines best fit. We are seeing increased and abundant interest in our Mass Ply products with several long-term projects currently underway and more signing on a weekly basis. Be on the lookout for amazing projects featuring Mass Ply in the future!
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