January Market Update: Expected Slow Start to the Year in the Wood Products Market

January 7, 2016

Happy New Year from Freres Lumber Company!

Overall Market

The month of December ended with stronger than expected plywood shipments to job sites in the field in most areas of the country. The Northeast enjoyed unseasonable December weather, which allowed yards to ship wood at a spring-summer pace, while operating with typically winter sized inventories. The net effect was customers needing to purchase more than expected. Coinciding with typical Holiday mill shutdowns, as well as less product on the market for December, this activity helped commodity sheathing prices rebound $15-30/m across the board during the last few weeks of 2015. That’s how the year ended, a subtle, but noticeable firming trend in the run up to the Holidays. Certainly not unwelcome from producers who have seen sheathing prices slide to multi-year lows, in some cases, but a bit unexpected, for sure.

Mill Activity

Production has now resumed at most plants, with a few mills already quoting into the 3rd and 4th week of January. Market/price direction is sideways for the moment, with no overriding sentiment either way as traders shake off the cobwebs from the last two Holiday weeks. While national weather is a mixed bag at this time, harsh winter weather has not yet appeared in too many areas thus far, which is good for lumber and panel markets. But the winter is young, and weather will be the trump card in determining building and shipping activity throughout the country.

2016 Predictions

Expectations are mixed as well. Most expect decent gains in housing overall in 2016, but there is the question as to whether this increase is enough to absorb what are already ample supplies of forest products to the U.S. In 2015, lumber dimension markets suffered through a difficult opening third of the year, with harsh winter weather and overly exuberant buying combining to weigh on the marketplace into late spring. Lumber markets did enjoy a sharp and welcome rebound in the summer-to-fall period. However, as often happens, things got overdone on the downside and buyers found themselves under bought. Those of us in the western plywood sheathing market were not as fortunate. Beset by excessive amounts of imported plywood from South America and Canada throughout the year, along with ample domestic production, the markets sputtered along and found little traction at any time of the year. Making it one of the more difficult trading years in recent memory. The stronger dollar will continue to exert pressure on our markets, thwarting export business and helping imports to flourish and making life difficult for U.S. producers.

Freres Lumber Company Operations

That said, overall business is not too bad. Most customers expect modest-to-good growth in 2016 sales. If supply becomes more in balance with demand business activity for Freres Lumber Company will remain steady. If not, it will continue to be a very competitive market out there, which and we are prepared for going forward, as well.

Bob Maeda, Plywood Sales