Spring has arrived and we are thankful for a little bit of sunshine, regardless of how fleeting it is. We’ll start a week with a few wonderful, sunny days and then have rain dumped on us for the remainder of the week. Welcome to Oregon.
Fortunately, the wood products markets treated us with more consistency. Plywood has continued to move reliable volumes on a weekly basis at slight but consistently increasing prices. LVL is slowly digging itself out of a deep and protracted market slow down and inventory build, but there are signs of life. Veneer prices are up, due to increased demand for green and dry veneer with increasing strength in both plywood and LVL. But more on market specifics later.
We are approaching the most predicted recession in market history. Most recessions hit hard and relatively quickly leaving companies scrambling to maintain cash flow. The interest-rate-induced recession that everyone keeps predicting seems more like a slow moving train wreck that never seems to reach its devastating end.
Wild predictions of housing starts below 1 million on a seasonally adjusted rate look a tad foolish now, as starts seem to have bottomed around 1.3 million; at least for the time being. The recent Fed’s 25-basis-point hike, and additional banks like PacWest announcing liquidity problems, has kept the fear of regional bank defaults on everyone’s minds. Renewed concerns about commercial real estate experiencing low occupancy rates amid the rate increases raises additional liquidity concerns.
The log cost to finished product price pinch continues. Oregon’s relentless political push to reduce forest management across the state through the Private Forest Accord, the Habitat Conservation Plan, and encouraging environmental group lawsuits, has led to industry professionals suggesting 11 mill closures due to reduced harvest levels. Mills are terrified that they won’t have logs to run through their facilities, so they continue to pay prices that they know can’t be processed profitably in the near term. These conditions make for a bloody start to 2023.
Plywood prices have improved about 20% from market lows and veneer is up about 10%, although you wouldn’t get that impression reading Random Lengths. White fir is in particular demand due to the heavy snow falls this year cutting many operators off from their supplies. This will likely improve as the higher elevations open up with better weather. White fir is projected to be in a longer-term shortage in our region due to the impact from the forest fires. White fir fiber just doesn’t seem to have the longevity that Douglas fir does after fires.
We congratulate oWow for the installation of the first floor of MPP on their 1510 Webster project, an 18-story multi-family construction in Oakland, California. They installed an entire floor in one day. The speed of construction for mass timber projects continues to prove itself compared to concrete and steel. A floor like this in a conventional building would take at least a couple of weeks to form and setup. oWow intends to continue installing two floors each week.
We are also delivering for a local project called Minnesota Places in Portland and an arena project in Edmonton, Canada, called Coronation Arena. These three projects in particular have kept Plant 6 on a very packed schedule. Thanks to everyone at Plant 6 for putting in the extra time to make these projects a reality.
We just visited another local project that we delivered last summer, Salem Public Works. This is a new facilities building for the City of Salem so they can combine their services into one location. The building is extraordinary and well deserved. The buildings where they currently operate were constructed circa 1950. Local projects committing to use local materials are extremely important to companies like ours.
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