August 10, 2020
It is amazing the difference that two months can make. Our markets are in a dramatically different place than early May, when COVID restrictions forced us to take a week down at most of our operations. Prior to our May shutdown, we were only selling a couple of trucks per week and trying to find places to stuff inventory to keep the plants running. Now the plant inventory spaces are empty, and our order files extend to the end of September. Prices are still reaching historical highs as distribution yards scramble to cover plywood orders.
Veneer is in acute shortage at the moment as many panel and LVL producers have large order files at high prices. Veneer imports from Canada are lower than typical as the Canadian market has also rebounded and manufacturers are using the product internally. Tempering this good news are log prices, which have remained stubbornly high this year. Unlike published veneer prices, which have been slow to move. However, we would anticipate that this is only the beginning of veneer price increases. It is likely that veneer will continue to benefit from the high prices of finished products.
There have been several reasons cited for the unexpected increase in panel demand. One factor is a lower level of imported panels. There is also reduced production and only so many plywood orders can be filled due to human resource constraints. We have seen a higher level of “shoulder-trade” purchases through Home Depot and Lowes from home fixer-uppers sheltering in place. Also on the home front, there has been a renewed interest in home ownership due to COVID, and lower mortgage rates. We are thankful that these events have led to higher market prices and the ability to run full production hours.
Housing starts and housing affordability are still big issues in the marketplace. The US has still not recovered to the 50-year average of 1.5 million housing starts prior to the 2008 recession. Now housing is a big deal as economistsforecast that we are 1 million housing units short of what is currently needed to house the US population. It is difficult to put too much faith in forecasters, but some say that we are starting a 5-year bull market for housing. I hope that is true as our population deserves quality shelter and it would also be an indication of future prosperity forour industry.
As you have probably seen in our social media posts, Freres Lumber is hiring. It is our goal to hire enough people to run both veneer plants consistently on a 2-shift basis. We would also like to hire people for a graveyard layup shift at the plywood plant. This shift was unfortunately curtailed at the end of December. If you know someone looking for good, hard work please send them our way. We are currently providing referral bonuses. We would like to do our part to reduce unemployment in our own rural community.
Tyler Freres, Vice President of Sales
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