Plywood sales strengthened considerably over the last two weeks with enough volume sold to move existing inventories and extend order files a short distance into the future. Plywood pricing increased as well, but not the dramatic increases that we have seen in past runups.
Purchasers are still cautious, replacing what they need and little more. Rain and late snow have hindered the northwest with late but welcome precipitation, and the spring building season seems as late to arrive as the garden planting season. We believe that there is more upside to panel markets going into summer and time will prove the current panel pricing as a mid-term bottom.
The fundamental reason for higher prices is resource scarcity, not in the future but right now. The primary resources in question are timber, labor, and secondary panel input prices. Timber is consistently restrained in Oregon and across the northwest. The Oregon Habitat Conservation Plan, Oregon Private Forest Accord, Rivers Democracy Act, and environmental group litigation to reduce common-sense salvage harvest and restore our local forests all limit available timber supply. Well done, Oregon politicians!
Luckily, or not, Washington and British Columbia are instituting the same timber and forest regressive policies. British Columbia just instituted a six million acre set aside for so-called “Old Growth” set asides. It has taken 30 years for British Columbia to be as restrictive as Oregon, so misery must love company.
Less timber volume means higher timber prices, which means higher panel prices at Home Depot. You don’t have to look far to see why housing prices are so high if you are basing your analysis primarily on wood products. Labor is still in short supply, and we are running on reduced schedules. All other inputs are up considerably, though we hope price increases will moderate.
A market adjustment years in the making is happening behind the scenes in the veneer markets. Laminated Veneer Lumber (LVL) and other engineered wood products (EWP) demand is off the charts, while plywood continues its usual ebb and flow.
Customers we talk to report a consistent and insatiable demand for EWP. We produce quite a bit of density-graded veneers for the traditional EWP producers, and are also dipping our toes into EWP with our introduction of the Mass Ply Panel. Some don’t realize that we are currently certified to produce some traditional LVL products right now and we intend to roll out additional certifications in the near future.
The problem for the market is that there is only a finite amount of LVL wood to service the marketplace with the limited harvest that is taking place in the northwest. Density-graded Douglas Fir veneer is still the king of all EWP veneers. LVL veneer is in strong demand and shows no signs of decreasing in price or volume in the near-term. Plywood has little impact on veneer pricing nowadays relative to LVL demand.
We are still running straight time hours through our facilities due to unpredictable log supply and high timber prices. This is our plan for the foreseeable future. We have a crane replacement project coming up this summer which may throw a wrench into our schedule, but nothing is set in stone for the moment. We look forward to sunny weather and solid markets!
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