Housing formations continue to outpace housing starts. On a macro-economic level, this means that demand for housing continues to exceed the available housing inventories. For those looking for housing this means that housing prices and rents continue to rise and will most likely continue to rise in the foreseeable future. The National Association of Home Builders reported that builders’ optimism is at the highest level since 1999. Construction and home building have lagged behind the phenomenal increase in stock market and economic gains seen since the recession of 2008.
It could very well be that we are just now seeing the housing market respond to the positive economic growth seen in the general economy. Our hope is that the US housing market can return to the historical average housing starts of around 1.5 million SAAR instead of 1.3 million as we have seen over the past decade. Growth in housing starts would not only be good for the wood products industry, it might also lead to housing affordability over time.
Plywood sales volumes have exceeded production capacity over the last four weeks, and we have drawn all inventories down considerably. We have finally seen price increases for our panels instead of a continual drain in pricing and sales. Plywood prices have jumped at least 15% over the last couple of weeks. This is a welcome development as we have been trading at levels at or below our break even relative to our incoming log prices for too long. It is a bit too early to determine what has spurred the unseasonal panel demand. Demand could be increasing due to increased housing starts, or a decrease in import volumes. Another factor could be Canadian log supply issues leading to production curtailments. Regardless, we are genuinely pleased to see some semblance of market forces return to the panel markets.
The US Structural Plywood Integrity Coalition is still working to enforce adherence to the PS1 plywood standard by imported products. The legal process is long and methodical, but we have all indications that our case will be proven in the long-term. It is our hope that US producers will be vindicated as quality producers that adhere to standards. These standards are being ignored by international producers.
Veneer pricing has continued to gain ground as LVL production has increased due to favorable markets. Shortages in veneer will continue to be a concern for NW producers until timber supply issues ease in Canada. Indications are that the metriguard veneer market will continue to be strong as we approach the building season. This does not appear to be a short-term push to build inventories in anticipation of future markets.
Mass Ply market development continues to show promise. We are on a whirlwind tour of projects in California, seeing firsthand how our products are used on construction sites. We are working with innovative customers who are exploring new types of multi-family and multi-story development. From modular to multi-story flat packed, the creative minds are working to find solutions using the new products we are developing.
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