Western Plywood continues a remarkable summer run into September. Buyer resistance to ever-increasing prices is evident, but most buyers appear to be underbought as we enter the fall building season, which is typically a strong consumption period for plywood.
At this stage of the game, buyers will likely keep to their needs-only buying, considering their perception of market risk. However, the longest order files of the year are keeping pressure on buyers of all stripes. At this writing, we are quoting wood for shipment in mid-October.
What is driving the market strength in western plywood? Most likely, a combination of things. While demand is steady but not spectacular, supply would appear to be a major factor, as supply has been constrained over the past 6-9 months as import volumes have decreased. Also, tariffs on Canadian Veneer and Plywood implemented last month have contributed to the most recent surge in plywood prices. We also probably underestimate how much plywood actually ships into the U.S. from Canada.
Add all these factors to the fact that inventory levels throughout the distribution pipeline have been largely kept lean, intentionally, all summer. This strategy, however, seems to have contributed to the market run, as buyers seemed to treat early building season market strength as an aberration, only to find throughout the summer that the supply/demand balance was good and prices were sustainable. Add seasonal pickup on such things as Ag products, treaters, new construction, and the sum of these things brings us to where we are now.
The commodity lumber and panel markets, in general, appear to be performing at a mostly pedestrian pace, OK, but not great. Meanwhile, Western Plywood is definitely an outlier at the moment. Southern Yellow Pine Plywood has been very steady and decent, but not spectacular.
Western Plywood has maintained a very hefty premium to Pine Plywood over the past few months, with surprising spreads not seen in recent memory. I’m surprised that OSB, while getting some modest price bumps in recent weeks from seasonal demand, is still priced way below either Pine or Western Plywood.
So, while buyer caution is justified at our current Western Plywood prices, there is nothing that says prices cannot continue to edge higher. Buyers are concerned about market risk, of course. Who isn’t? But if you have little to no inventory in your yard, why would you be concerned with market risk? And, as they say, you can’t sell from an empty warehouse. So, buyers are stuck in between. Concerned about prices, but needing to have enough inventory to appease their own just-in-time buyers, which describes many of their customers.
With current order file strength and seasonal demand, it’s hard to see much change in the trajectory of the market in the near term. Time will tell.
Subscribe
We’ll send you a notification when a new story has been posted. It’s the easiest way to stay in the know.