After a flat spot in the market in the month of June, commodity western plywood has traded well all through the month of July, with the last two weeks being our best sales volume weeks of the year.
Supply and demand appear to be in good balance right now. Most customers have returned to a just-in-time buying strategy, keeping inventories low in the field. We are in the heart of the building season now, and demand seems to be a little better than it’s given credit for. Overall demand for western plywood appears to be sneaky decent, even good. After several weeks of flat, unchanged prices, a noticeable pickup in buying this week has elevated prices by a few points.
Recent announcements on impending tariffs on Canadian and Brazilian imports have likely been factors in the past week’s resurgence on the buy side. Underestimating underlying demand in the marketplace is also a factor.
Overall, commodity lumber and panel markets in the U.S. seem to be behaving nicely, with the exception of OSB. A side note: interestingly, despite the OSB market seemingly unable to get out from under its own shadow for most of the year, and with prices of 7/16 less than half the price of 15/32 CD, plywood continues to outperform OSB on sales and price.
In the past, the fortunes of these two commodity groups, OSB vs. SYP/Western Plywood, seemed to be directly tied to each other. The thought being that where OSB goes, plywood has to follow, since OSB is roughly 60-65% of the total construction-grade panel market. The prices of the two groups, OSB vs. plywood, would move up and down relative to each other, based on their price spreads.
That doesn’t appear to be happening right now. Western plywood commodity prices have risen 20-25% since March of this year, while OSB has been stuck in the lowest end of its recent price ranges. Kind of interesting, to me. Perhaps it is generally more about the carving out of each product group’s respective customer base. Not sure.
For now, conventional wisdom doesn’t hold water with the current divergence of these two groups’ current market direction. It’s likely that overall plywood supply has tightened with less imported wood for sale, impacting SYP and Western plywood markets.
Where do we go from here? At the moment, it feels like U.S. plywood prices could continue to move higher. Overall, supply could continue to be pinched, particularly on the import side of things. It is a big factor if imported volumes to the U.S. continue to decrease in the months ahead. Buyers’ risk-averse approach to the market can also add to the volatility in commodities as well. There is not much wood in the supply pipeline.
As usual, a lot of balls in the air with regard to our economy, the Iran War, the political scene, and the direction of our own markets. The uncertainties do keep everyone off balance, but that seems to be the new normal, and we must manage it and deal with it accordingly. As always, time will tell.
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