Market Update: Banking Crisis and the Engineered Wood Market

In recent weeks, commodity plywood sales have slowed and prices have softened. One factor has been continuing late winter weather in many regions of the country that has stifled consumption. In addition, the recent banking crisis has cast another shadow over our economy, as consumers and business owners struggle to digest the news and make financial decisions amidst the uncertainty in the marketplace and economy.

Prior to Friday, March 10, when the Silicon Valley Bank dissolved, there were some indications that commodity lumber and panels were perhaps starting to gear up for some renewed spring buying. The current banking issues have thrown cold water on almost everything regarding our economy — particularly near-term.

This, of course, will eventually sort itself out, but it doesn’t lessen the anxiety these events produce on main street. Main street inhabitants are being whipsawed by these events as we seem to careen from one disaster to another.

Unfortunately, we are still compelled to question the soundness and integrity of our country’s institutions — specifically, the government and banking system — and the leaders entrusted to be responsible for the people they serve. As we saw in the financial crisis in 2009, poor bank management and risky balance sheets are rewarded with bailouts, while regional banks are punished for playing by the rules.

Now there is speculation, given the banking chaos, that the Feds will need to quickly pivot from proposed interest rate hikes next week and beyond, to bring more stability in the system. This was not the plan a week ago. It seems the Feds have no great options, only ones that might be less painful (but never painless).

Nonetheless, our business needs to move forward. On Thursday, reports came out showing that February housing starts were up almost 10%; way above the consensus figure. That is a surprise to many, and bodes well for both near- and long-term markets. If interest rate hikes slow or actually start to go lower in the months ahead, it will be bullish for our industry.

In the near-term, our markets are undergoing some correction to the downside. But with an under-inventoried field, continued decent demand (starts), and the prospect of moderate spring weather ahead, one should be paying attention to commodities. Which, in our industry, are still underpriced and underbought.