Wood products markets are still a grind for almost all our product lines. The LVL market is lackluster, so the takeaway for density-graded veneers has slowed considerably. Plywood sales prices improved slightly over the last couple of weeks and sales volumes are consistent. We are selling production each week, but we have not yet seen a week where there has been a surge in demand that dramatically exceeds production.
US wood products market conditions shouldn’t come as a surprise considering the ISM (Institute for Supply Management) Manufacturing PMI (Purchasing Managers Index), which is an indicator of expansion or contraction in US manufacturing, has indicated 21 monthly declines out of the last 22 periods. Manufacturing in the US is further impacted by the strength of the US dollar, which is currently at a 20-year high when compared to a basket of currencies from major trading partners.
The US has again become the destination for wood products from all over the world as foreign economies try to dig themselves out of economic malaise by spurring exports. Recent reports indicate that 50% of the trade between Russia and the US in 2024 has been manufactured wood products. Russia is now the fifth largest plywood supplier to the US behind Brazil, Vietnam (a proxy for Chinese production), Canada, and Indonesia. When will we ever learn that we hinder wood products production in the Pacific Northwest only to enrich foreign powers?
There does, however, seem to be a thawing in the market and an ever-so-slight sense that we can see the light at the end of the tunnel. The Fed’s discussion of potential interest rate easing has pushed mortgage rates down by about 25 basis points and has increased mortgage applications by 1.4%. Talks of September rate declines range from 25 to 50 basis points, recognizing that the upcoming election puts rate talks in a tricky situation. Considering that some estimates put the US housing shortage at 4.5 million housing units, a modest decrease in interest rates has the potential for dramatic improvement in the housing market.
Where our boots meet the ground, we are seeing quite a few more inquiries for LVL products such as rim board, form board, headers, and beams in anticipation of improving markets going into 2025. Customers are looking for customized and unique layups for very particular uses. We are happy to oblige within our manufacturing constraints and certification limitations. Mass timber projects also seem to be coming back to the table as financing becomes more available. We are crossing our fingers for a few large projects that aim to start at the beginning of 2025.
The last year has been a brutal slowdown in our markets, so we are looking forward to improvement in 2025.
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