June15

Lumber Update – July 2018

By Paul Rogers

Last month’s unprecedented run-up in lumber pricing sent a shock through the system, stunning buyers at every level and leaving one to wonder how long it would last. Attributing to an extremely strong demand and chronic truck and railcar shortages (both of which ratcheted up buyers’ angst), the ensuing dramatic reaction of buying that followed flooded the mills with orders, which further exacerbated the situation. Nonetheless, like we have frequently seen when the market reacts quickly to a situation, it soon cools down and stabilizes as buyers, sated for what they had done to cover their needs, redirect their concerns to whether or not they overbought and would soon be saddled with too much over-priced stock. Traders were quick to dispel any concerns of that happening (as they wanted to keep the energy going to prop up sales) and used impending summer shut-downs, seasonally strong demand and no logistical relief in sight as reasons to keep buying. Nevertheless, traders often don’t know their customers’ business as well as they think they may, and so caution and hesitation were employed in purchasing as distributors and dealers chose to digest some inventory before going back for more, especially at the astronomic asking prices. Although pricing has stabilized, it remains firm and we expect it to remain so throughout July: business is strong and, with mills’ current order files (which are out 3+ weeks), impending summer shut-downs for retooling and trucking still an issue, availability will still be a wild-card.

It’s safe to say that the worst reaction is an over-reaction: when emotions run the show, rationality looks for the exit. However, with what we have been experiencing in recent years for factors that affect the market, it’s hard to keep it all in perspective. We’ve run down the list of issues almost on a monthly basis: duties, trucking shortages, natural disasters and economic recovery all have had a heavy hand on market instability. What more can you say or do to explain or protect yourself from the issues that we are experiencing with lumber, particularly when it comes to quality, price and availability? Not much, except to acknowledge that what goes up, usually comes down (and often just as fast), that there is always, always an element of excitement when an event occurs that fans the fires of an over-reaction and that, if you align yourself with the right people who remain rational, are committed to your well-being and aren’t opportunistic, all will be OK in the end. After all, when faced with situations that are beyond your personal control, it’s people who make the difference and the ones you surround yourself with (your subcontractors, employees and suppliers) will either help or obstruct you from achieving success. With that in mind, consider that there are no secrets in this business: we generally all have the same resources, but games are often played when trying to earn sales. Misleading descriptions on products (especially grades and species), loss leaders that divert  your attention away from the cost of other items on the quote or hiding costs in the not-so-obvious places, such as payment discounts, delivery charges or return fees are commonplace. When the costs of goods escalate, be keen in making sure that you are looking at the whole package and that comparisons are apples to apples, as your true business partners will not try to bury the differences where you may not be paying attention. A fair business partner will be just that: fair in price, product and service and all of which are essential for success in times of market volatility. Being a fair business partner, please know that we do our best to quell market upsets long before you have to deal with them: if we know that we can cover your needs in advance of a spike or an outage, we will. Even more so, we won’t hedge our bets by running up the price to give us the unfair advantage: we work diligently to stabilize pricing on all of our product categories in order to help you secure and stay within your budget. When we do need to react, we will do so based on averages, in order to keep the shocks to an absolute minimum.

With summer in full swing, we hope that you are able to break away for a bit and enjoy everything that living and working on Cape Cod has to offer, as it is truly a beautiful and special place that is best appreciated this time of year. We are grateful for the part we play in in the Cape Cod community, but most especially the role we play in your business and sincerely hope that we are providing to you the value that you expect in a building materials supplier. Thank you for your business!

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