November28

Lumber Updates – December 2018

By Paul Rogers,

Lumber pricing finally found a bottom in November, bringing to an end a five month streak of steady declines. When the market peaked in early June,
the fervor surrounding the pace of construction, limitations of available wood and transportation issues (and the effect they had on lead times) had convinced most that it was the “new norm”, that prices, if they were to relax in the near term, would deflate only moderately. With this mindset, buyers weren’t prone to take a “wait and see” approach. Instead, most readily bought beyond their needs as a defensive plan. What occurred since then was an abundance of supply and moderate demand which, consequently, brought prices back down to where the “old norm” had been (and, by all accounts, a result that was not expected). Zooming forward
to the present day, battered and bruised, mills and suppliers are lamenting the actual and potential losses they’ve incurred as the market corrected in
a seemingly endless run. However, it’s curious to note that the bottom that has finally been hit has not been a response to an influx of demand: it’s been a restriction of supply brought about by mill closures and curtailments, a retreat of soliciting sales in the U.S. market by Canadian and European traders and a general thought that the best of the housing market is behind us, as home sales falter.
In the long term, few are taking a stance as to what business climate 2019 may bring, other than “steady”. In the short term, no one thinks that pricing will do much more than lump and bump along the “bottom” for December, and potentially through the first quarter of 2019. Of course, these are predictions that are being made by the same folks who got spanked by the recent market decline so, although no one rightfully knows what 2019 will bring at this time, we are confident that December will be flat, with the potential of a slight bump at the end of the month as we usually see when mills enter their winter shut downs.

This industry seems to get itself in to trouble when purchasing agents either try to outfox the market or are startled by what they are seeing and freely dispense purchase orders. As traders and mills are always on the hunt for orders, they’ll never tell you not to buy. In addition, it’s interesting to note how some of the more respected agencies in this industry can dole out some disturbing advice, such as one gem from this year to “buy it if you need it, buy it if you don’t need it, buy it if you don’t stock it”. There may have been a time when strategies employed by studying historical data would have held a greater value but, in today’s intensely competitive global market, situations can change at a moment’s notice which, in turn, can have a profound impact on your project if you are looking too far ahead. It’s best to buy what you need at a time that gives you plenty of room to have it when you need it and to do business with the suppliers that you can trust: they are the ones that aren’t looking to capitalize on you through fear tactics but stand by and support you when the going gets rough. To clarify, there are many excellent dealers in our industry, but others make a sport of employing tactics such as arbitrarily distributing notices of impending price increases that you are expected to fully absorb, reducing quote expiration periods in a rising market, surreptitiously adding surcharges to bottom lines, selling framing that incorporates descriptions of wildly varying wood species in the same line item and, last but not least, inaccurate quotes that purposely omit critical items required for a complete job, in an effort to appear less expensive. Sadly, these examples are used more commonly than one would expect and have a profoundly negative effect upon all of our livelihoods.    

Bruce Rauner (businessman, philanthropist and politician) is credited with saying “Success is all about persistence and doing the right thing for the long term” and we are sincere believers. Although industry agents may dole out questionable advice and employ different tactics to make a sale, we choose to do the right thing by remaining honest and trustworthy for the long term, because that is what we do. We wish you all the best that this holiday season can bring to you and sincerely thank you for your business!

 

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