August 2013 – Market Update

As is typically the case for the month of August, the lumber market is status quo as building activity has subsided due to the heat of summer and family vacations. As is also the norm, mills are either currently closed or are coming back from their two to three week shut downs (a period they use to retool and take their own vacations). Dealers and wholesalers have prepared for the shut downs by buying enough material ahead of time to cover their needs through the rest of the season. As some mills worked diligently to produce their order files up until their scheduled shut downs, several announced early closures due to a lack of logs. Some of these same (and more popular) mills offered to cancel contracts for orders they couldn’t produce in time, an indicator of their confidence that there will be work to be had after they go back on-line. The confidence that business will be strong in the fall permeated throughout the supply channel, which led several wholesalers and dealers alike to take positions based on some of the lumber deals that were being presented to them. If space and cash could be afforded, this seemed to be a sound strategy as the decline in lumber pricing in the second quarter of this year sank to levels that were certainly unexpected. Buying at such low numbers meant that there was little risk as prices could only seemingly go up, but a little over-zealousness could set us up for a repeat of this past spring where buying stopped due to over-inflated inventories. There is a saying that goes “pigs will be pigs, but hogs will always be slaughtered”. Although it’s a bit of a gruesome proverb, it’s an effective one when used in the context of warning one not to take too much advantage of a good opportunity. In this industry, it’s critical to be able to take advantage of deals that will give you a market advantage over your competition. However, a little over-zealousness can easily lead us all to the fluctuations which attribute to market instability and this is where the hogs will get “slaughtered”. On the premise that we are still cutting our teeth on the new economy, perhaps time will relax some of the knee-jerk reactions we are prone to making and, in turn, will help to mitigate the market peaks and valleys.

The market is currently stable, but the general consensus is that dealers will work through their inventories and a new influx of orders will cause prices to appreciate into September. In the meantime, we are well stocked against our own forecasted business, with competitively priced stock. If you have any questions or need any assistance with your building project, please be sure contact your Shepley lumber sales person.

Enjoy the rest of your summer and thank you for your business!

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