August 2014 – Market Update

Lumber sales came to life in July and spurred a rally of sorts where dealers and wholesalers alike made quick moves to order stock while it was still available. The mill’s annual summer two-week plus shut downs certainly contributed to the sense of urgency, but business activity also played a large part as the construction sector was humming along. Order fulfillment was spotty (with some tallies available for immediate shipment and others requiring weeks), but in every case the lack of available trucks made for an uncertainty of when loads would arrive, aggravating suppliers and dealers alike. The situation with trucking is still a very real issue and one that doesn’t seem to be getting any better as demand is far greater than the industry can accommodate. Some companies are now taking matters into their own hands by experimenting with running their own trucks and drivers in an effort to have better control over customer service (and, not the least of which, timely invoicing). However, the expense of equipment and drivers (and the added detriment of not having a backhaul opportunity) force many to remain with consigners and just grin and bear it. Transportation issues aside, pricing is reflective of the outputting of material and thinning of inventories at the mill level so gains were made in July. As we round into August, business is still remaining relatively strong so pricing is expected to be flat up through the end of the month: flat, if business curtails and the re-opening mills get ahead of production, and up if the pace of business continues as it is.

With a turning inventory (and the difficulty in obtaining replacement stock promptly) some dealers get in the position of having to fill in out of local distributor’s supplies. When forced to go this route, they oftentimes have to relinquish the ability to choose their preferred mills or grades that they normally would buy. In our case, we choose to buy certain grades and from certain mills in order to maintain better control of the quality, and we invest heavily in our inventory so that we are always well-supplied. For instance, we only buy our Eastern stock from “No Prior Select” (or NPS) mills that will not pull out their Premium pieces for resale at a higher dollar. The advantage to using these mills is that each unit that we buy will have a percentage of Premium pieces at the #2&BTR price. In addition, we do buy Premium product for many of our dimensions (if not exclusively, then as a mix) in order to have better control over the waste factor. As a rule, we will buy only KD SPF (Spruce/Pine/Fir) or KD Doug Fir as an alternate (typically for stock unavailable in SPF). We will not by green stock or Hem Fir, as both are notoriously unstable and prone to checking and mold. Sometimes our choices may carry a slightly higher price, but our strategy is to keep our pricing competitive with standard grade material (even with our better grade product) by buying at the right time, with the right mix and through our supplier-partners. In the end, this prevents us from having to fill in out of local distributors and lends a consistency to the lumber quality and pricing you expect.

With this in mind, we have positioned ourselves well with quality material that is competitively priced. Nonetheless, quality issues do arise from time to time, but you can rest assured that if you have any issue with the products we supply, we will address it immediately and will see to it that it does not occur again.  As always, please consult your lumber sales person should you have any questions or concerns on any upcoming projects, and we sincerely thank you for your business.

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