December 2015 – Market Update

by Paul Rogers,

After a short term rally in November (that was largely driven by buyers coming to the realization that the end of the year was approaching and pricing wasn’t likely to deflate for the rest of 2015), the market firmed and flattened. Mills had curtailed their production long enough that, when buying finally kicked in, there were shortages on spot products (such as 2×6 and select pre-cut studs) and late shipments were rampant. The fast approaching year end and threat of a hard winter certainly added extra stress to the demand-side of the market, as builders went into an urgent mode of getting their projects well underway so that they could be weather-tight before the snow flies. In addition, the trucking shortage (which seemingly gets worse with every month and is an ever-present issue for all producers) delayed many deliveries far beyond their promise dates, putting an extra stress on distributor’s trucking and inventory as dealers turned to them for fill-in stock. For December, the market has settled into a calmer tone as producing and buying has subsided. Mills will be shutting down for retooling over the holidays, and dealers are actively drawing down their stock levels in anticipation of year- end inventories and potential tax penalties based upon their year-end inventory values. Pricing is firm but flat, and is anticipated to remain that way through the New Year.

It’s been remarked lately by many in the industry that the market has lost a lot of its predictability. Inaccurate predictions could be attributed to the sensationalism that is doled out by the media where, seemingly every day, new postings appear that cite the latest trends, lists, percentages and opinions, with many of them contradicting each other. While all of these can lend a better understanding of current and future market conditions, many take too narrow or broad of a scope to get an accurate understanding of what will happen in our area. For instance, our preferred products typically stand away from the rest of the country as, being traditionalists to the definition, we are likely not to use a lot of common building products that you would see in other areas as alternatives to our own (OSB versus plywood, fir over SPF framing, vinyl siding instead of white cedar shingles, etc.). As our own trends are well-defined by the authentic materials that have been used on Cape Cod for years, the rest of the building material industry has been busy embracing the newest alternatives that we will still commonly shun. However, this is not to say that we haven’t made significant progress with items that weren’t commonly used a decade ago on Cape Cod (such as Azek PVC trim boards and Advantech engineered subfloor, both of which are lead products for their category). As with most things, it takes the brave of heart to try a new product. These “early adopters” are the ones that will likely enjoy the exciting benefits of a new product, but may also have to work through the issues that may arise. New products require our intensive study, but once we feel that we’ve done our due diligence and it gets to the stage that you hear us promote it, you can trust that we are confident in its performance and will support you every step of the way. In addition, we work very hard at conveying feedback from the field to our suppliers in order to improve upon the product. Unfortunately, many of the authentic products of old are in their twilight years, so we are constantly keeping our eyes and ears open to learn and evaluate the “latest and greatest”, to best distill down what we think will be successful substitutes. However, we cannot evaluate their performance without our early adopters, who work with us on these new products (and allow me to express our eternal gratitude to these “pioneers”). As how these new products relate to market predictability, it can be said that no one knows what the future holds, but we can be certain that market trends and new products will influence and displace the demand on traditional items, effectively influencing future market conditions. It will be at the hands and influence of the early adopters, our industry’s “pioneers”, who will ultimately change and shape our future building material demands.

Though the market may become more unpredictable and our own building trends may be shifting away from traditional products, you can rest assured that the Shepley code of customer service has not wavered and will always be our top priority: it is our inherent mission to provide you with the best service and quality products at competitive pricing that a lumber dealer can offer. Our company philosophy is to develop a high level of customer service through intense training of brilliant, ambitious and conscientious people, and we have hit a new level in that respect. We are extremely grateful to you for your past and present business, and are eager to show you how well we can serve you on your future business. Thank you, and have a safe and happy New Year!

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