January 2017 – Lumber Update

By Paul Rogers,

The New Year is off with a start, as the announcement of impending duties on Canadian lumber as a result of the now expired Softwood Lumber Agreement has given rise to the uncertainty of where Canadian lumber exported to the U.S. market will fare, in terms of supply and pricing. The day after Thanksgiving, countervailing and anti-dumping duty petitions were filed against Canadian lumber imports by the U.S. Lumber Coalition and watchful eyes have been paying close attention ever since. How and when these duties will impact our current pricing has been the chief concern. Speculators are entertaining scenarios such as mills choosing to pass along their duties as part of the cost of goods, pull out of the U.S. market entirely or shut down if they are unable to do either. As the agencies and mills determine their course of action, wholesalers and dealers are trying to figure out how to protect themselves in terms of supply and price, as the uncertainty of each will likely lead to volatility in the market. One thing that we do know for certain is that this industry likes to have a little drama in the mix and will happily feed off of any thread that can be had, if it can spur sales. The reality is that there is a whole process that must be followed before duties are imposed, which can extend the outcome by months (and even longer, depending upon preceding circumstances). Currently, it’s anticipated that the Department of Commerce will be waiting until this spring before it makes a preliminary ruling but we are monitoring the situation closely. In the meantime, supply is good (mills will be back on line from their breaks next week) and the market is stable. Demand is good as well, and we expect it to be so for the rest of the month, as long as the weather cooperates….

Although the official effect that duties instituted from the expired S.L.A. will have on the industry are still months out (that is, if they do get carried out), the psychological effect of what could or will happen are closer at hand. Speculation, opinions and rumors are rampant throughout the industry: it’s the chief topic of conversation. As the fervor builds and traders and dealers make the attempt to try to get ahead of what may be coming, decisions tend to become more emotional (and therefore irrational). As we’ve seen in the past (most especially with the effects of the Great Recession), emotional decisions have a tendency to feed upon themselves and create a lot of confusion, undue stress and, eventually, an unstable market. It’s all too frequent that the reality doesn’t live up to the hype, which can leave the market saturated with inventory bought “ahead of the wave” and further cripples the market thereafter, as retailers struggle to move out their purchases. These “run-ups” that just “run-down” help no one in the end. Nonetheless, these situations are nothing to ignore and must be carefully monitored. We see our role as one that will protect your interests as well as our own, and we accomplish this through our collective efforts to employ well-thought out, pre-emptive and rational purchasing decisions. If the market reacts, we will react accordingly and be the buffer against market peaks and valleys, overstocks and outages: we vow to keep you flush and competitive for your project needs.

As we start the New Year, we are excited at the opportunities that we face and hope that we can continue to be (or to become) an integral part of your business. We have put in a lot of effort in recent years in training our staff, improving our facilities (check out our new Nantucket office and warehouse!) and upgrading our equipment, all with the endeavor to provide you with better service and products. Although we constantly strive to improve, we do feel that we are better than ever: please allow us to prove it to you on your next project! Thank you for your business and all the best to you and yours in 2017!

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