July 2013 – Market Update

By Paul Rogers
It’s said that “what goes up must come down” and it appears that the lumber market is no exception. In contrast to first quarter 2013 (where prices were climbing at an alarmingly steady rate), pricing during the second quarter continued its steady decline. As the market languished, watchful eyes were busy searching for the bottom, in the hopes of stemming existing inventory value losses and to also take advantage of some potential deals. Several months ago, concerns were great that the market would continue to climb because it was expected that supplies would be tight amidst a rebound in building. Many reacted by over-buying at higher levels, which turned out to work against them as the market underwent its correction. May and June sales didn’t produce any notable outtake so many dealers were forced to work off their inventories at a loss. As the market was declining, wholesalers were busy offering deals as they needed to move their stock. Although there was little position-buying, wholesalers and dealers alike were tuned in to daily lumber reports looking for the most apt time to make a purchase, as speculation of when the bottom would be realized remained elusive. As it developed, the bottom settled around the mid $300’s, right where it was in late Fall 2012, before the market went on its tear. As of print, pricing has stabilized and is expected to climb a few points as most dealers have reached their re-order levels and are buying again. Further bolstering this is the threat of limited production as mills close for their summer shut downs.

Fortunately, there has been much great economic news of late, all of which is helping to build strength in the lumber and housing markets. With the steady increases in housing starts and home values and decreases in unemployment and foreclosures, Americans are once again beginning to feel some security in their state of wealth. In turn, homes sales and remodeling are enjoying a spike of business. Stability in the lumber market will be driven by a sustained demand and an ample supply, but we are still in the early stages of a growth economy and there are bound to be more highs and lows to contend with. Until we reach equilibrium where there is some “normalcy” to supply and demand, these pricing fluctuations will certainly drive up the anxieties of all of us. There is little that can be done to control it on the large scope of things, but we do our part at Shepley by trying to keep drastic swings in check for you by buying strategically and managing our inventory which, in turn, helps to clip the peaks and valleys off of lumber pricing. Oftentimes, deals are to be had during market corrections and we take full advantage of them so that we can pass the savings on to you. Our intention is for you to have confidence when you submit your bid with a Shepley quote knowing that, not only is it complete, but it is also competitively priced and secure.

July brings impending mill shut downs, which generally run prices up a bit. We have bought ahead and have actively been able to take advantage of some market deals. We anticipate that pricing will be flat to up a couple of percentage points, at least until the forecasts (and reality) of fall business is at hand.

Please remember to speak with your Shepley Lumber sales person should you have any questions or concerns, and thank you for your business!

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