June 2014- Market Update

By Paul Rogers,

The lumber market came back to life in May as many segments of the nation reported a marked improvement in building activity. Although the most positively affected area was the South, the Atlantic corridor and southern New England felt the movement as well and the activity was solidly bolstered by favorable weather. Throughout May, demand drove weekly price increases and the climbing numbers kicked into action the dealers who were waiting on the sidelines looking for a bottom. Once it became apparent that pricing was moving upward and would stay firm for the foreseeable future, buyers, if they weren’t already scrambling to replenish stock, were scrambling to beat the market. In similar fashion, the plywood market experienced a run up in recent weeks (but has since flattened) and framing lumber is expected to do the same. The long term outlook shared by most for the market is that this is a cyclical blip based upon pent up demand and it will not be sustained as we head into July. For the short term, we can expect pricing to climb until the demand/supply equilibrium has been reached.

One thing that does not appear to be cyclical (as it keeps getting worse) is the trucking industry. The loss of drivers and rigs from the recession coupled with strict regulations that restrict drivers to 70 hours per week (drivers are not allowed to resume driving until they have had 34 consecutive hours of rest and they have an 11-hour daily driving limit with a 14-hour work day maximum) have put an end to red-eye driving and have severely affected lead times. The effect that it has had in times like these is that orders do not materialize when needed and so buyers are forced to fill in from distributors or substitute stock, both of which can have a profound effect on order fulfillment, price, quality and, ultimately, profitability. Until this end of the industry rebounds, there will be rough roads for buyers and distributors to deal with when it comes to procuring material.

Knowing that we may have potential issues with market fluctuations and order fulfillment, we aim to position ourselves in a manner with our inventory that keeps us well-stocked: we are not afraid of carrying ample inventory and don’t get hung up on the peaks and valleys of the market. Rather, we choose to work with a formula that keeps us not only well-stocked but competitive as well. We have been blessed with a great year so far and have you, our customers to thank for it. Looking forward, we are excited to be your choice of supplier and are eager to do whatever we can to continue to earn your business!

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