November25

Lumber Update – December 2020

By Paul Rogers

It’s been a challenging year and the epic rally that spiked lumber pricing to record heights won’t be forgotten any time soon. As with most rallies, they tend to incite exuberant buying so they conclude with ample stock at the retail level. Buying then stops, the market weakens and prices collapse. This last rally was no different. Anxiety over rising prices and exceptionally long lead times spurred buyers to cover their immediate needs and beyond. Once material arrived and needs dissipated, buyers immediately moved to the sidelines and waited for a retraction. What was different with this rally has been its unprecedented duration (for both the climb and the descent) and certainly how high it went. What goes up, must come down but the duration of each is always uncertain as economic and societal conditions have a profound effect on each. We experienced almost five months of steady increases until it peaked in September (and lumber prices almost tripled in that same period). Its descent is now almost two months in progress and yet prices are still in historically high territory. The correction has been a painfully slow and uncertain one as trading levels have been very hard to establish. Demand is strong but few are willing to buy when the market is in correction mode. In the end, replenishing orders have had to occur sooner than expected which has helped to prop up pricing and hence slow down the correction. As a result, the full market correction is taking a little longer than any of us want. Nonetheless, the housing market continues to chug along, sales are solid in our region, and from most reports, construction is slated to remain strong into January.  As is the normal practice at the end of every year, retailers run down their inventories in order to avoid a year-over-year growth tax and mills close between the holidays for retooling.  For December, we anticipate that pricing will be relatively stable with some corrections, and will likely conclude with a bump up at month’s end.

We have much to be grateful for, in that business has been incredibly strong for our industry this year (even if it has often led to the near breaking point for many of us). We’ve had extreme challenges dealing with unprecedented lead times, price hikes and dreaded quality-control issues. With the pace of business, the pressure of deadlines, and lack of skilled labor, no one in this industry can afford to have interruptions or delays, especially if you have subcontractors lined up, contracts to fulfill and, ultimately, a satisfied client you need to answer to. Unfortunately, with the increase of business comes the increase of wrong, defective, or damaged products and the inconvenience of any of these issues can be incalculable. Quality inspection is a very big part of our Receiving and Shipping departments. It’s a daily practice for them to refuse and quarantine product that they have deemed unacceptable. We consider our Receivers and Shippers the best in the industry (and many of our suppliers do as well), but it’s impossible for them to catch all issues. The otherwise small percentage of errors and quality defects we usually encounter has grown as manufacturers struggle with demand and an extremely shallow labor pool. As a safeguard (and in addition to our screening), we ask that you and your workers carefully inspect your products for defects prior to installing and/or finishing. We realize that sometimes a defect isn’t found until after a portion has been installed, so we want to impart to you that. If you or any of your crew notice anything that looks amiss at any stage, you stop and contact us immediately so that we can fix the problem. We can assure you that these situations get top priority and will not be ignored, as we try to mitigate all issues before they get bigger. We will literally drop everything in order to immediately address the issue and will act to replace or correct the product. Our ultimate goal is to deliver perfect product on time and in full. In the event that something arises, know that we are here for you and are committed to keeping you going with as little interruption as possible and to deliver upon your 100% satisfaction.

Although it’s been a rough year, it’s still a good one if we have our health and each other. We are truly grateful for the relationships we have with our customers and intend to earn your business upon every sale. We will never take it for granted. On behalf of all of us here at Shepley, we sincerely thank you for your past, present and future business and wish you a safe, healthy and happy holiday season!

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