September24

Lumber Update – October 2020

By Paul Rogers

With what can only be considered an exhausting, frustrating, and completely off-the-hook rally, the lumber, plywood, and pressure treated markets finally appear to be relaxing. Cracks first appeared in early September, when the futures market took a dip and material (that had been ordered months prior to its arrival) started rolling in to distributor and dealer yards. The arrival of stock took some pressure off of buyers, who had been frenetically ordering material from anyone and at any price for weeks, not knowing when the escalating prices and lead times were going to end. As purchase order books were put away, the market broke its record pace but still carried strength throughout the month as available inventory remained dangerously thin, especially due to logging interruptions caused by wildfires on the West Coast. As of print, it’s still somewhat of a battlefield in the market, with no clear winners except the mills, who have order files at rally-pricing well into early November. Distributors and dealers, although taking a pause on buying, are shell-shocked and aren’t likely to believe that the rally is really over until prices come off more and lead times get back to normal. However, make no mistake in thinking that they aren’t also losing sleep about selling off the high-priced material that they had been so yearning for before the market corrects and takes their lumber values with it. The market is still considered unstable (as new floor prices need to be discovered while supply and demand weigh each other out), but the general consensus is that prices will be firm for October. Please keep in close touch with your Shepley sales person for the latest developing trends and how they may affect your projects.

The NAHB (National Association of Home Builders) recently posted an article speaking to how this rally has impacted the cost of home-building: “Since mid-April 2020, lumber costs for the average single-family home have climbed more than 130%. According to the NAHB analysis, this has resulted in an increase of more than $16,000 in the price of a new single-family home; the average cost increase for a new multifamily unit is approximately $6,107. These sharp increases threaten the affordability of new homes and the housing sector, which is leading the nation’s economic recovery.”  Some contractors in other areas of the country have already reacted by putting projects on hiatus, waiting for the market to return to more normal levels. As if the high cost of lumber wasn’t bad enough to deal with, some suppliers have made doing business even more difficult by abruptly changing payment terms, not honoring quotes (or slashing their quote-term periods to mere days), halting credit pick-ups or making all sales final.  In some cases, the high cost of lumber has forced good contractors to exceed their credit limits and seek alternate suppliers. We believe that a supplier’s job is to find a way to make business easier for their customers (especially in times of turmoil), but it’s shocking how many have set up road blocks instead. This rally-of-all-rallies has been a test of these relationships and there is no doubt that, while some will remain loyal to the suppliers who took care of them through this mess, there are others that will be making changes for 2021. We feel that a supplier should always be looking at situations from their customer’s point of view, as times like these aren’t when you change the terms of business, it’s when you stand by them. What goes up, must come down and as this unprecedented rally runs its course, undoubtedly there will be more hurdles to overcome but we will carry on as we always do, protecting our valued customers from these disruptions while bringing normalcy and consistency to our everyday business. In kind, we will remember the suppliers who supported us as well, and will surely reward them with our future business.

Bruce Rauner (businessman, philanthropist and politician) is credited with saying “Success is all about persistence and doing the right thing for the long term” and we are sincere believers in that philosophy. When things get hairy, some people will change the rules of the game. However, we choose to do the right thing by having the integrity to keep business as normal as possible for you for the long term, because we want to be part of your success. Thank you for choosing to do business with us and know that we never take your patronage for granted.

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