May 2015 – Market Update

By Paul Rogers,

Lackluster sales continued to plague the market well into April and most dealers and wholesalers, who had anticipated a bullish Spring, suffered with inflated inventory levels. Deals were rampant as the market softened, but as weeks continued on with fewer sales, better, more aggressive deals were offered by traders who had committed to block-buys and were desperate to move inventory. Dealers eventually needed to replenish, so outtake finally stopped the market free fall. However, it was too late and the first quarter of 2015 ended up being a bad one (even despite a strong January). According to Random Lengths, the first quarter of this year had the worst market slide since the inception of their database in back in 1995. Typically (and not including the years of the Great Recession), the first quarter is relatively firm and remains so up until the time purchasing begins for Spring consumption. New England can attribute much of our poor sales to the bad weather, but other factors contributed to the back-slide as well: port strikes on the West Coast created a backlog of containers on both coasts (which kept a constraint on commerce and created numerous late shipments), the strengthening U.S. dollar encouraged more imports and fewer exports and, finally, exports to the Asian market (particularly, China) declined.  It’s likely to take some time for the market to see any significant change in pricing as dealers and distributors alike need to work off the inventory that they accumulated during the slow period. In the meantime, mills are holding firm on pricing (they generally haven’t over-produced), order files are good and the anticipation of near-future business has them regulating production.  Until replenishing in quantity occurs, we can expect pricing to be flat for the foreseeable future.

A few months ago, the market was bullish, but the reaction to buy while the market was in the tank left those in the supply chain heavy on inventory. Now that the outtake hasn’t fully materialized, the first line of defense to improve sales is to drop prices. Price is driven by the market, but several other factors that affect quality (such as specie, mill, grade and tally) play very heavily into pricing. When comparing products, it’s critical to be certain that you are quoting apples to apples, as apples to oranges cannot possibly allow you to make the educated decision that you need to make for your purchase; you don’t want any surprises on the job that may stop progress and force you to channel your efforts into sourcing replacement stock. The best deals don’t forfeit quality, so don’t be led by the price tag but rather by the whole package: a poor yield will seldom make up for a bargain price. To better regulate the quality of most of the lumber we sell, we buy from mills that do not pull out their finest pieces (known as “Premium”). These “NPS” mills (No Prior Select) will leave their Premium pieces in as part of their #2&BTR production, so units will not, essentially, be culled over. However, we also do buy Premium products where it’s critical to do so (such as for our studs, as it’s the best assurance of maintaining straight walls). In every case, we shop and buy better quality products because we recognize the value beyond just the price.

It can be a complicated process deciphering dealer’s quotes and understanding the available products in the marketplace, but please allow us to help you understand what is being quoted and how it compares. We are confident that the quality products and competitive prices that we have to offer on all of our building materials will be to your satisfaction. Please be sure to let us help you with your next project, and thank you for your business!

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