Lumber Market Report-August | Shepley Wood Products
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Lumber Market Report-August

Since the 4th of July holiday, the market has been steady but strangely subdued, with prices climbing based upon a tightening supply rather than a strong demand.

With impending, extended seasonal mill shut-downs, Canadian wildfire threats and reports of positive home building stats, the market became more active than it had been in months and prices appeared to be on an aggressive north-bound trajectory for the foreseeable future. However, sales were not as robust as many traders anticipated as dealers remained conservative, only ordering enough stock to ride out the shutdowns and with much of it coming out of local distribution. Seasonal factors weighed heavily on consumption as well, not the least of which has been unusually heavy rainfall and oppressive heat. How well dealers have covered their needs remains to be seen, but from most reports the mills aren’t clutching a hoard of orders to fill upon their return to production and dealers appear to be confident with what they have. Nonetheless, it isn’t uncommon for any significant demand to return until September, when dealers typically buy for their fall needs. It should be noted that with the plywood sector, prices are tightening up as well, with coastal buyers in particular carefully monitoring their levels and ready to react should this “hurricane season” bring the need forth. For now, dealers are digesting their lumber troves, conservatively buying whatever they may need to stretch their inventories while knowing that the mills will be coming back on-line in a few short weeks. As of print (and despite a middling demand), prices are unwavering and modestly climbing as the tightened supply has given mills the upper hand. We anticipate that they will continue to do so throughout the month of August, as it takes time for the mills to come back to full production and work through whatever order files they have to produce lumber for the open market.

Whether it’s feast or famine, there never seems to be a time when you have too much of a good thing or too little of a bad one. With that in mind, there is a lot of “feast” we are now experiencing post-pandemic, as it relates to building products. When “famine” ruled supreme during the pandemic, in order to survive we all had to adjust our strategies by changing to different products, brands or suppliers and all the while absorbing ridiculous costs. We also had to plan farther ahead than we had ever hoped that we would have had to do. Some products still haven’t recovered (white cedar shingles, anyone?), but most have. Unfortunately, some suppliers had to close their businesses while others were sold off as the principals were simply crushed under the weight of all the chaos that was going on. Some prices have also adjusted (incredibly, lumber was more than three times today’s costs at the peak of the pandemic) while others have not, but we’re working on that by putting pressure on our suppliers. Finally, lead times are, for the most part, back to normal. However, unlike products, suppliers and costs, the correction and re-adjustment to current lead times hasn’t been fully appreciated yet because they are intangible. The pandemic disciplined many dealers and contractors in planning well in advance and ordering material long before it was truly needed, in order for it to be ready when they needed it. However, the pendulum has swung too far in the other direction now as, with ample supply, labor and drivers, many orders are shipping in record time and then sitting idle in warehouses and yards far in advance of when they are truly needed. Big deal: we are getting orders early and we are complaining about that? Well, yes, because when the supply end starts to flow too fast and customers are ordering their orders too far in advance, we lose key opportunities. First and foremost would be the opportunity to make order changes or cancellations (a very frequent occurrence in this business), which is a terrible luxury to lose. With a correction back to normal business levels, there is also the risk of missing out on potential price reductions. In addition, the window of opportunity to return an item closes if too much time has passed between the date of receipt and the date of the requested return. In extreme cases, even the warranty can expire before the item has even been shipped or installed, if it was ordered too far in advance of the need date. The “simple” fix is one that we have been actively practicing in order to protect us both from these scenarios: clear communication of the need dates of orders. Not that anyone is looking for an exact date, but a stated “need week of” is ideal. It’s ingrained in our salespeople to provide a lead time on all quotes and orders. In turn, they request an approximate need date from you that is used as a target date for the material to arrive at Shepley. With the benefit of knowing your approximate need date, we can better manage the arrival of your order so that it is ready when you actually need it and not forfeit valuable attributes that surround your purchase.

So as “no good deed goes unpunished” we do sincerely thank all of our customers who work to provide us with their most accurate need dates. We know that you are often up against the wall when it comes to knowing exactly when your project will start (as our industry is fraught with delays and interruptions), but we do appreciate your best effort in giving us an approximation. Thank you for your business!