Much to the dismay of most suppliers (and despite finally having favorable weather), the lumber market failed to meet expectations in June. Mills and traders alike made aggressive overtures to sell down their inventories, but potential buyers remained conservative with their purchases. As the month wore on, inventories at the wholesale end continued to mount while retailers either cherry-picked or were indifferent to offers. Although wholesalers were adamant that the retail sector was “underbought” due to the lack of sales, it was evident that most dealers had ample inventory, or at least enough to remain unconcerned about obtaining more. With little occurring on either side to move the needle, prices have been flat but are also low when compared to historical standards. On paper, it’s a great time to buy: the market is unlikely to soften any further as mills (whose profits are suffering) are beginning to implement curtailments and extend shutdowns to curb expenses. As most mills were already planning to close for a week (standard protocol for retooling this time of year), the lack of a bounce in June was a distinct disappointment as pulling production out of the system for any period normally excites the market.
Nonetheless, if you don’t need it, you don’t need it and, on that premise, it became clear that buyers had had ample supply which, undoubtedly, was caused not only by a lack of outtake but also from purchases made upon previous weeks’ claims that the market had “bottomed”. Traders are a little tired of sounding like a broken record, but need to keep their sales up so they continue to caution buyers that this “can’t last for long and it is best to buy now, while prices are low.” Even though we know that to be true, there still seems to be little concern over it as high housing prices, interest rates and inflation continue to play a significantly negative role in American consumers’ budgets and psyches. With little occurring to rock it out of its rut, it seems unlikely that much is going to change the market before the fall season, but one never knows. As of print, prices remain flat, but more mills are announcing cutbacks, so it is likely that prices will remain in a holding pattern or slightly escalate as we move through July.
This industry gets in to trouble when purchasing agents either try to outfox the market or are startled by what they are hearing and freely dispense purchase orders, as fears of missing the lowest price or paying the highest price are always top of mind for commodity buyers. As traders are the “sages of the market” but are always on the hunt for orders, they’ll never tell you when not to buy but often tout the virtues of buying now due to either low costs or scarce supplies. A buyer must be discerning in what advice they follow and make rational, not emotional, decisions, which at times can be difficult when they rely upon the relationships they’ve established. Nonetheless, some traders dole out some disturbing advice, such as this gem from an industry veteran to “buy it if you need it, buy it if you don’t need it, buy it if you don’t stock it”. There may have been a time when strategies employed by studying historical data would have held a greater value but, in today’s intensely competitive global market, situations can change at a moment’s notice which, in turn, can have a profound impact on your project if you are looking too far ahead.
It’s best to buy what you need at a time that gives you enough room to ensure that you have it on hand when you need it but, more importantly, to buy from the suppliers that you can trust: they are the ones that aren’t looking to capitalize through fear tactics but rather to stand by and support you when the going gets rough or if the future appears murky. To clarify, there are many excellent dealers in our industry, but some make a sport of employing tactics such as arbitrarily distributing notices of impending price increases that you are expected to fully absorb, reducing quote expiration periods in a rising market, surreptitiously adding surcharges to bottom lines, selling framing that incorporates descriptions of wildly varying wood species in the same line item and, last but not least, inaccurate quotes that purposely omit critical items required for a complete job, in an effort to appear less expensive. Sadly, these examples are used more commonly than one would expect and have a profoundly negative effect upon all our livelihoods. 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. Although others may dole out questionable advice and employ different tactics to make a sale, we choose to do the right thing by remaining honest and trustworthy for the long term. We do this not only because we value our customers’ well-being, but also, at our core, it is who we are.
For us, business has been great and, while we can enjoy the stability and low prices that we are currently seeing in the lumber market, we know that nothing lasts forever. Until the next event occurs that may affect prices and supply, let’s enjoy the timing of this flat market as it coincides with the best time to relax and enjoy Cape Cod. We wish you all the best that this summer season can bring to you and sincerely thank you for your business!