Thinning inventories on both the retail and wholesale ends kept activity motoring along in September, but dealers mostly stuck to the sidelines, ordering fill-in stock and not much more. The drama that unfolded in August’s market (rail interruptions due to wildfires, rail lock outs, increased duties and lumber mill production retractions) had dissipated relatively quickly and had little net effect on overall pricing, except for 2x6 and 2x10, which remained particularly tight. On September 4th, Canfor (a major Canadian supplier of framing lumber) announced the closure of two of their facilities in Northern British Columbia, laying off approximately 500 employees and halting a startling 670 million board feet from Canada’s annual production. Citing increased regulatory complexity, high operating costs and an inability to reliably access economically viable lumber, it’s a devastating action from a renowned company that has been in operation for over 85 years. Canfor’s closures represent a significant 4.9% reduction in overall Canadian production but, relative to the current pace of sales and the availability of alternative wood (such as European “euro wood” and Southern Yellow Pine from the American south), there wasn’t a significant market reaction. Buyers continue to be cautious, opting for the deals that make sense for their needs and doing so with an elevated sense of comfort, as supplies and lead times, although thinning and growing from where they were just a few short weeks ago, are still more favorable to buyers than sellers. Some positive news announced mid-month (reduced interest rates, moderating inflation, an increase in housing starts (up 9.6%) and building permits (up 4.9%) in August) has given the industry a boost of confidence that the fall may be better than previously expected. Whether or not October brings a shift to the current supply-demand balance remains to be seen but, for now, the market is holding steady. We anticipate that prices will remain firm over the next 30 days, with the relative chance that a pop in business for replenishment may inch them forward as the month progresses.
It has now been over four and a half years since the pandemic struck and taught us all a little something about anxiety and how to react, manage and eventually quell it. With that in mind, there appears to be an old and a new way of reacting to market conditions as, throughout those years when we couldn’t get what we wanted unless we paid through the nose or waited months for it (and often did both), we learned to make our best attempt to resolve the issue and then to live with whatever we were up against. As the lumber industry has been recently barraged with supply, transportation and cost issues, the reaction has been notably different: these kinds of events, in the past, would easily spur wild reactions, setting the market alight. For the sake of this industry, we need to show more restraint to help keep volatility to a minimum, for the sake of our contractor customers and, ultimately, our homebuyers. With all the uncertainty that surrounds buying a new home, it is nerve-wracking enough stepping into the quagmire of bill-writing, contract authorizations, decision-making and signoffs without having to worry about lumber prices. Nonetheless, there are plenty of lumber suppliers that like to capitalize on news events and are prone to immediately changing their pricing or shortening quote terms due to potential volatility issues, even if they haven’t quite yet manifested, let alone impacted their profitability. This is one area that we have never wavered from: we abhor price volatility and have always actively worked against it by clipping the peaks out of highs and lows. We choose instead to instill stability in pricing so that budgets don’t suffer wild swings, affecting your profitability or punting the humble homebuyer out of the homeownership arena. This has been our commitment to you for over 46 years and, despite what may occur in the market, we assure you that we will always work in your best interest.
As lumber is a commodity, there will be times when price fluctuations are swift, but you have our assurance that we are committed to keeping the pricing of not only our lumber, but all our stock as stable as possible so that you can plan accordingly. No surprises: that’s what you get when you are a Shepley customer. We recognize that our success depends upon yours, so we support you in every facet that we can when it comes to providing high quality, competitively priced building materials when you need them. Thank you for your business!