A seasonal fade in demand cooled the lumber market last month, which gave mills some much needed time to rebuild depleted stock, a challenge that they have been under since early October. By most accounts, sales were good, but most dealers had obtained enough general inventory to cover their needs throughout the holidays and instead turned to distributors for any fill-in stock. The resulting challenge fell upon wholesalers, who frequently ran out or low of items which often left retailers making multiple calls, scrambling to find what they needed before it disappeared. This behavior lent a false read of how busy the local market really was but, nonetheless, wholesalers enjoyed the activity as it gave their sales a boost, especially for those who capitalized on the items that they could easily sell above normal market prices. Overall, it’s very common for things to quiet down in advance of the holidays and many dealers can appreciate the respite as they prepare for year-end inventories. Few are looking to add to their inventories as they don’t want to count any more products than they need to, but also because many must make an aggressive attempt to pare down their inventories to avoid a tax penalty, which is based upon a year-over-year growth in value. This last goal is a little trickier this year as many dealers report that they have more inventory than they would normally carry at this time (a common occurrence after a rally, as there is always a backwash of stock once demand peters out) and because lumber prices have increased year over year. On that topic, the Random Lengths Framing Composite settled at $440/m mid-month whereas, one year ago, it was at $$379, a 14% increase year over year. Although prices have only recently been softening, the wood that is being calculated for value that sits in lumber yards today (and likely to be on hand at the turn of the new year) is higher-priced stock, much to the dismay of lumber buyers and corporate accountants alike. Nonetheless, buyers may get their vindication as prices are firming (as they always do after the New Year) because most mills shut down for the holidays. There is great optimism that 2025 will start off strong and, unless adverse weather plays a heavy hand in interrupting logistics, we anticipate that pricing in January will hold firm and likely tick upward as the month progresses.
The Random Lengths Framing Lumber Composite is an index that follows the price behavior of framing lumber in the United States. The definition of what is (and of what we commonly call the “Composite” for short) is just that: an assembly of 15 key framing lumber prices from varying species and regions that is used to track the general pricing of lumber, packaged into one neat number, represented in U.S. dollars and by the thousand board foot (IE: $440/m). Like most indices, it’s geared toward identifying trends on a massive scale, not necessarily what may be specifically going on in pockets such as New England, but what has or may soon occur as our industry procures material from far and near. Random Lengths also publishes pricing by region and dimension, which is used as a general guide for specific price movement. As what happens in one market often affects another, it’s a good reference to use to help identify emerging trends. On a more local level, prices can become greatly skewed based upon demand or lack of availability (as recently seen with dealers’ fill-in orders from wholesalers), and actual replacement costs can far exceed the published price…and yet very rarely sell for below it. The challenge lumber buyers have is to follow the trends and try to get ahead of any shortages before they occur and without using too heavy a hand in ordering. As the Random Lengths Lumber Price Guide is the chief publication that all lumber buyers use to gauge costs, it truly cannot be used exclusively as you must pay attention to what is currently occurring closer to home and then compare that against the published price. This is where you can really see where trends are developing, as real-time prices are far more accurate than the published price, especially when the full report is published once a week, with an abbreviated mid-week print. By the time that you identify trends from the publication, it’s last week’s news (or older) and many factors suddenly occur that tip the market, such as weather events, unanticipated mill closures (we’ve seen them all, equipment failures, fires, hunting season, sick-outs), logistical issues (such as port and rail strikes) and more. So, while the guide is a guide, it’s not the rule and we recently experienced it firsthand with the nearly vertical trajectory of 2x6 and some other dimensions during the height of this latest rally. Although we can’t control the events, we can control the effect they have on our customers so, when they do occur (and knowing that what goes up must come down), we work with our own “composite” based upon what we have on hand, on order and intend to buy. It’s this way that we can clip the peaks out of price spikes, stabilizing our pricing (instead of reactively adjusting it every single week, like so many others do) and be able to honor our quotes for thirty days.
There’s an inherent value in doing business with companies that put their customers first. We understand that customers need advocates in the supply chain and that our role, as a leader in the supply of building materials to contractors for over 46 years, is to not make our problem your problem. When there is volatility or disruption in the industry, we feel that we’ve done our job well when it hasn’t affected yours. We thank you for your past, present and future business and wish you all a very happy, healthy and prosperous New Year!