Lumber Market Update- July 2019 | Shepley Wood Products
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Lumber Market Update- July 2019

The languishing market seemed to come to an end mid-month, as a rally spurred by additional mill curtailments and closures created what appears to be a bottom for a market that had been in decline for months. Up until the rally, it was confounding to the mills and traders that lumber dealers weren’t actively replenishing for near term needs, especially after a busy spring and with the added bonus of a favorable turnaround in weather conditions. However, demand was steady (but not robust) and supply remained more than ample, so there had been no opportunity to raise prices, only to gratefully accept an order when it was offered. This latest rally (which was spurred by Canfor’s announcement of a 200 million board foot curtailment) caught the attention of enough buyers to consider and/or take action, but it still didn’t spark the sales that were anticipated. Even with this pop of business, prices still paled to where they were one year ago, when record highs were the norm and there was seemingly no end in sight. Nonetheless, we can’t lose context of why prices have been off this year (and theories as to why run the gamut), but a few of the notable ones are that the labor shortage has regulated production, a mild winter cheated business away from the spring, the new tax laws (with their reduced returns) pulled spending money out of homeowner’s budgets, Euro wood has been more desirable than Canadian (as it is not impacted by the Softwood Lumber Duties and therefore more affordable), the rising cost of real estate has set future homeowners on the sidelines and, finally, that last year’s market volatility (and the industry’s fear-mongering coverage of the same) had finally made lumber buyers deaf to the hype. All of these factors have had an impact to more or less of an extent, but the simple fact is that there has been more wood available than is currently needed. Now, with production being limited through curtailments and normally scheduled summer shut downs, prices have a chance to rebound. However, we must err on the side of caution as surely the reasons listed above have had some part in reduced sales, and there is always a ripple-effect of activity for a period after an announcement that is often not sustained. We are watching the situation closely and have positioned ourselves against any volatility, but, as of print, prices have slightly rebounded and will likely pull through in to July, with the potential for a run up if a surge in demand occurs. We experienced this to a greater extent during our last recession, but the hunger for business for survival’s sake often supersedes good intentions, so lumber mills will sometimes look for ways to shave their expenses and hope that it goes unnoticed by their customers. When this occurs, we’ll see quality drift away from the standard expectation, and often with material from suppliers who are normally quite reliable. Particularly when it comes to checking and maintaining our quality standards with lumber, we rely upon the feedback of our Receivers, Order Pickers, Drivers and, most especially, you, our customer. As the saying goes, “you get what you inspect, not what you expect”. The folks who are in constant contact with the material are the best judges of what is acceptable and what is not. With the unprofitability that mills are facing with today’s lumber market, many are tempted to seek a higher margin by incorporating a larger percentage of what appear to be off-grade products in their units. When compared to other pieces in the unit, these opposing ones can look like the anomaly and clearly be off-grade. However, it is often not the case when consulting the grade specifications of the NLGA (National Lumber Grades Authority), who states that “the grading of lumber cannot be considered an exact science because it is based on a visual inspection of each piece and the judgment of the grader and/or on the results of a method of mechanically determining the strength characteristics of structural lumber.” In a nutshell, there will be pieces in a unit that look questionable but will still “make the grade” (at least according to its grade stamp). This is typically common knowledge as construction anticipates cull in just about every facet and typically makes the most of it (usually blocking). We generally don’t have problems in this area (as the mills we choose to buy from know that we scrutinize our lumber for quality), but our best defense is our Order Pickers, who are well-trained to identify problem stock and will set it aside so that it doesn’t become your problem. Barring that first line of defense, you have our assurance that, if something slips through, we will address it immediately. It is our collective goal to provide you with the best product at a competitive price and we appreciate any feedback that you have to give to us (both positive and negative) as we value your opinion and will use it to improve upon our quality and service to you. We know that construction isn’t an easy business. Complications arise from all angles and, with deadlines and labor to account for, you simply don’t have time to spare. However, do not hesitate to contact us should you have an issue in the field with one of our products or conversely, if there is something that you particularly liked that helped you get your job done to your satisfaction. We promise to act swiftly in either case, in our best effort to please you. Thank you for your business!

Paul Rogers, Purchasing Manager