Lumber Update – November 2020 | Shepley Wood Products
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Lumber Update – November 2020

It’s been a long and grueling haul, but finally the lumber market is retreating. By mid-October, it became clear that the record run up (five months strong and with an unprecedented Random Length Framing Composite of $955) had crested and dashed the predictions of many market forecasters who thought that it would continue through the New Year. With the wind taken out of the mills’ sails, it became a buyer’s market but, despite that, no one was buying anything at all unless they knew that they absolutely needed it as, even with the retraction, prices were still sky-high and a long, long way from what could be considered bottom. However, in this year and with all of its unpredictability, what can be considered “bottom”? That’s the $100,000 dollar question as, although we are far from it, the industry is accustomed to paying prices that are more than half of what the market peaked out at. How far and how fast the market will drop will depend upon how much buying is being curbed. It may be sooner than later though, as much of the material bought weeks, even months ago has finally been arriving in dealer and distributor’s yards. Although it’s selling at a moderate pace, it’s slowly being replenished with prompt trucks at far lower prices. The market correction is also dependent upon home sales and the pace of construction, which is relying upon favorable weather, engaged and reinstated laborers, and buyers who have the budget (and desire) to accommodate these still ridiculous prices. As it turns out, more and more contractors have chosen to sit on the sidelines, waiting the retraction out and lumber buyers are doing the same, knowing that they have a debt to their customers to show constraint and force the market back to reason by withholding their purchases. The buyers who are living hand-to-mouth (with the goal of not buying a single stick more than they have to until the falling numbers stabilize) are also dealing with mills who are trying to fire-sale what they can while the numbers are still high, in order to gain their best return. For better or worse, business has been strong enough that lumber buyers have had to cave in and buy material to cover some of their immediate needs which has, so far, decelerated the correction. Unless some extreme event occurs, we are confident that five months of increases won’t be corrected overnight but, for November, we are optimistic that prices will continue to erode, predicated upon a healthy demand but an even healthier supply.

It’s said that “timing is everything”, that the success of something is often related to when it happens. “When”, in this industry, can be a very, very relative term as we all know how schedules can get blown up due to a myriad of reasons (weather delays, subcontractor schedules, project issues, and product lead times), but it’s rarely delayed because of pricing. It is not uncommon for us to be granted with an order for a house start that needs to be delivered the day the call comes in, as timing is everything. When it has to be done, it has to get done. Other times, you may have the luxury to wait so, when you consider all the circumstances, taking no action is actually the best option. We first saw this a few months ago when the market was rocketing up to limits unknown, and contractors from other areas of the country either could not or would not stand for it. They determined that it was in their better interest to sideline the project until the market corrected rather than blow up their budgets with the exorbitant cost of lumber. Although the housing market is booming and there is clearly reason to strike while the iron is hot, it is also clear that when situations reach a frenzied state and rationality gets thrown aside, it’s time to put on the brakes and reassess the situation. Although it may be contradictory for a lumber supplier to support postponing job starts, we respect and applaud the contractors who were able to do just that. We believe that business should not be rewarded to the companies that instill fear and uncertainty in a purchase. It should be rewarded to the companies that stand behind their customers and make every effort to take the sting out of a bad situation. If there is one thing that we could do to learn from this latest marathon-rally, it’s to understand that, collectively, we do have a say in an outcome. We are the customers, the driving force of what makes suppliers succeed or fail, or markets rise and fall. If we are suddenly put in a gross position, we need to register our economic vote by looking at our options and weighing out what we can do in protest and, sometimes, doing nothing is the loudest and most effective protest of all.

Our challenge is to keep the momentum going by putting the pressure on our industry to keep costs in check, to avoid budget-cutting or, even worse, discourage building. We work tirelessly to address and question every price increase that comes our way, and know that it’s our duty to you to do just that. In addition, we clip out the peaks on costs and honor our quotes for 30 days so that there is a lesser impact on your project. If you have any questions or concerns regarding the effect the market may have on your current or future projects, please do not hesitate to contact your Shepley sales person. Thank you for your business!