November 2013-Market Update

October lumber sales were relatively modest across most of New England, quelling some of the optimism that Fall 2013 would be a busy building season. Federal government budget issues notwithstanding, few ended up taking positions against the market as the direction of both supply and demand continued to be a conundrum that was difficult to interpret. Buying was sporadic and was mostly generated to fill holes in inventories or to take advantage of deals. Although pricing had escalated and remained firm well into October, cracks were developing as buyers remained conservative and mills wanted to move stock. As we head into November, unless a spike in business suddenly materializes, pricing is expected to come off until winter shut downs are announced.

From the supply side, many lumber traders and wholesalers try to stimulate business by offering below-market deals as they are concerned about having inventory on the ground in excess of 30, 60 or 90 days. In addition to the swings of the market value of lumber, a lack of turns can also quickly cut away any hope for a profit as carrying costs can equate to a 1% net profit margin loss per 30 day period. In the single digit profit margin world of lumber commodities, this erosion is not one that today’s traders, wholesalers and dealers can easily absorb. As a result, their efforts shift to aggressively selling off their lumber inventories, and oftentimes at below market values. Of course, this is a temporary solution and inventories will need to be replenished. As we head into the winter season and with business being subdued, supply will undoubtedly tighten as mills will produce less for the market. An irony to the moving of this lumber inventory is the ongoing shortage of trucks and drivers that do the moving. Orders are not invoiced until they are loaded, and most loads are constantly late because “there isn’t a truck to put under it”.  In some cases, truckers will commit and then fail to take loads for the chance to take a higher paying charge, leaving the supplier high and dry. For this time of year, we’ll soon be competing against Christmas Trees for our lumber deliveries which could create an interesting market if demand does kick in (as prompt deliveries will surely be hard to obtain). For those yards that have run down their stock, replenishing swiftly may become quite a challenge.

Despite the national economic issues we face and the impact that it has on us locally, we are glad to report that our business is strong. Through our efforts in establishing relationships and applying our industry know-how, we are well stocked with competitively priced, quality materials for your next project and remain dedicated to your success. As always, we appreciate and thank you for your business!

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