October 2013 – Market Update

September lumber sales for New England outpaced most predictions and instilled confidence that this Fall is going to be a busy one. It became apparent that wholesalers and dealers had covered their needs well into October as sales were mostly to fill holes in inventories (and prompt shipments were few and far between). Nonetheless, mills were kept busy filling order files and working to bolster stock levels against a demand that they see building. China came back into the buying game, making an impact to stock levels. As noted in a recent issue of Random Lengths, North American softwood lumber exports to China reached 350 million board feet in July, the largest single-month volume since June 2011. China, which had remained relatively dormant in recent years, came back to take advantage of the deflated prices that bottomed out in July. As you may recall, first quarter 2013 had a monumental run-up of lumber pricing. By the time the second quarter arrived, it was realized (too late) that buyers were overzealous with their purchasing, causing a punishing inventory glut. Steady declines were seen from mid-April all the way through July, much to the surprise of everyone who participated in the frenzy just months before. As China bought in at the lower pricing, Western inventories quickly depleted which, in turn, has affected us here on the East Coast as it pressed a greater demand on Eastern stock. In any event, despite our own demand of lumber being moderate at best, the lack of Western stock has made Eastern wood more in demand and has kept prices propped up. As we get deeper into our second “building season” of the year, expectations are that our own demand will increase, which should continue to prop up (or to raise) prices.

As speculation in this industry can either make or break a profit, it’s crucial not to get too caught up in the unfolding market events that seemingly, in the heat of the moment, have a long lasting effect. Few have been successful in outsmarting the market more than once and, much like the stock market, the more that is risked the more reward or punishment one stands to incur. Inevitably, after the run ups and run downs, market pricing normalcy returns when equilibrium is found. For our part, we try to smooth out the peaks and valleys of market fluctuations and use averages as guideline, so that wild fluctuations can be kept to a minimum. We believe in the “steady as she goes” approach and, in doing so, feel that we are better able to stand behind our quotes for longer periods than other sources (who can be known to have some remarkably short quote expiration periods). In the end, this allows you to be as competitive as you can be with your bid without any surprises at the end of the job.

As of print, pricing is firm and expectations are that it will increase against a growing demand (for at least the short term).  We are well poised this season to meet your needs and encourage you to contact your Shepley sales person should you have any questions or concerns regarding your project. Thank you for your business!

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