Kozels Commentary

Tuesday, July 20th:

The dimension and stud market experienced another quiet week.  The dimension market continued to trend slightly higher as buyers continued to replenish inventories, and coupled with seasonal and market related cutbacks kept the tone firm.  Most buyers are not too inclined to buy more than what is needed, as most feel demand is not apt to get much stronger in the near future

The stud market was very similar to dimension lumber.  Early in the week stud prices gained as orders came in, but by the end of the week things had quieted down leaving studs just above where they started the week.  There seems to be ample supply at this time, unless there is an unexpected increase in construction, it would appear curtailments and closings will need to happen to see prices go much higher.

The panel markets were both uneventful the past week.  The biggest difference was OSB continues to show potential for additional weakness, whereas fir plywood there are thin enough inventories, that most buyers do not fear much downsize risk.  So far the fir mills have been content to extend order prices rather than raise prices.  If mills are able to extend files we could see some price increases follow.  This now makes 5 weeks straight with very little activity,

Housing numbers nationwide continue to be pretty dismal, and improvement seems to be down the road.  We can feel fortunate that we are in an area of the country where remodel and new construction does continue.

Tuesday, June 29th:

What goes up must come down!  The lumber and panel markets are certainly adhering to that motto.  It took lumber prices 15 weeks to go from the bottom to the top, which was about a 50% jump in prices, now in just 8 weeks we are back to where we were at the beginning of the year.  Most of the national news has been negative in relationship to housing starts, so it would appear that it will be difficult for material prices to get much footing to go higher.  This trend of large run up in prices and then quick pullbacks over all are unhealthy for the industry.  Log prices have gone up significantly, and with these lower prices, it is almost certain that we will see some mills permanently close their doors.  Less competition will ultimately lead the volatility continuing in the market place.  It will just take time to get the housing market back to growing again.  We can feel very fortunate that we are in Sioux Falls, SD, and not some of the other metropolitan areas.  Housing values have held up pretty good, so our recovery should come quicker and be stronger.

The panel market has had much the same scenario as the lumber market, with the exception that panels jumped 73% and have only backtracked around 50%.  That is due to less competition in the panel arena.  Most production in both OSB and plywood in controlled by a few large producers.  It looks like panels have reached the bottom or very near to it.  We should see some stabilization for the near term..

Other items to be aware of, is fiberglass insulation up 20%.  Pricing on roofing products have stayed pretty stable, but recent price increases will find their way into the market place at some time.  We will see around a 10% when the full effect is felt.

Sorry for missing a few weeks.  I will try to be more consistent.  Have a Happy and safe 4th of July.

Monday, May 17th:

The dimension and stud market continued on a downward move again this week, although studs were not quite as volatile as dimension lumber was.  Both were double digit down, with 2 x 4 & 2 x 6 giving up 20 dollars per “M” and studs dropping 13 – 15 dollars.  Most traders are pretty cautious in near term, as there appears to be ample wood in reload centers to feed the immediate needs for the market, and the other deterrent is how much material the Canadians will ship across the border in June when their tax goes off.  It’s hard to imagine that they will flood the market with material, as the tax would return again if the Random Lengths composite average would go down.  There is just enough uncertainty that should balance the market.

Panels were a little big of a surprise.  Fir plywood was flat for the second week in row, although the mills are pretty nervous as to the direction which is most likely down.  The big surprise was 7/16 OSB and ¾ T & G both dropping 20 dollars per “M”.  That would mean that OSB mills didn’t have the order files they were boasting, or they are trying to find buyers to extend their files out another week or two.  This market had a huge run up  going up 72% from the bottom to the top.  It would look like there will be more weakness in coming weeks.  We will just have to see if it is a sharp decline or an orderly one.

Please let your salesperson know if you have projects coming up that need to be covered as there will definitely be buying opportunities in the coming weeks.

Wednesday, May 12th:

The lumber market finally took a breath after multiple weeks of going higher.  Both dimension and studs drifted lower this week.  It still looks like there will be more to go.  There are several factors working against each other, and remains to be seen what will win out.  Starting in June, both Alberta and British Columbia can start shipping into the US without and tax or quotas.  This is part of the lumber agreement with the US that sets a tax at certain levels and then removes it as the market goes higher.  If the Canadians ship excess material that will put pressure on pricing, more logs should be available by June, so again the opportunity for mills to produce more material.  The wild card to keep prices up would be inventory quantities in the market place and how much usage will be needed going forward.  Early news stories seem to show that housing could slow nation wide without the stimulus money.  We will have to see how that plays out over the couple of months.  Low interest rates could be a factor to encourage more building.  There are a lot of different forces in play.

Panels have leveled out from their steady climb, but have not started to go down yet.  Mills still have order files out to late Mary or early June, so they are content to wait for buyers to come to market.  We will monitor this market closely as it has had quite a run up and we don’t want to get caught on the wrong side if there should be a sizable drop.  Most likely the drop will be sharp and short. 

Let your salesmen know of upcoming projects so we are positioned to buy when the market looks favorable.

Monday, May 3rd:

 The lumber market took a much needed pause this past week.  Dimension and studs were both flat for the week.  Mills still have order files that stretch out till late May, so they are content to hold prices at current levels.  Wholesalers and distributors that have material have been the main sellers of wood.  Most buyers seem to think we will see a decline in the coming weeks, but log shortages are real and it could be June or July before we see enough of a production increase to affect the market to the downside.  Inventories are still pretty lean, so any drop in prices will probably be short lived.

Panels continue to show strength with both plywood and osb jumping double digits again this week.  Osb mills have order files into June, so they clearly have the upper hand.  Buying has slowed so we could at least see this market level out in the near future.  Osb and plywood have moved so much so fast that the fall could be just as spectacular when production exceeds usage, and that is likely to happen as the greed factor sets in.  It may take several more weeks for the volatility to come out of this market.

Other prices continue to go up as well, with all shingles companies announcing increases as well as James Hardie siding, and drywall.  It seems that nobody wants to be left out.  Keep in touch with your salesman for current developments.

Monday, April 19th:

Both the lumber market and panel market continue to move full speed again this week.  The lumber market continued to follow the pattern it set a few weeks back.  Early in the week buying is at a minimum, but by mid week purchases pick up enough to extend order files and allows the mills to push the prices higher.  The market is still being controlled by lack of supply, and until production picks up this will continue on the same path.  There are several factors that contribute to this.  Most supplies and wholesalers didn’t see this market move coming, so many are still on the sidelines waiting for a pullback, and that leads to buying just enough to get by, which feeds the market on a weekly basis.  Exports continue to go to places like China and Japan, which also leads to the log shortages we see, and just the mills unwillingness to ramp up production, until they feel that these prices have a chance to hold.  The prevailing thought seems to be July before we will see production increases.  For the time being expect prices to continue on it’s upward direction.

Panels continue to be the big story.  7/16 OSB jumped double digits for the 4th straight week, and ¾ T & G for the 5th straight week.  Again this week the move was steep with 7/16 up another 35 dollars per “M” and ¾ T & G another 45.  Fir plywood was not much different as ½: jumped 26 and ¾ T & G another 15.  The buying in the panel market was described as panic buying.  If that is the case we might at least be at the end of the large moves each week.  Order files are now into June, so I wouldn’t anticipate any kind of a pullback for sometime.  As is the case in the dimension market, expect panels to continue its steady climb.

Monday, April 12th:

I could just re copy last weeks comments or the week before, as all markets continued their steady climb upward.  Studs and dimension were both very active increasing anywhere from 9 to 20 dollars per “M”.  For the second week in a row the move in lumber was pale in comparison to the panel markets.  Both plywood and OSB had increases of 20 – 40 dollars per “M”.  Osb again led the way with 7/16 going up 30 dollars and ¾ T & G up another 40.  That is in addition to 50 last week.  That would be a 20% move in just 2 weeks.  Production continues to lag orders.  Order files are out to mid May or beyond.  With these types of order files, there really is no incentive to take less for your product.

Many people are asking “where is all this material going?”  There are a couple answers to this question.  Exports have been a large factor in the recent upward swing.  Imports to China were up 123% in 2009 from Canada, and 72% from the US.  Most of the product going overseas is low grade, but higher grade stock is improving also.  The other factor is our own markets may just be stronger than what most people believe.

In talking with several buyers, it appears this market will stay active well into June and possibly July before production will pick up enough to stabilize prices.  The other consensus is quality material will continue to be harder to find.  Near term will be volatile, with some stability hopefully returning by mid summer.  As painful as these increases may be, most mills have lost a lot of money in the last 2 years, so some financial strength is a good thing for a continued supply of good quality products at affordable prices..

Monday, April 5th:

Another week and for the 3rd straight week the pattern was very similar.  The stud and dimension market both started out pretty quiet, but midweek saw a pick up in orders and by the end of the week mills had extended their order files and were able to move prices up again.  Traders out watching for an increase in production, but so far that has not happened.  The panel market was again volatile.  OSB prices increased 22 dollars per “M” on 7/16 to a whopping 50 dollars per “M” on ¾ T & G OSB.  Mills are in firm control with expanding order files into May.  The biggest danger now is the more the price runs up more the correction will be.  It will be a market that will be hard to read in the short term.  Fir plywood was not quite as active, but still managed a positive week as well.  The range was 8 dollars on ½ to 15 dollars on ¾ T & G.  The fir market has definitely benefited from the OSB market.  Log supplies continue to be an issue and some areas are experiencing a shortage in trucks.  It sure looks like the strength will continue for the next few weeks.  There isn’t any real incentive for mills to lower prices.

Wednesday, March 31st:

It was another week, but it was a carbon copy of the week before.  Early week was quiet in the stud and dimension market, but by Wednesday things had picked up again.  There were a couple of catalysts to buying.  Strength in the May futures contract was one; the other was buyers that were waiting for a pullback that couldn’t wait any longer.  These lead to another 5 – 10 dollars per “M” increase in prices at the mill level.  The panel markets were also very similar to the previous week as well.  Orders outpaced production again this week and that led to double digit gains for the second week in a row for both plywood and osb.  No market goes up or down forever, but the tone on this market is more upward momentum.  Production and usage is very balanced, and any little bit of news is causing the prices to jump quickly.  Mills have order files ranging from 3 – 6 weeks, so a near term pullback would seem to be a ways down the road.  If you would like anymore information please give us a call.

Wednesday, March 24th:

Random length 2 x 4 & 2 x 6 moved up slightly at the end of the week.  The week started slowly, but a pickup in buying at mid week and limit up on the futures market on Thursday.  Studs fared a little better with an increase of 4 – 6 dollars per “M” for the week.  2 x 6 studs continue to be in short supply.  The cycle that we have gotten into seems to be active buying that fills mills order files out 2 – 3 weeks, followed by a pullback in buying, but with order files out a couple of weeks, buyers have had to go back in to purchase before the market can soften.  Production continues to be very lean.  Without a pick up in production this cycle could last for a while.

Panels once again had a strong week.  Fir plywood was up 17 dollars per “M” on ½ to 30 dollars per “M” on ¾ T & G.  That market is still feeling the affects of the earthquake in Chile, as many US mills have switched production from sheathing and underlayment grade to sanded, as there is more money to be made.  Chile was producing a very large amount of sanded plywood coming to the US.  So far one mill has been somewhat reopened, but all production is being used to stabilize the Chilean economy.  Don’t look for that to change soon.  OSB again benefited from the gains in the fir market, but not quite as much.7/16 osb was up another 5 dollars per “M” and ¾ T & G was up another 10 dollars per “M” this week.  At present most mills are out to late April, so there is not much reason to lower prices. These patterns will change with time, but for the near term it appears to be more of the same.

Please call if you would like to discuss specifics

Monday, March 15th:

Many framing lumber prices moved higher this past week. Traders at all levels of the market continued to label price trends as “supply driven”, with few noting any major increases in consumption. Mills have drawn back production more than 50% from the peak demand of 2005. We should expect many ups and downs in lumber pricing should the mills maintain production levels that seem to be better aligned with demand as compared to last year.

Plywood prices continue to skyrocket from the effects of the earthquake in Chile. Sheathing price increases rivaled those after Hurricane Katrina. Mill sales of OSB kicked in mid week as some traders credited strength in lumber and plywood markets for the stronger sales pace. Price increases were minor but the strong plywood market concerns many that it may pull OSB prices higher. Like lumber, plywood and OSB mills have curtailed production to better match demand which will likely cause price volatility this year.

Monday, March 8th:

The week started out pretty quiet, but a round of buying on Wednesday did a lot to firm the market up.  Most mills” order files were pretty depleted, so the buying helped extend order files.  It did a lot to minimize the downside risk.  Housing is still very slow nation wide, and without a pick up there, it would be hard to sustain a large move in prices.  Ultimately the mills hold the upper hand as production continues to be very anemic.  The biggest news this week was the earthquake in Chile.  Chile was a large supplier of sanded plywood and pine millwork.  The damage to the infrastructure will probably affect their exports for the rest of the year.  Some US plywood mills have indicated they would increase production on sanded plywood, but that would be at the expense of sheathing.  Even though our plywood usage is small, an increase there could pull OSB higher.  That market was very quiet, printing flat for the week.  There seems to be a fair balance between production and usage, but any increased buying will bring the volatility back in the market.  Expect that to be prevalent throughout the year..

Tuesday, March 2nd:

Both the lumber market and the stud market took a little rest this past week.  They were both down double digits, but based on the increases since the first of the year, this was not too surprising.  The panel market was much the same, with softness in the fir plywood, but no change in the OSB market.  OSB is faring the best of all markets, as they have order files into early April, and will not need to do any price adjusting for 2 – 3 weeks.

 We have two strong opposing forces that dominate these markets.  We have economic news in housing that continues to be disappointing, and we have production levels that are at historic lows.  When buyers are in the marketplace, prices are going to go higher.  When they are not prices will drift lower, this pattern will continue until we have increased production or increased volume in housing starts.  It is going to cause the market to be extremely volatile

 Keep in contact with your salesperson or stop and see us for any changes.

Monday, Feb. 22nd:

 The stud and dimension market took a much needed rest after a sharp move upward to begin the year.  Most mills will need to look for orders in the next couple of weeks, and wholesalers are already under cutting mill prices.  We should see some downward movement in the coming weeks.  The market overall still has an upward bias, as mill production is very light and any surge in buying will cause considerable volatility in the market place.

 The panel market was similar to the dimension market with fir plywood flat, but osb still managed to have a small gain.  The biggest difference in panels is most osb mills have order files into late March and early April.  Based on that, the prices will likely stay flat to slightly higher.  The panel market is very similar to the dimension market, with limited production and again with any surge in buying the volatility could be considerable.