February Market Update
Nov 12, 2013
Greetings from the great white north! Despite the fact we live in Wisconsin it has been a bit of a shock to the system that we are having more of a traditional winter season. In some parts of the state there is little snow on the ground and in others there is snow and frost 2+ feet into the ground. The extra snow will be good for the fields and lakes once it melts but it makes our work a little tougher.
The big question we hear from our customers is how high will this commodity market go? Without a doubt this is one of the more vexing issues we face as we head into our building season. These bull market conditions are unlike anything we've seen at this time of year. Since the housing slowdown 148 mills have been closed or shuttered and this has reduced capacity for production. A typical mill will produce about 150 million board feet per year. In 2006, 3% of Canadian lumber production was exported to Asian countries. The Asian market is now drawing almost 40% of the production out of the system and their demand is not expected to lessen. Consequently, we have three things that are impacting pricing: an uptick in domestic demand, reduced capacity at the mills and a much larger export market. The last challenge we face is there is little product in the pipeline at the wholesale level which exposes all of us to increased volatility.
How can we best work together on this? Communication. Please communicate with your sales person on your projects and when you expect them to ship. This gives us the opportunity to work with our purchasing team to try and protect the pricing for the project. Please communicate with your customers that it is very difficult to hold prices beyond 30 days. Many of our customers are telling us they now have a 30 day quote policy with the homeowner.
Cost of Framing Materials Continues to Climb
The numbers are in and the demand for building materials in February proves that 2013 will be an interesting year for the housing industry. Cost of framing materials in February is 3.65% higher when compared to January and is 32.77% higher than last year. Pricing for framing materials has not been at this level since 2006.
Reduced Design Values for Southern Pine by June 2013
After reports of surprising weaknesses in 2x4 lumber, a series of tests within sawmills in Southern Pine growing regions were conducted to reassess the lumber's value. The American Lumber Standards Committee (ALSC) has voted to issue new design values for Southern Pine, including all sizes and grades of dimensional lumber. Design values for #2 2x4 Southern Pine were already reduced last year as a result of preliminary testing. Now, 2x8 and 2x10 lumber has been tested as well, including #1, #2, and Select Structural grades. The results found values were significantly lower for the modulus of elasticity (MOE) and modulus of rupture of the lumber. The change will incite an adjustment period for decking, flooring and framing professionals--especially truss makers who will need to redesign the manufacture of their products by June 2013.
The good news is that we are well aware of these changes and have already taken the steps to be prepared. Our truss manufacturing facility has already reviewed all the software design values and will be incorporating these changes well ahead of the June timeline. You can expect a seamless transition to the new specifications.
Strong Sales in 2013 Negate Lumber's Winter Weather Troubles
Harsh winter weather has lead to reports of slowed production and consumption of various lumber products across the nation. Northern markets were overwhelmed by winter storms, but demand remained steady due to new sales orders extending into March. The south battled bouts of rain, causing limited availability for large logs, thus driving up prices of all #2 widths.