Every year there's discussions on this forum about the state of the economy. About half the contributors predict impending doom, total economic collapse, etc and the other half predict steady growth. If memory serves, there was a discussion a year or two ago (pre-pandemic) at which time I suggested we all check in again in about 2 years time to see if the economy had in fact collapsed or if things were going along smoothly.
Not sure if my timing is right, but the receipt of this news letter by one of my door suppliers seemed like a good opportunity to bring the topic up again. I posted the contents of the whole newsletter below, but this particular sentence caught my attention.
"We may be seeing the early days of an economic boom not seen since the end of WW2. "
I guess I'll have to wait a few more years for that economic collapse.
Here's that newsletter:
From: Rob Cabral
Vice President Lumber and Inventory Management
UCS Forest Group of Companies
Overview
Here are a few interesting talking points that Hardwood Lumber Producers never figured would impact them. It all starts with a white hot residential housing market.
• Demand / Supply imbalance in Framing Lumber for housing construction has had extreme effects on softwood pricing and will continue to impact the hardwood market. The RISI Framing Lumber Composite Price which is a blend of different prices for products that are related to framing including studs and joists, has moved from $428 to $1044 this past week. That’s an increase of 144% in 12 months. That rapid increase is allowing Softwood mills to out pay hardwood mills for logging crews. One hardwood supplier I spoke to last week said he was told by one logging crew that they would not work for hardwood mills as long as the softwood mills were paying $400/m….consider that framing lumber composite index was $408 a year ago. Even with the impacts of the pandemic, Southern Yellow Pine harvest in 2020 topped 50 Billion board feet which is an all time record. Still not enough to meet demand.
• Shortages in MDF are forcing some Cabinet and millwork producers to revisit REAL WOOD. This is just starting to put further pressure on paint grade woods like Poplar and Paint Grade Maple. These pressure will increase in months to come. MDF production is not expected to catch up to demand any time soon. Below is look at What RISI is reporting in MDF prices…if you can get it at all….
• Stressed Offshore Supply Chains – As domestic producers struggle to manufacture cabinetry, moldings and millwork to meet residential housing demand, off shore producers are having the same supply issues. When you consider the cycle involved in sourcing north American hardwoods to ship to Asia and have products manufactured and shipped back, any supply interruption for offshore producers will have a longer term impact. Consider the additional issues around shortages of ocean containers and logistics and many domestic traders of imported wood products are wondering how they can manufacture those products domestically to bridge the shortfall. One comment from a division manager this week on our monthly inventory calls was “we need more poplar because off shore passage door manufacturers are late on deliveries and they now need to produce those doors domestically to fill their orders”.
What if other market demand comes on line? – trying to deal with the here and now but the reality is as vaccines are being distributed at some point, travel and hospitality, convention and store fixture industries will come back on line and perhaps with as much fury as residential housing. We may be seeing the early days of an economic boom not seen since the end of WW2.
Key Species Observations
• Poplar - After a couple of weeks of dry weather in the Carolinas and Virginias, meteorologists are calling for rain for most of this coming week. We saw some key supply partners step up this past week to ship delayed orders. Reality is that even if producers had a good month of logging, the pent up demand throughout North America would still keep shelves barely covered. We continue to push for more than our share and key partners are committing to give us that but the pie so limited right now, more than our share is 1-2 loads at a time where our needs go far beyond that. Divisions continue to share inventories and purchase order files to cover those most in need as orders come ready. Many issues on the demand side working against us as well.
• Hard Maple – Mud season is in play. This has the net effect of reducing log inflow to sawmills. Supplies are going to continue to tighten over the next 45 days. Hopefully some light at the end of the tunnel by late April early May but there will not be any price relief.
• Soft Maple – Continued shift to soft maple from hard is being seen. Supplies are tight but attainable.
• Red Oak – while sawmills had no hard maple to saw red oak was available and was processed. Many mills set red oak inventories out to Air Dry for a period. Many producers are looking for kiln space to start drying their green / air drying inventories. Red oak is stabilising now and will be more plentiful in coming months.
• White Oak – 5/4 and 6/4 supplies are non existent. Price pressures continue and will not slow down. Every division has a marketing package from Frank Miller with samples of prefinished red oak and white oak. It’s a great time to dust that off. Upsell red oak!
• Alder – The big two are sold through April. Our purchase orders are in both Utah and PNW could sell more if we could get it. Had a discussion with senior leadership at one of the large alder producers last year. Their goal is to ship us as much alder as they did last year. We are messaging that we need more. There is opportunity out there in Frame alder we don’t seem to be able to secure on the supply side. P-frame and Superior 10’ is super tight
• Euro Beech – Prices are going up as logistics challenges are adding to transportation costs from Germany. More information to come on this early this week. Still a great value relative to domestic products.