Eurowood and SYP…the Future!
It’s times like the last couple of weeks in SPF-W, when buyers get taken by surprise, and they have one question for sellers. “How you gonna help me?”
Two weeks ago, I warned that SPF mills were about to spring surprise, imminent curtailments and closures on us. We got that and more. After Canfor’s 1-week warning of a 6-week curtailment and permanent closure, West Fraser followed with the same, giving a more vague timeline of sometime in Q3, which could be two weeks.
Now the bigger question hangs, “How you gonna help me next month and next year with SPF?” The answer is simple. EUROWOOD! By the time Canadian mills complete their current dismantling of their lumber industry, there will be ample wood to make up for lost SPF.
My FORECAST is that the current anticipated lumber supply disruption will never happen. The rally at hand is 95% emotion. There is no shortage of any species of lumber. The 2-week $100 price jack in western Canadian SPF is ALL speculation and panic. It is already over-bought. When this disruption is over, SPF-W will be a west-of-the-Mississippi item. Eurowood will claim the abandoned East and Gulf Coasts. The southeastern housing hotbed will be a Eurowood market by the end of 2019.
Here is what I am gonna do for you. I will begin covering Eurowood, including how that market works and how to buy it. I am indeed looking forward to it.
Lumber & Housing Forecast—Plenty of Both
The future of housing and lumber supply will be well into its rebirth by the end of 2019. We just saw the future of SPF. The complementing species will be SYP. Combined U.S. lumber demand of 60–65 billion board feet will be dominated by 30 billion board feet of SYP production. Eurowood can easily make up 5–10 bbft decline from Canada.
New home construction innovations, and living smaller, will require less lumber in the very near future. If anything, the current global lumber supply is excessive and not likely to be in short supply over the next decade.
What does that mean for lumber prices? Unfortunately...equal or more volatility. The reason is Eurowood transit time. Specifically, the ability to buy speculatively 1–2 months in advance. Inventory accumulations and liquidations will still occur. Eurowood will make our lumber market more complicated for home builders and contractor yards. Distributors and brokers will have to take more risks. Trucking along the East and Gulf Coasts will be redefined.
For now, I suggest not chasing this market out of fear. There is no reason to have any lumber bought beyond the end of July. Western Canadian SPF will fall just as quickly as it’s rising. I expect mid-July through August will give lumber prices a brutal beat down.
Looking Forward...ML
A veteran lumberman, Matt Layman publishes Layman’s Lumber Guide, the weekly forecasts and buying advisories that help component manufacturers save money on lumber purchases every day. You can reach Matt at 336-516-6684 or Matt@laymansguide.info.
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