COVID Shipment Delays WILL RISE
The global pandemic surge is further exacerbating shipment schedules, lengthening many commodity and specialty items that are weeks behind already. Some truckloads of basic commodity Canadian lumber are just now catching up on two-month delays despite prices falling $500 over that same period. LVL is one of the most current to the list of construction supply shortages along with case goods, appliances, composite decking, plumbing fixtures, and tub/shower units. It may be notable that these items are not in short supply due to increased demand, rather have extended order files based upon inability to meet production capacity as a function of COVID’s collective distribution disruption. We should expect, with 100% certainty, COVID-related lumber delivery delays this winter.
There are a few significant differences in COVID now and last February. We now know the illness was already active this month last year, and 2020’s hindsight gives real time data and 9 months of historical data to project the next three months. Yes, we are closer to a vaccine, however, best-case scenario, it will not be available to housing, construction, and “lumber businesses” even if classified as “essential” and remain open. There will be more and longer delays of supplies for essential businesses, because the fear of-infection factor will be greater between now and March.
Of equal fear is the likelihood of civil unrest during the presidential transition of power. Stir in the promise to increase corporate taxes during the first 100 days to pay for economic stimulus of some sort and January could be horrendous from multiple perspectives. The over-looked obvious is job uncertainty and delayed stimulus payments. This fact will encourage savings and paying off newly accumulated debt more so than new spending. Desire for less corporate debt will squelch growth in the new year, including physical inventory like lumber. I’ll say it again, January is going to be hellacious.
The most significant difference about this January and last is we know what is coming. As for the COVID vaccine, the comment I hear most from millennials is, “Not taking the first round.”
Everything Oversold, Except Lumber
The lumber question for 2021 is, “Will we see a 2020 repeat of a 300% price increase and severe supply disruption?” Let’s deduce.
As we bring 2020 to a close, buyers are apprehensive. We have a much clearer view and understanding of potential disruptions which reduces, but does not eliminate, the elements of surprise or the impact of either higher or lower volatility. The industry intuits that the new year will begin with several explosions...pandemic, political discourse, civil unrest. What else could we get hit with? What is off the radar? Where are we most vulnerable? #1...terrorism...it’s been very quiet in America. With so much attention on national issues, is our international guard down, or relaxed? Nothing much in the news, is there?
#2...weather...it’s been abnormally contrary. Intermittent warmer weather in Canada means unfavorable logging conditions. Without frozen ground to drive on, loggers cannot navigate slush. Log decks next spring could be significantly reduced. What’s the deal with hurricanes in mid-November in the Gulf? A lot of rain has poured into SYP producing territory, Carolinas across to east Texas. Even minor thunderstorms are dumping multiple inches of flood-inducing rain on a weekly basis.
Buyers are preparing for all these components to create lower demand after December. They are operating from the perspective they can best see...disrupted demand. They are acting cautiously on most recent price movement, after having gotten over-bought at the market’s September top when delivery disruptions resulted in an over-bought condition.
The problem I see right now is builders’ commitment. They have talked a big game over the past three months, but have failed to deliver the hard commitments of lumber package delivery dates that contractor yards need to make their like-kind commitments beyond 60 days.
I sense a slipping builder confidence, not based upon current sales or even long-term projections, more an uncertainty about near term disruptions spoken of in this forecast.
Buying Strategy: Cover through January and get out of the way.
Looking Forward...ML
Are you fed up with being caught on the wrong side of the market...losing orders because your lumber prices make you uncompetitive. I can assure you the orders you lose are not because the other guy is selling at a loss. It’s not you or your buying style. It’s just timing. I forecast when the Lumber Market will rise and fall. No one else tells you months in advance when prices will reverse....no one! Call me 336.516.6684. www.laymansguide.info