March 29, 2020
We are just days away from the sharpest lumber market price reversal ever experienced. It began last week with unreasonable mill panic selling in an attempt to secure short-term operational cash and a $50 drop.
Next week and the following week, there will government mandated significant declines in lumber production and shipments and jobsite construction. It is the only way to disrupt this disruption. More virus testing will lead to the conclusion that we are losing the pandemic war.
Buyers with less than six weeks lumber supply are already in trouble. If it’s not on order or rolling, you are at high risk of upside price exposure and supply outages. Mills are raising cash, not selling to the market. The panic selling will end when the Fed shuts us all down this week. Then comes the aftershock. With a finite and dwindling inventory, mills will shift from aggressive sellers to protective defenders of their commodity. This shift in producer posturing will result in a sharp 180° reversal in price direction. We could easily see $100 spike higher on no sales.
That said, the only way to stop this pandemic without medicine and science is to starve it to death. That means minimum 14 days of quarantine...for every family. Essential business exceptions like construction and lumber yards makes us part of the problem. We should all voluntarily quarantine before the National Guard makes us. Otherwise, we will keep feeding the virus, fresh uninfected bodies to feast on.
Right now, for the first time in my lumber career, my suggestion is to stop buying and producing...everything. Close your business so it is not accessible for others to comingle. Stop producing lumber, stop selling lumber. Let’s become part of the solution. Do not be concerned with the lumber market for two full weeks. Shut it down and stay home.
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.