Rationing
On May 23, in its most active lumber futures day ever, the market traded $68 of volatility from $15 limit down to $30 limit up and back down $15 to unchanged. Why is that? Futures suspected what we Layman’s Lumber Guide members have known since mid-May. BC mills are not selling production and have not since early May. The rationing tactic was just that...• sell small offerings, • sustain the panic, • jack up prices. That intraday $30 futures rally was the result of one mill selling some quantity of $660 2x4 #2. The immediate $15 sell off was the reality of what mills are not saying. That is, how much is getting sold at each of these rationed offerings at higher prices.
Western Canadian production is down by 5% and shipments are down 20% through Q1. No argument. What’s missing from the daily sales pitch is that mills are not selling production. The 8-week shipment lead times and order files have been cut in half over the past three weeks, all while prices have been pushed higher by $60/mbft.
A standard measure of a market changing momentum is price moving in one direction while sales and shipment volumes move in the opposite direction.
You will hear from Canada that BC mills will continue to ship 20% less to the U.S. and ration supply because of the duty. That is bullish as long as buyers are building inventories. It does not work and is bearish when buyers are liquidating or just maintaining stocks. What better fitting a time for the end to this historic lumber mayhem than Memorial Day.
U.S. & Canada Share the Responsibility
BC mills have made the decision to reduce U.S. shipments by whatever they can sell elsewhere, China, Korea, Japan, etc. The reasoning is that no other importer has a duty. They can get 20% more elsewhere. Fair enough. Currently, BC only ships 46% of its production to the U.S. That is exactly what the U.S. Lumber Coalition has been lobbying for over the last 20 years. Less Canadian wood and higher prices all around creates windfall profits.
When looking for someone to be angry at about $700 lumber, don’t lay all the blame on Canada...and don’t blame the Crown for helping its citizens. America bribes millions of profiled citizens and non-citizens with welfare checks to stay out of the way. (I mean workforce.) Most of the responsibility for record high lumber prices falls on the U.S. Lumber Coalition who orchestrated this whole thing at your expense. Even those who are not members of the Coalition are complicit by not opposing it along the way.
Unless we like paying $4 per stud on the weekend or losing 30% honoring jobsite commitments, it’s time to make some noise. Justified or not, we are suffering through the U.S. Lumber Coalition’s win.
Now don’t pick up the phone and blast your mill sales person. They are just doing their job as best they can while being under attack every day for something they cannot control.
If you want to be heard, be part of an organized association with lobbying connections, such as
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.