It is my belief that the lumber market trades in a repeating, predictable pattern. That pattern is created by the interaction between production and how the supply chain lumber dealers, component manufacturers, wood preservers, and wholesale distributors collectively prepare for seasonal increases in lumber demand from new home builders and remodeling contractors.
The chart illustrates that interaction. Mill production is the most constant, with minor reductions July 4th week and Christmas week.
Builders’ and contractors’ peak demand is April, May, and June. That is a function of the amount of daylight to work with and the most desirable weather conditions and uninterrupted production momentum.
July and August taper from heat-induced lower jobsite productivity. September and October are the second best months due to a push to get framing done for year-end close outs.
In between the constant mill production and the seasonal surges in building activity, our lumber market is seeming like a Mexican jumping bean, popping up and down amid wicked volatility. However random it may seem, price movement is very predictable.
The annual lows first arrive in late August after the supply side has liquidated heavy spring inventories. The next possible low or double bottom is in early November, once again due to inventory liquidation, this time in preparation for year-end.
From mid November through Easter, the market rises on preparation by the supply side for the coming building season. Depending how aggressively inventory shifts from producer to the supply chain determines whether we get an early Easter top or a delayed Memorial Day top.
Along the way, there are multiple profit opportunities knowing when to increase or decrease inventory, or by timing your weekly buys to beat rising prices or take advantage of falling prices.
That’s what I do for you. Show you the WHEN of the lumber market.
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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