“What is the lumber market going to do?” is a very important question and the answer is very simple. It is going to rise and fall. Brilliant, right?
A better question might be, “How far will lumber prices rise and fall?” That answer requires an understanding of direction and momentum. For example, my forecast back in December was that 2x4#2 in Canada and the U.S. would reach $600 FOB mill by spring 2018. That conclusion was based upon my expectation that prices would rise December through May at an average rate of $5/mbft per week, with a short digestion in early January. So far, the January pause was more brief than expected and buying has been steady as expected, even through the winter storms.
Which brings us to the most important question, “When will our lumber market rise and fall?” It would be incredibly arrogant of me to say “I know” something you don’t know about lumber supply and demand. I do not. The difference between being a good lumber buyer and a good lumber market analyst is what we focus on.
Lumber buyers’ focus is on price direction, anticipated lumber usage, storage, and ability to pay for it over a specific period of time.
My focus is on the collective attitude of lumber buyers. As long as that attitude is, “Business is very good, BUT what could go wrong?” I remain bullish. Why? Apprehension reduces the likelihood of an over bought condition, which is needed to stall price advances.
When buyer attitudes become, “Nothing can go wrong,” I become bearish. That is when our lumber market becomes over bought causing that price stall and potential reversal.
My objective is to identify likely reversal and acceleration areas to help buyers make informed decisions.
The buyer sentiment I see at the end of January for early spring is “business is good, but what could go wrong.” Collectively, buyers are not piling on with a “nothing could go wrong” appetite for lumber. For that reason, I remain bullish and maintain...$600 will be the asking price at the mills for 2x4#2 by early spring.
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.