Do you think us housing starts will recover this summer (2011)?

View Results

Loading ... Loading ...


Do modern timber harvest practices take environmental concerns seriously enough?

View Results

Loading ... Loading ...


Does increased paper production in emerging nations like china and india mean the end of the north american and european paper industry?

View Results

Loading ... Loading ...


Will china's growing hunger for timber cause a threat to global supply from new zealand's forestland?

View Results

Loading ... Loading ...


Will russia eventually develop a thriving sawmill industry?

View Results

Loading ... Loading ...

Solid Market for Buyers in Wood Lumber Products

Volume 50 No. 45 – November10, 2000

The Solid Wood Dilemma

As a wood products industry newsletter, we stand elbow to elbow on the front line with the legions of individuals moving this country’s forest products from the manufacturing facilities, through sales and marketing, to the consumer. Selling lumber and other forest products is an exciting game. Not only is it fraught with the ups and downs of market cycles, but it is also the point where producers find out if they live or die. With WSPF prices in the low $200s and below, it has been more the latter of late, but the marketplace is a roller coaster that goes up and down.

Considering the effort it takes to compete in the solid wood business today, it isn’t any wonder players can get a case of the blinders and fail to see changes taking place before their very eyes. That’s why my bell started ringing when a news release from International Wood Markets Research Inc., produced by R.E. Taylor & Associates Ltd., showed up on my desk a short while ago. The subject was the growth of substitute lumber products and, as you can guess, it caught my attention right away.

I started becoming more aware of substitute wood products several years ago when I did an article on steel framing. At that time, I interviewed a contractor who was erecting steel frame houses and I must admit, I was impressed. The steel industry has been chasing the housing market for many years and every time lumber prices head toward the moon, it dusts off its marketing plans yet again and starts promoting steel construction.

Since that article, I am more mindful of wood substitutes and whenever I find articles on them, I try to include the information in Madison’s. I’m not doing this to promote them in any way, but rather to alert solid wood producers of the encroaching competition. Many ofthese products are wood based, but many are not, and while they may not now represent a significant threat—especially with lumber prices so low—they are insidious in their efforts to undermine and supplant the use of lumber in many applications. In his news release, Russell Taylor says that collectively, substitutes represent over 10 per cent of all wood product consumption in North America. In 1999 terms, that’s more than seven billion board feet. Taylor also points out that these substitutes have collectively been growing at the astonishing rate of almost 20 per cent per year since 1992—a rate that pales anything in the solid wood end.

Next time you go through a new house, take a look around and you’ll will see quite a number of wood substitute products. Steel studs are presently the biggest competition and they can be found in nearly every commercial building, but plastics are also making significant inroads. For instance, there are vinyl sidings, plastic mouldings and window frames, plastic decking, plastic lumber—I have even seen plastic fence posts.

Wood based substitutes, mainly engineered wood products, are also in competition with solid wood. Products such as I-joists, laminated lumber (LVL), glue-lam beams, OSB and the composite family, even finger jointed lumber is an engineered competitor. Next time you’re looking at window and door casings, check for finger joints. For better or worse, it’s hard to find solid wood window and door casings anymore. Taylor says the variety of lumber substitutes is growing at over 500 million board feet per year and with lumber production dropping off in the face of the current oversupply situation, substitute producers will surely seize the opportunity to expand even more.

Well, you say, that may be true, but they are more expensive. You’d be right, of course, but that isn’t keeping them out of the marketplace. Taylor points out that end users are willing to pay a 50 per cent premium for certain wood substitutes, simply because they deliver the quality, value, performance, and reliability the end user wants. In fact, incorporating wood substitutes in place of solid wood components is a trend in some products lines, says Taylor.

There seems to be a growing lack of confidence in lumber engendered, in part at least, by the intensive promotion campaigns substitute producers generate. That feeling isn’t without some justification, since lumber strength and quality are not consistent. Besides, lumber prices are very volatile and there is suspicion the retail sector is gouging consumers when lumber prices fall. Taylor points out that over the past 20 years, vinyl siding has achieved a 50 per cent share of the siding market, and that it is now the lowest priced product. Other substitutes such as fiber-cement siding and OSB occupy another 10 per cent each, leaving sold wood with only about an eight per cent market share. That’s down from close to 50 per cent in the late 1970′s, he says.

Nobody knows what new substitutes will show up in the coming years, but there is little doubt use of substitutes will increase. This trend is being driven by older, more affluent consumers who want consistent performance, little maintenance, and a long term warranty—from 10 years to 50 years. Environmental considerations are also high on the priority list—as everyone in the forest industry well knows.

This trend means the solid wood industry must produce better products, reposition itself in the marketplace, and price its products better if it hopes to compete with alternative substitutes and wood based competition. The dominance solid wood has had since the beginning is under siege and gyrations such as wild price swings and oversup-ply aren’t helping. Wood, with its multitude of attributes, is an amazing material, but in our shrinking, technological world, there are no guarantees.

C Housing Up

Canada Mortgage and Housing Corporation says Canadian housing starts rose 4.9 per cent in October to 164,800 units SAAR. This is up from 157,100 units the previous month. Urban multiples jumped 14.8 per cent to 72,300 units, while urban singles fell 1.7 per cent to 71,300, down from 72,500 in September. In B.C., starts jumped 39.6 per cent over September; Ontario starts rose 9.1 per cent; in Quebec, starts were down 1.8 per cent; the Prairie provinces recorded a drop of 9.0 per cent; while the Atlantic Region reported a drop of 8.2 per cent.

Interfor Wins Award

The Squamish Lumber Division of International Forest Products is this year’s winner of the Canadian Society of Safety Engineering Award for the Canada’s top health and safety awareness program. The Award was presented on the basis of the Division’s workplace and community outreach programs staged during this year’s North American Occupational Safety and Health Week. Squamish first won the B.C. Regional Award, then the National Award. There were six national finalists.

The Squamish Division program featured a strong community component, which included a focus on safety awareness in schools. It included workplace and community presentations, safety concourses, and a locally produced 26 minute health and safety video.

WSPF Hyped

The uncertainty surrounding the U.S. Presidential election has not had much effect on the cash lumber market. Lumber is improved and steady; there is nothing here like the loops that are being witnessed on the big board at the stock market.

This week’s cash market doesn’t look like much when taken alone. Without the data to compare this week’s $208 price to last week’s $193 (KD R/L Std&Btr 2×4), you might miss what all the excitement is about. Last week’s NAWLA http://www.lumber.org/  convention in Dallas gave buyers and sellers a chance to get together and sort out the confusion of the last several months. Following a few days and some long liquid nights, the consensus was that this market must go up. There are no other options.

To help dry up the prevailing oversup-ply problem, a three week holiday shutdown has been announced by Abitibi in eastern Canada, and additional shutdowns or production curtailments are expected at western mills as well. Shrinking supplies always result in rising prices. As the supplies get smaller, fence sitters turn into buyers.

In KD R/L Std&Btr 2×4, the price leapt up $15, well over that $200 barrier to conclude the week at $208. Mill order files were filling as buyers from all segments came in to take their share. Orders are into the week of November 20 at most mills. As the order files hit the two week mark, buyers began backing off, uncertain that they wanted to commit to anything that would be delivered after the U.S. Thanksgiving weekend, traditionally a dead zone in lumber sales. In KD R/L #2&Btr, 2×6 took a pop fly of $10 to $220; 2×8 made a baby step up $5 to $215; 2×10 found a good firm $10 to move to $270; and 2×12 equaled that $10 to $350.

Studs Advantageous

Mills took advantage of the surge after NAWLA to book some decent volumes and move up prices. After several weeks that were about as lively as working in a mortuary, traders were gratified by customers’ willingness to buy at the list prices without haggling. Commodity studs, KD SPF 2×4 925/8″ PET, were the best sellers. As order files grew, sales began to slow. Orders are now into the week of November 27.

MSR Fair & Firm

Fair inquiry resulted in decent sales at firm prices this week in MSR. Although 2×4 products held at recently established levels, 2x6s came off approximately $5 on each ofthe stress grades of 1650f, 2100f, and 2400f. A drop in demand for 2×6 is expected at this time of year. Order files are into the week of November 24—approximately two weeks.

ESPF Fun & Frolics

After the year’s biggest party in Dallas, it was back to business as usual in eastern Canada. Traders said it was good to be away and to hear the scuttlebutt around the convention floor. Contrary to expectations, the talk at NAWLA was mostly positive and resulted in a surge in sales when traders returned to their desks. Prices jumped $10 to $15 on random lengths, and 2×4-8’ studs took a corresponding $12 jump to $272.

Cedar Chatty

It was all talk and little action in cedar this week. Although sales were okay for November, volumes were slightly off from the norm. It was inquiry that had everybody jumping, fielding calls stirred up by contacts at NAWLA. From the advance buzz, expect decking to heat up for spring buying programs, while mixed timbers should start moving in the next few weeks.

OSB & Plywood

No one is quite sure what happened, but in one week, confidence in the ample supply of OSB began disappearing. There is now a widespread perception supply is threatened. It’s too early to say whether perception will turn into reality, but there is no doubt supply took some hits this week. Two major OSB producers in Minnesota say the woods are so wet, access to their fiber supply is almost impossible. There is also talk of curtailments and even problems with regulatory authorities in other areas of the U.S. Complacent J-I-T buyers have all become impatient at the same time. Secondary suppliers are nearly out of product and are in no mood for price concessions. OSB producers are happily building order files with no prompt wood to be found. As one trader put it: “The supply concerns caught an awful lot of people by surprise.” Traders say buyers are still buying short term and seem determined to live with low inventories. In central Canada, 7/16” Toronto jumped C$20 and is now selling for C$245. Order files are through the week of November with some producers claiming order files into December. In western Canada, 7/16” Vancouver is also up C$20, selling for $245 until late in the week. Traders expect 7/16” prices to reach C$252 quickly. Order files are comfortably through the week of November 27.

Cargo & Reload

It was another steady week for the lumber business in the U.S. northeast. Stocking wholesalers report that when buyers find the tally they require, there is little dickering. Buyers now know they miscalculated on ground inventories, which are not as large as they thought. The scarcities we mentioned last week have grown worse. Both green fir 2×6 and 2×10 are difficult to find in virtually all sizes. Green fir selling prices increased for all items, led by 2×6 which was up by $15, and 2×8 and 2×10 each rising by $10. Green hemlock selling prices moved up by $5 for all items but 2×4. Green fir delivered prices from mills in the U.S. west also increased by $10 to $15. Traders say growing scarcities in the northeast have resulted in more carload buying. Georgia-Pacific announced late this week that three of its fir mills in Oregon and California will be down the last two weeks of November and the last two weeks of December.

Refer to Madison’s Lumber Reporter for the latest news in the lumber industry.

Related Articles:

To vote on this article click on the below bar (make sure to choose vote before clicking):
1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading ... Loading ...

You must be logged in to post a comment.