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February 2021 #13259 Page #96
Lumber Briefs By Matt Layman Publisher, Layman’s Lumber Guide
Softwood Framing Lumber Market Forecast
COVID’s 2021 Reverse Impact
L
et’s see if we can get this one right. A member recently requested that I forecast when the misses were going to happen. Sounds difficult, but not impossible. COVID 2020 was a once in a lifetime paradigm shift in our learning curve. To date, I have found no one who predicted that a homebound lock down would ignite a DIY explosion and a suburban housing boom. In hindsight, it makes perfectly good sense. Folks were delightfully imprisoned, reluctantly believing the worse case scenario, behaving like they were getting a free extended vacation. The lumber and housing industries both responded in kind on the initial news. Dump and run, expecting demand contraction. COVID 2021 is the complete reverse. The lumber industry is ramping up inventory. We predicted several weeks of January Chaos as COVID exponentially accelerated and social unrest was politically sparked. The lumber market reacted to the uncertainty with producers slashing prices to protect 2-week order files for the two weeks of peak chaos. Buyers in turn followed with their typical response of liquidating inventory having no indication that demand was declining. The political component was immediately diffused on inauguration day. My observation was that the lumber market was creating an under supplied condition and the January dip was an opportunity to shore up inventories through mid March. We are currently transitioning from January Chaos to Fabulous February. Housing starts are 1.66 mm with framing lumber and panel supply only producing enough for 1.4 mm, tops. There WILL be a lumber and panel shortage in February and prices WILL make new all time highs. 30 days of lumber over reactive purchasing will create a double bought condition, evidenced by 6-week shipment or longer. Remember, shipment is not the same as order file. Shipment is what buyers must commit to for inventory protection. Order file is shorter underlying amount of mill orders. March’s Meltdown could be brutal. Rampant COVID spread, infections, mutations, deaths and inefficient vaccine distribution through February will create the impact we expected in 2020...sharply decreased demand. DIY will decline despite spring weather, builders will receive record cancellations.
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