North American dimension lumber sales fizzled through September, to the great disappointment of solid wood traders looking for increased demand during great home building weather. Prices on most lumber and panel commodities maintained relatively level while some specialty items lost ground. Perhaps most importantly, prices generally were stable over this time last year.
Producers reported good order files, with most sawmills enjoying two weeks of production already sold. Both manufacturers and wholesalers, however, strained their vision toward China in the hopes of some large-volume buying while these softer prices last.
Suppliers expressed confusion as to why sales would be slowing this month, which has proved to be excellent for home building right across the continent. Even the nightmarish forest fire danger seems to have passed for the year. So why are end-users continuing the recent habit of just-in-time buying? Many might say fear of a significant price drop is contributing to a reluctance to actually built inventory.
So far this year lumber manufacturing and sales volumes in both Canada and the US match those of last year, while prices are up somewhat. This week Statistics Canada released “Manufacturing: The year 2013 in review” which found that the Canadian wood product industry had the largest gain in sales of all manufacturing, increasing $3.6 billion from 2012 to $23.8 billion (+17.8%) in 2013. Since the recession of 2008-2009, improved economic conditions and increased exports to the United States and China have contributed to higher sales for the Canadian wood products industry, said StatsCan Monday.
Stability of this kind brings with it expectation of improved business conditions for the North American forest products industry.Narrow widths fared the worst, as benchmark dimension lumber commodity Western Spruce-Pine-Fir KD 2×4 #2&Btr lost $10 to close the week at US$352 per thousand board feet (net FOB mill). This is $6 lower than the same time last year. Supply of wider sizes continued to be scarce, across commodity and region, so were easier for sellers to hold at current price points.
In the US, southern yellow pine dimension lumber prices lost significant ground but had enjoyed an extravagant run-up during summer so were quite due for a correction. For it’s part, lumber futures on the Chicago Mercantile Exchange continued to flounder, closing this week at US$327.20 mfbm on the November contract at a massive discount to cash. Elsewhere, Oriented Strand Board prices have waffled up and down by $5 or $10 as suppliers and customers struggle toward an equitable price floor.
In company news this week, West Fraser Timber Co. Ltd. (TSX: T.WFT, Stock Forum) announced a quarterly dividend Thursday. Stockholders of record on Tuesday, October 14th will be paid a dividend of 0.07 per share on Tuesday, October 14th. This represents a dividend yield of 0.5%. The ex-dividend date is Thursday, September 25th.
As well, Canfor Corp. (TSX: T. CFP, Stock Forum) plans to construct a pellet plant at it’s Chetwynd and Fort St. John, BC, sawmill sites, the company said Wednesday. The pellet plants will be constructed and operated in partnership with Pacific Bioenergy Corporation. The two plants will have a combined annual production capacity of 175,000 tonnes of wood pellets, the sale of which is tied to a long term agreement with a power utility customer. The total investment of $58 million will include electrical self-generation capacity of 3 megawatts supported through BC Hydro’s Power Smart Load Displacement Program.
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