Lumber price volatility and supply chain snafus will continue to propel an evolution in how framers should buy and use lumber, a quintet of forest products experts predict.
The five spoke at a panel session Sept. 14 in Columbus, OH, organized by the National Framers Council as part of the Building Component Manufacturers Conference, the truss industry’s trade show.
Stinson Dean, a lumber trader and president of Deacon Lumber Co., said rapid price changes and delivery issues have made the lumber-buying business more expensive—and perilous. The tradition of handshake agreements “got tested as people got on the wrong side of agreements,” he said, adding: “You’ve got to know what you’re signing up for, because things are moving faster and higher than in the past. … It’s more of a deterrent today to say 'yes' to a deal and figure out the cost later.”
Small mistakes today can cause huge losses, Dean added. These dangers have led people like Shelter Products’ James Zurcher to reduce their tolerance for risk. Moderator Tim Aspinwall, also of Shelter Products, said he says no to deals more often, even as he feels forced to carry more inventory so he has supply on hand in case promised shipments don’t arrive on time.
Speaking of supply chain issues, Dean said the price run-up in this year’s first quarter “really was a logistics issue” rather than the result of low production. “You could have the wood on order and have the purchase order, but you couldn’t get it to the job.”
Dean and the others noticed that, partly in response to those shortages, framers engaged in more species swapping—particularly switching to Southern yellow pine (SYP) from spruce-pine-fir (SPF)—than they had seen in past years. “People were forced to try SYP and found it less bad" than they thought, Dean said.
Looking ahead, John Vranizan, president of American International Forest Products, believes we’re currently in a state of equilibrium between supply and demand--but also thinks it won’t last. That’s in part because he suspects “there is business on the books waiting to happen when the stars align.” And if the war in Ukraine sends Europe into recession, that could lead European mills to send more lumber to these shores.
Dean said recent sentiment about a slowdown coming in homebuilding has led buyers to trim their inventories. On the supplier side, he noted that because mills have made big profits in the past couple of years, “they are in a position to not being forced sellers.”
Dean sees “a recipe for volatility on the upside.” And Vranizan says seasonality, plus that as-yet uncommitted demand, sets the table for repeating the same cycle of price surges that we have seen the past two years.
What can framers do? Josh Pounds, Boise Cascade’s business development manager for EWP sales to multifamily builders, encouraged framers to communicate with their vendors as much as possible so that they don’t get sideswiped by price changes. Those communications may become less tense, as Pounds also said he believes we're entering a state of supply-demand equilibrium in which ordering will follow historical patterns.
Vranizan lamented that some builders will see the price on a futures contract dropping and think they automatically should see retail lumber prices fall, too.
“At your level, why are futures relevant?” Vranizan asked rhetorically. “Are your customers going to play futures? We have to educate our customers’ customer.”