Random Lengths framing lumber composite drops US$5 to US$262/mbf, sharp stock market declines on Thursday trigger $10 limit-down drop in September futures

Wendy Lisney

LOS ANGELES , August 21, 2011 (Forestweb) – The Random Lengths framing lumber composite continued to move downwards in the week ending Aug. 19, dropping $5 (1.87%) to $262 per thousand board ft. (mbf). But compared to the price at this time last year of $244/mbf, the composite is $18 (7.38%) higher.

For July as a whole, the framing lumber composite averaged $270/mbf, up $8 (3.05%) from the average in June of $262/mbf and $18 (7.14%) higher than the July 2010 average of $252/mbf, according to Random Lengths data. The yearly average for 2010 was $284/mbf, $62 (27.93%) higher than 2009’s average of $222/mbf.

In last week's trading, softwood lumber sales were slow as weak home construction data and Thursday’s sharp stock market declines increased buyers' caution.

The U.S. Commerce Dept. reported a 1.5% decline in housing starts on Tuesday to an annual rate of 604,000 in July, from 613,000 in June. Building permits were lower than had been expected, dropping to 597,000 from 617,000 in June. Lumber futures dropped on the news after gains of up to $6.50/mbf on Monday, and the September contract fell further on Wednesday, by $2 to $227.50/mbf.

Thursday’s sharp U.S. stock market declines led to limit-down drops in lumber futures. The September contract fell by the $10 daily limit to $217.50/mbf, while November, January and March all fell $9.70 to $221.90/mbf, $244.50/mbf and $257/mbf respectively. September dropped a further $1 on Friday to close the week at $216.50, but modest gains of up to $1.60 in all other months saw November end the week at $223.50/mbf, January at $245.50/mbf and March at $258/mbf.

Thursday’s declines in futures prices quietened Western SPF trading, which had been slow in the first part of the week, as buyers became even more cautious, reported Random Lengths. Mills kept #2&Btr 2x4 quotes in the $230s or higher, but sales slipped into the $220s, and the reported price was $225/mbf, down $5 (2.17%) from the week before. Friday’s reported price was $1 (0.45%) higher than a year ago ($224/mbf).

In Eastern SPF trading, most prices moved lower. In the U.S., markets were quiet by the end of the week after earlier discounting allowed some mills to sell blocks into the Mid-Atlantic and Southeast. In Canada, #1&2 prices dipped in Toronto and deeper cuts were reported in #2x4 prices, while in Montreal most #1&2 prices were flat.

The reported price of KD Eastern SPF (delivered Great Lakes) #1&2 2x4 random dropped $5 (1.55%) to $318/mbf, but was $5 (1.60%) higher than the price at this time last year of $313/mbf.

Southern pine producers opened to counters after weak demand throughout August dried up order files. Prices of all widths of #2 dimension were affected and most random prices fell $7-10 or more. #2 was the most vulnerable, and the reported price of the benchmark grade, 2x4 #2 KD SYP (Westside), dropped $8 (2.90%) to $268/mbf - $40 (17.54%) higher than the price reported at this time last year of $228/mbf.

Douglas fir producers struggled to find customers willing to purchase carload volumes, reported Random Lengths, and many customers bypassed mills to purchase mixed truckloads from reloads and distribution yards. #1&Btr 2x4 held at around $290/mbf and sales of Std&Btr 2x4 were in a $235-225 spread.

The reported price of Green Douglas fir (Portland rate) Std&Btr 2x4 dropped $5 (2%) to $245/mbf, up $50 (25.64%) from the price reported at this time last year ($195/mbf).

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