Random Lengths framing lumber composite drops for first time since week of July 4 by US$1 to US$341/mbf; August average climbs 27.55% year-over-year to US$338/mbf

Wendy Lisney

LOS ANGELES , September 9, 2012 (Industry Intelligence Inc.) – The Random Lengths framing lumber composite dropped for the first time since the week of July 4 in the short week following the Labor Day weekend, by US$1 (0.29%) to $341 per thousand board ft. (mbf).

Compared to the price at this time last year of $259/mbf, the composite is $82 (31.66%) higher.

For August as a whole, the composite averaged $338/mbf, up $17 (5.30%) from the average in July of $321/mbf, and $73 (27.55%) higher than the price in Aug. 2011 of $265/mbf, according to Random Lengths data. The yearly average for 2011 was $272/mbf, $12 (4.23%) lower than the average in 2010 of $284/mbf.

Lumber prices remained on a downward trend throughout the week as traders reacted to signs that supplies were expanding as demand weakened. The September futures contract remained at a large discount to mill quotes, leading Western SPF producers to open to counters of $4-6 on #2&Btr 2x4. Cash quotes were reported in a range around $314/mbf on Tuesday, but had dropped to around $300/mbf by Thursday.

The September contract dropped $5.90 to $282.20/mbf on Tuesday but lifted slightly on Wednesday and again on Thursday, when it closed up $2.60 at $286.00/mbf after the European Central Bank said it would lower borrowing costs for countries hit hardest by the European debt crisis. On Friday, futures dropped in all months, with September sliding $1.70 from Thursday to finish the week at $284.30/mbf, and November closing $4.40 lower at $275/mbf.

As the Sept. 14 close of the September futures contract approached, Random Lengths noted that many Western SPF traders covered their needs through Exchange Futures for Physicals (EFPs), or remained on the sidelines and covered immediate needs from distribution yards or reloads.

The reported price of KD Western SPF #2&Btr 2x4 dropped $4 (1.28%) to $308/mbf from $312/mbf in the week ending Aug. 31, and was $51 (19.84%) above the year-ago price of $257/mbf.

In Eastern SPF markets, sales increased but producers had to reduce quotes and accept counters of $5-10 or more. Order files dried up, and Western mills’ aggressive efforts to sell into Eastern markets added to the downward pressure on prices, reported Random Lengths.

The reported price of Eastern SPF (del. Great Lakes) #1&2 2x4 random dropped $5 (1.23%) to $400/mbf, but was $62 (18.34%) higher than the price in the corresponding week a year ago of $338/mbf.

Southern pine prices spread $5 on either side of reported levels in the week ending Aug. 31. Strong demand from Texas drove price increases on the Westside, leading many buyers to place orders from mills in the central zone – although the aftermath of Hurricane Isaac resulted in late shipments from several mills.

The reported price of KD Southern Pine (Westside) #2 2x4 Random climbed $8 (2.19%) to $374/mbf from 366/mbf in the week ending Aug. 31, and was $130 (53.28%) above the price at this time last year of $244/mbf.

Douglas fir prices trends shifted in favor of buyers, and some mills lowered quotes and listened for offers, reported Random Lengths, although they mostly rejected sharp counters. Some unconfirmed reports circulated that sales at below $300/mbf were closed on Std&Btr 2x4 and #2&Btr 2x6.

The reported price of green Douglas fir (Portland rate) Std&Btr 2x4 dropped $10 (3.15%) to $307/mbf from $317/mbf, but was $62 (25.31%) higher than the price reported a year ago of $245/mbf.

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