Multiple Mills Continue Curtailments
Mills have been forced to operate at a low cost level partnered with high log prices resulting in skimpy margins that put jobs at risk. In an attempt to drive up the market, more mills curtailed production to lower supply and increase demand.
Who’s Controlling the Market
While the mills cannot control the economy and builders, they can attempt to control the market using these curtailments. The latest Canadian mills shutdown will remove 200 million feet of production in the next two months.
Their goal is to drive up both the Cash Market and Futures Market.
As of today, the Futures Market is responding with an upward shift of more
than $50/M. That’s a significant increase!
Example: A shift in $50/M can equate to a $5600 increase per rail car of lumber.
The opening of 2 new OSB mills increased production and supply and keeps the OSB market low. Structural Panel and OSB markets often mirror each other.
Recognizing Trends
The ability to recognize trends is a critical skill in Purchasing. We keep a close eye on the Future Market and Cash Market daily to identify these trends.
The primary goal in reviewing ‘today’s market’ trends is to determine if we have indeed hit the bottom floor and do all ‘indications’ point to an
increase moving forward.
