Yaletown Lumber Industries Ltd.

Weekly Market Wrap
Yaletown Lumber Industries Ltd. Prepared by Vince Bulic
For Week Ending Friday March 20, 2015
Futures Wk. Close Change
↑ 7.30
↑ 6.00
↑ 5.60
Cash prices as reported by Random Lengths
Cash: Overall selling lumber was a struggle this week –
product changed hands but prices suffered as sellers were
more eager than buyers. There was a brief pick-up in
business mid-week but by the end of the week momentum
had stalled. Buyers seem to be content to fill needs and not
more even with prices (USD prices that is) at levels we have
not seen in some time. US February housing starts were
down 17% to 897,000 units, but most ascribed this large
drop to weather as permits actually rose 3% to 1,065,000.
The Random Length Composite Index fell $2 to $333. If it
stays down here Canadian mills will be faced with a 10%
export tax in May. The April 5% export tax will be the first
tax since September 2013.
Futures: May started the week under pressure, made a low
of $265.50 Tuesday morning and then recovered that
afternoon. The rally in the futures has been capped by the
reluctance of cash to go along. May futures are for wood
two months out so the premium to cash is not surprising.
It’s also a sign that it is getting harder and harder to be really
pessimistic given that we’ve dropped $60 since December
and are at levels that have triggered larger buy ins before.
An optimist could find support on the chart at $270 – this
was a previous support level in late 2012 and during the
2013 collapse. So maybe futures consolidate above $270
2x4 #2+Btr Base Price
Compared to Futures
Last Week
Last Year
May $8 Prem $ 333.00
Cdn $
until real world supply and demand dictates the next move.
A rally back up to $300 is also a possibility if those short
start covering en masse, but $300 would be really hard to
break through easily now.
Looking ahead: In 4 of the last 5 years the market has fallen
in the 2nd quarter. So the first day of spring has not been a
good omen the last few years. Could this year be different?
We are definitely starting at much lower levels - last year
2x4 SPF was exactly US$90 higher. The exchange rate has
softened the blow for Canadian producers, but no such luck
for their US counterparts. China usually steps in when
prices get cheap but no sign of them so far. Are the
Europeans and Russians stealing the North American
producer’s lunch over there? It would seem so along with a
Chinese appetite for lumber that may have reached its peak.
I remember seeing a chart in a presentation a couple of years
ago which showed China as a very large importer of logs
from the Pacific Northwest back in the early 1980’s. They
were a substantial player in the market and then they just
disappeared for 25 years. With the way the global economy
has changed I can’t imagine something like that happening
again – but heaven help us if it does.
Vince Bulic,Yaletown Lumber, Tel: 604-688-1037
Futures Weekly Chart – Could $270 be a new support level and $300 the new resistance point?