Yin-Yang

In Chinese philosophy, the concept of yin-yang, which is often called yin and yang, is used to describe how seemingly opposite or contrary forces are interconnected and interdependent in the natural world; and, how they give rise to each other as they interrelate to one another.

In this year of the Horse, the usual supply/demand factors that shape lumber markets are seemingly in pause mode. But! Traders are casting a wary eye over the slow simmer that presently characterizes lumber market activity. In the face of a harsh winter, opposing tensions are brewing. Is the market “loading the slingshot” for a significant spring rally or, is the stage being set for a significant correction? Here at Dakeryn the trading floor weighs in with some arguments in support of either scenario.

Lumber prices will collapse this spring because:

  1. When lumber prices climb, global fibre supply increases, capping the price ascent
  2. Customers have been buying from sources outside B.C. Pent up demand is not what it seems.
  3. Sawmill output is increasing. There will be ample supply to meet demand.
  4. The recent tumble in U.S. housing starts and permits will continue. In a compressed building season, starts cannot catch up to projections (for a 20% increase over last year).
  5. The market has so far been propped up by lack of car supply. Lumber supply will overwhelm the market when rail cars return.
  6. Offshore demand will falter.

 

Lumber prices will erupt this spring because:

  1. The gradual recovery in the U.S. housing market will continue. Forest stock analysts forecast higher highs and higher lows in lumber prices through 2015 – the trend is your friend.
  2. Rail car supply will continue to squeeze shipments. April wood will not arrive until May. Look out.
  3. A major announcement concerning sawmill shutdown/curtailment due to dwindling fibre supply/fractured supply chain will ignite a feeding frenzy
  4. Hand-to-mouth buying patterns = lean field inventories; dealers and wholesale distributors are under-bought.
  5. A demand surge will see freight costs skyrocket.
  6. Offshore demand will shatter the record volumes of softwood lumber and log shipments achieved in 2013.

 

“Winter weather, late rail cars, high prices relative to the last 6 years, and accountants calling the shots on inventories have the market myopic and unable to look past tomorrow’s needs.”
– a Midwest lumber wholesaler this week.

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