The national forest and panel products purchasing manager for Allied Building Products Corp. took issue today with a ProSales article in which a veteran timber economist said lumber prices are near their peak and likely will begin dropping "fairly sharply" in May or June.
"It appears that economist Paul Jannke of Forest Economic Advisors has a crystal ball or psychic powers not granted to us mere mortals who spend most of our day toiling in the real lumber and panel markets," Joseph Glitman said in an e-mail to ProSales. "While I am certain that nothing will go up or down forever, at this moment I see mill order files that stretch from late May all the way to mid June. Prices only move lower when mills and office wholesalers and other secondaries do not have an audience for their production.Clearly at this time--and May starts this Saturday--that is not the case.
"While it is clear that prices are now at 2005 levels on both lumber and panels, and that was a period of time when we had 1.5 to 1.7 [million] new housing starts, the production field has changed dramatically and not in favor of additional production which would sink this market," continued Glitman, who stressed in a later note that these views are his own and don't necessarily reflect those of his East Rutherford, N.J.-based employer. "Unless mills begin adding shifts--or shoulder the burden of reopening shutter mills, neither of which is likely at this time--prices will remain close to these lofty levels."
The story quoted Jannke, speaking in a webinar on Tuesday, as saying that the three key factors that powered the recent runup in prices--modest rises in consumption, low inventories at dealers, and wet weather--all are short-term phenomena. The North American timber industry's latent production capacity "far outstrips any rise in the level of demand for the next few years," he said.
But Glitman sees things differently.
"As far as retailers adding additional inventory, new credit limits from their lending institutions keep that prospect at a minimum," Glitman said. As long as we all purchase hand to mouth, the market beast needs to be fed.
"What Mr. Jannke so carefully didn't say was how much of an adjustment we would experience if we were to experience an adjustment at all," Glitman continued. "Words like "large" and "fast" draw upon buyers' emotions but are not quantifiable. Take just one example: the price of 23/32" T&G OSB. The price last week increased $105 MSF or $3.36 per sheet in one week. Over the past three weeks, including the $ 105 MSF bump,- prices on that product have risen $235 MSF or $7.52 per sheet. Using Mr. Jannke's thoughts of [a drop that's] hard and fast, I wonder if he is anticipating that by mid-May this item will have not only given up its $7.52 rise in three weeks but perhaps an additional $2 to $3 per sheet?
"Unfortunately Mr. Jannke is a timber advisor, not a finished product or manufacturer adviser," Glitman concluded. "People have a tendency to believe what they read in a magazine, or even worse what they hear from a talking head on TV or radio. Mr. Jannke and this article, although somewhat factually based, failed to take into consideration the finished product side of the lumber and panel markets and sent false information out to many buyers and companies that have promised to hold prices for 30-60-90 days and now find themselves in a terrible upside-down position."
Your views on both Jannke's article and Glitman's response are invited. Send your comments to ProSales editor Craig Webb at firstname.lastname@example.org.