Just two months ago, spring was in the air, and the volatile market for structural panels was in bloom once again, sending out mixed signals. Prices for OSB and plywood, which hit 10-year highs last fall, were softening in mid-March, even though residential construction, which feasts on these products, had climbed 13 percent in February above the same month a year ago, according to the U.S. Department of Commerce. As a result, dealers waiting on the sidelines for a good deal suddenly had buying opportunities.

“We've gotten e-mails about carloads of underlayment and 7/16 OSB, which were in extreme short supply last year,” confirms Gene McKinney, vice president of purchasing for Tindell's Builder Supply, a six-yard dealer based in Knoxville, Tenn.

But as dealers prepare for what promises to be a busy summer, many are apprehensive about panel availability—especially OSB—and desperate to avoid a repeat of last year, when scrambling for panels at any price was an adventure and staying in stock sometimes meant purchasing product from The Home Depot and Lowe's. If construction and remodeling remain strong, as is expected, panels likely will remain pricey and hard to come by. “There's tremendous uncertainty on both the supplier and dealer ends,” observes Phil Skarada, president of Altoona, Pa.–based Your Building Centers, whose 15 yards were stocking six to eight weeks worth of panels, versus 12 weeks a year earlier. Speaking at Banc of America Securities' Consumer Conference on March 30, Lowe's chairman and CEO Bob Tillman said he saw no signs that plywood pricing would fall anytime soon. “The supply is pretty well managed. There's not oversupply. There are fewer manufacturers,” said Tillman, whose North Carolina–based company operates more than 950 stores in 45 states.

After the debacle in 2003—when prices and supply rose and fell like yo-yos as panel consumption outpaced production by 482 million square feet, according to Tacoma, Wash.–based APA-The Engineered Wood Association—dealers are ordering prudently. Supply instability has led dealers such as 29-unit Cox Lumber, based in St.Petersburg, Fla., to turn to Europe and South America for stock. But even Cox had just four and six weeks of inventory in early spring, compared to eight weeks a year ago, according to its director of purchasing Rich Pickens.

Dealers are stuck between the rock of not wanting to be caught short, and the hard place of still-stratospheric prices: On March 26, Random Length's benchmark for 7/16 OSB North Central—$470 per 1,000 square feet—was 173 percent higher than a year ago, and that was after a correction. “We're not sticking our necks out too far,” said Bob Roach, purchasing manager for Roanoke, Va.–based Moore's Lumber & Building Supplies, whose 19 yards had four to six weeks of panel inventory in late March.

That decision may not be completely voluntary, as suppliers set aside more panels for contracted customers, and limit opportunities for block buys and open-market purchases. “Five years ago, we could order 25 carloads whenever we needed them. Now, you're lucky if five are available,” says Michelle Newcomb, a buyer for the 240-dealer buying group ENAP.

“There's not a lot of inventory at retail, and it's been kind of a stare-off to see who's going to blink first,” said Quent Ondricek, vice president of lumber and building materials for co-op Do it Best, half of whose 4,400 dealer-members sell building products. “Dealers are holding back and betting that order fills will shorten, and suppliers hope that retailers will move back into the market before they have to lower prices again.”

Ganahl Lumber made its move when prices dipped briefly in November and December and its buyers started purchasing panels aggressively. “I've told them to go for it,” says Peter Ganahl, president of the Anaheim, Calif.–based dealer, whose eight yards had stockouts last year. Profitability, however, hinges on timing, as Ganahl anticipates “some relief” on panel prices by midyear. —John Caulfield is a contributing editor to PROSALES.