As I See It
August 13th, 2009 — By Jeff Meyer
As we move into the latter part of the summer, it’s hard to get a read on where the lumber markets are headed. Domestically, our distribution customers are telling us that July was a slower month after they experienced some better activity in the spring. Our hope is that once we get into the fall the distribution business will pick up again. Of all sectors, flooring seems to show the most life. Flooring manufacturers are experiencing a shortage of green lumber, primarily based on reduced production by sawmills. However, we sense that sales of flooring itself are getting moderately better.
Some of the general economic indicators, as well as indices specific to the housing industry, show reason for cautious optimism. One report showed that average sales prices for existing homes increased slightly for two months in a row in most major metropolitan markets. This suggests that the housing sector has hit bottom and is on its way back up. On the other hand, I read an interesting article in the Wall Street Journal a few weeks ago which said that tough times are now hitting the upper end housing market. Up until now, lower to moderate priced houses have been affected the most. The market for these homes is now better, but now upper end homes are beginning to suffer. Since many of our products go into upper end homes, this is not necessarily an encouraging statistic for us. This mix of economic indicators is indicative of the uncertainty in our markets.
A few comments specific to species and markets. Our sense is that Europe will experience a shortage of White Oak in the fall, which will most likely be driven more by lack of supply than demand. I’m not sure demand will pick up substantially, but there is clearly significantly less White Oak being produced. This, taken together with the low inventories that most importers are carrying, suggests that there may be opportunities for better sales in the fall in the European market.
The one bright spot we’ve seen over the last couple months is the Asian business. We’re experiencing more inquiries and more orders. The question is whether this will be a sustained rally, or whether buyers are simply replacing inventory.
Along with you, we hope that conditions for the industry will improve as we move into the fall. As I always tell our bankers, our industry is cyclical and we don’t ever stay in one part of the cycle too long. We certainly look forward to the next phase of this cycle.