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Market Recap: RISI Crow’s Construction Materials Cost Index
A price index of lumber and panels used in actual construction for Dec. 2, 2011
*Western – regional species perimeter foundation; Southern – regional species slab construction.
Crow’s Market Recap — A condensed recap of the market conditions for the major North American softwood lumber and panel products as reported in Crow’s Weekly Market Report.
LUMBER: SPF lumber buyers watched futures drop precipitously, generating some hesitancy. In addition, many buyers had already purchased needs prior to the Thanksgiving holiday. Mill order files reported extending into the week Dec. 12 left minimal volumes available for the remainder of the year at some mills. Southern Pine lumber demand faded, easing the price appreciation that took place in recent weeks. Production startups following shutdowns during the Thanksgiving week gave buyers a reason to step back and consider their next move. Sales activity was quieter in the Coastal Species lumber market, but limited availability left prices somewhat firm in most instances. Lean inventories in yards and limited production, along with a lack of severe winter weather, all have buyers paying close attention to the market. The week started slow in the Inland lumber market, with narrows showing signs of weakening. However, buyers stepped in later in the week, and mills were able to clean up excesses and firm or even increase prices. Activity was mostly with secondaries and big retail chains. Although sales volumes were light, prices for Ponderosa Pine Selects and Commons remained firm. Production cutbacks due to difficulty getting logs helped keep Eastern White Pine prices firm. Idaho White Pine prices remained on firm ground, in spite of light sales. Prices were unchanged for Ponderosa Pine Mldg&Btr and Shop grades, although some downward pressure on Shop lumber was reported. Importers of finger joint moldings reported full order files. Western Red Cedar producers and their customers continued to line up business for 2012, each week placing more emphasis on the upcoming year. Orders taken for December shipment were very limited.
PANELS: OSB producers reported a strong finish to the week, with prices and order files both extending. Improved sales, along with upcoming holiday shutdowns, were enough to propel mill order files into the new year on many items. Southern Pine plywood producers continued to achieve higher-rated sheathing price levels of $5 to $15 and extend order files. Retailers purchased steady volumes, as did distribution yards. Wholesalers, able to sell off previous positions, bought back in with a fair degree of confidence. Sales activity in the Western Fir plywood market was strong enough to maintain firm pricing. Sales extended into the week of Dec. 19, but volumes were available for quicker shipment at mills. An improving Canadian plywood market that started last week continued this week, as holiday shutdowns were announced, and mild weather strengthened buyers’ confidence in the market. Much of the same trends were in play in both the MDF and particleboard markets. Despite unbalanced markets, particularly in the West, producers told their customers to expect price increases of 5% or less beginning Jan. 1, 2012.
AHMA Industry Confidence Index improves
The American Hardware Manufacturers Association’s AHMA Home Improvement Industry Confidence Index’s Current Situation Index improved in November to 266.7 from 262.5 in October (November 2008 = 100), while the Future Expectations Index also improved to 262.1 from 236.2.
In comparing current sales levels with year-ago levels, 64% of respondents said sales were higher in November versus year-ago levels, up from 63% in October. For November, 12% reported sales were even, and 24% said sales were below year-ago levels.
Looking forward six months, 76% of November respondents said they expect sales to be above current levels, up from 60% in October. In November, 16% of respondents said they expect sales to be even in six months, and 8% expect sales to be below current levels.
Looking forward one year, 76% of respondents projected sales will be higher, down from 79% who felt that way in October. Sixteen percent of November respondents projected sales will be even one year from now, and 8% projected sales will be below current levels.
Timothy Farrell, president and CEO of the AHMA, said: “It is encouraging to see, for the fifth consecutive month, that our members are reporting higher sales than the preceding month. We also see progress in other economic indicators, such as unemployment and housing sales. While these signs of improvement are consoling, we remain dissatisfied with the rate at which economic recovery is occurring and would hope for accelerated growth going forward.”
Lowe’s has praise for the ‘creator’ customer
All customers are not created equal.
During Lowe’s annual conference Tuesday, senior VP marketing and advertising Tom Lamb defined the company’s target customer by first breaking down home improvement consumers into four distinct groups.
Lowe’s target, he said, is on the two largest spending groups, together called "creators."
Understanding the target customer is a key to the company’s strategy of using the best combination of support and value, wherever and whenever customers choose to engage. Based on market analysis, Lamb pointed to four groups of customers, each with primary shopping motivation that influences their habits.
• "Diligent maintainers" are those who get the project done and move on. They represent 15% of households and 10% of home improvement spending;
• "Opportunistic diehards" are those who relentlessly search for the best deals. They represent 20% of households and about 20% of spend;
• "Inquisitive curators" are those who seek out expert opinion and innovation for their home as a retreat. They represent 30% of households and 30% of spend; and
• Finally, the "trendsetting upgraders" are those who love exploring and experimenting with their homes. These consumers represent 30% of households and 40% of spend.
Lamb described the target customer as a combination of "inquisitive curators" and "trendsetting upgraders." Together these two groups are described as "creators," and they represent more than 70% of home improvement dollars. Creators value reputation, customer experience, product range, availability and good value, he said.
"By meeting the home improvement expectations of the creator customer, we will exceed the expectations of all customers," Lamb said.
The creator mind-set also applies to the commercial business customer, who makes up about 25% of Lowe’s sales today, he added.