Market Recap: RISI Crow’s Construction Materials Cost Index
A price index of lumber and panels used in actual construction for Oct. 27, 2017.
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.
SPF lumber sales continued at a pace supporting higher prices for the ninth consecutive week. Limited supplies of SPF received much of the credit for escalating prices while demand remained strong. Apprehension among buyers to purchase grows each week, but needs often outweigh caution, evident in buyers now purchasing volumes for shipment as far out as the week of Dec. 4.
- Southern Pine pricing remained on a downward trajectory. Producers entered the market with greater buildups than the week prior and discounted accordingly. Buyers often reported purchasing the same volumes selling from their yards, avoiding any inventory buildups while awaiting a price bottom.
- The Coastal species market continued at a decent pace, maintaining pricing across several items, but some started to teeter a bit by week’s end. Buyers began to see greater volumes on some mill lists.
- Inland species continue to move forward, and buyers are not against getting in line for what they need. The protracted summer has become fall, and mills have good order files.
- Stud items once again varied in degrees of strength, lending to narrowly mixed price changes. Much of the market’s weakness was found in 2×4 items, where prices tended to decline $5 in most instances. On the other end of the spectrum, supplies of 2×6 9’ trims remained relatively tight.
- Buyers say they are finding more Radiata Pine available, but through August, imports of the species into the states is down from last year.
- Demand for Ponderosa Pine 4/4 Selects is sufficient to keep prices very firm. This year has seen one modest increase in Selects, some months ago. All 4/4 Common boards continue to be in reasonable demand, but they have clearly slowed from the strong markets earlier in the summer.
- Western Red Cedar producers reported sluggish trading. Buyers filled in inventories with a broad array of items purchased in modest quantities.
Buyers retreated from the OSB market this week as pricing continued to unravel in all but two regions. Retail takeaway still has some strength with the fall building season; however, caution and low inventory maintenance are the rule.
- Southern Pine plywood sales slowed, placing more downward pressure on rated sheathing prices. Seeing a weakening market, buyers limited their participation in anticipation of lower prices. Several buyers continued to wait on late shipments from producers trying to catch up with orders.
- Greater numbers of buyers held out of the Western Fir plywood market after seeing increased urgency among producers to sell. Mills lowered CDX quotes early, but by the end of the week admitted $10 discounts did not draw much more consideration from buyers.
- Canadian plywood pricing approached a perceived bottom, which quelled anxieties and brought buyers back to the table. Mills offered discounts early in the week to move files, but firmed by week’s end.
- Producers of both MDF and particleboard often reported a steady to moderately slower sales pace. Yards maintained close checks on inventory levels ahead of November and an approaching Thanksgiving holiday that typically ushers in an even slower rate of sales.
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Mixed results in Q3 for Lumber Liquidators
Lumber Liquidators, the hardwood flooring specialty retailer, reported third quarter 2017 net sales increased 5.4% to $257.2 million, from net sales of $244.1 million in the third quarter of 2016.
The Toano, Va.-based company also reported net sales in comparable stores increased $9.3 million, or 3.8%, driven by a 3% increase in the average sale and a 0.8% increase in the number of customers invoiced. Merchandise sales in comparable stores grew 1.8% in the quarter while net sales in non-comparable stores increased $3.8 million.
During the quarter, Lumber Liquidators opened three new stores and closed another. As of Sept. 30, the retailer operated 387 stores.
For the third quarter the company reported a net loss of $18.9 million compared to a net loss of $18.4 million during the same period last year.
"We saw continued growth in sales and positive comp store growth for the fifth consecutive quarter,” Dennis Knowles, Lumber Liquidators CEO, said in a statement. “That is despite the unusually severe hurricane season that we believe had a slight negative impact on net sales in some of our stores. A lot of credit should be given to our associates directly impacted by these storms. Their resiliency and commitment were inspiring, and our customers appreciated their responsiveness.”
Trex sales rise 32%
Trex, the decking and railing manufacturer, reported third quarter 2017 net sales of $140 million, a 32% increase from net sales of $106 million in the third quarter 2016.
Trex residential product sales were up 23% to $131 million. The Winchester, Va.-based company also reported a third quarter net income of $20.1 million compared to a net income of $7.8 million. Third quarter net earnings improved by 34% after adjusting for the effects of the prior year warranty reserve, the company said.
“Our organic revenue growth in the third quarter reflected strong demand for Trex residential products, as we continue to successfully gain market share from the traditional wood market and reinforce our leadership position in the outdoor living category. At the same time, gross margin continued to benefit from our ongoing process improvement programs, lower input costs and increased capacity utilization,” James Cline, Trex president and CEO said in a statement released by the company this afternoon.
“Our acquisition of SC Company, which was completed in the third quarter, forms the core of Trex Commercial Products and provides us with access to an important growth market as well as end market sales diversification. The integration is progressing according to plan, the segment’s third quarter revenue and earnings contribution were in line with our expectations, and it was accretive to EBITDA.”
Total net sales for the first nine months of 2017 were $443 million, a 15% increase over prior year, with Trex Residential Products sales up 13% to $434 million. Net income for the first nine months of 2017 was $76.8 million, up from $55.2 million in the prior year.