Plywood costs, wow !!

Perfect Drift · 09-26-2003, 03:56 PM

I went to Parr Lumber this morning, all I needed was 2 sheets of 1/4in. A/C plywood. I was floored with the cost, $ 21.00 a sheet and this is 1/4 ". Well, how much is 3/4", are you ready? $ 36.00
The salesman explained that with all of the big contracts and lumber going to Iraq, guess what??
And who has the biggest contracts? Companies from Texas !!
Some how the big plywood and wafer board mills have had a shortage since May, imagine that. They cut production to raise the prices.
When, if ever will this stop?? Some how all of the gas stations magicaly raise the prices on the same day, HUM ? It makes me so angry !!
Anyone have another angle on the lumber cost?

Bait Bucket · 09-26-2003, 04:17 PM

Plywood is traded as a commodity on the commodities market. The prices you see today reflect the market five to ten years ago coupled with the higher price of energy to manufacturer the board and, of course, the lack of local supply because of exports. The folks back east had a very difficult time preparing for the hurricane there because of the availability (or lack thereof) of plywood.

Thumper · 09-26-2003, 08:29 PM

Quote:

Originally posted by Perfect Drift:
The salesman explained that with all of the big contracts and lumber going to Iraq, guess what??
And who has the biggest contracts? Companies from Texas !!

<font size="2" face="verdana,arial,helvetica">I am told that the recent hurricane totally depleted plywood stocks on the east coast. I suspect that is the main reason, and probably has little to do with Iraq or companies from Texas(?)

1pump · 09-26-2003, 09:21 PM

A combination of all of the above.

As the Church Lady would say, "How convenient!"

monoman · 09-27-2003, 06:34 AM

In order to make plywood you must cut trees! If trees are in short supply, for what ever reason, than plywood will be in short supply.
I can not believe Iraq is pushing up the plywood market that much, and I don't know too many lumber brokers in Texas.
What else can we blame on those poor Texans?

roadsend · 09-27-2003, 06:56 AM

"If trees are in short supply, for what ever reason, than plywood will be in short supply."

The current price offered for my logs is less than half of what I received seven or eight years ago. Plywood prices were nowhere near as high then. A modest increase in log prices would send supply through the roof.

I think the plywood marketing folks are taking lessons from the oil companies.

Woody · 09-27-2003, 08:14 AM

I'm building 4 ft high sideboards for my dual axle flatbead trailer this weekend. Because of the high plywood prices (30 bucks for 3/4 ACX),I found it was actually cheaper for me to use solid 2x6 all the way up!!!

Conn · 09-29-2003, 09:34 AM

I'd like to add my $.02. As a broker of timber products, not this exact commodity, I have enough understanding to state my opinion. For the past few years, the plywood market has been hovering at record lows. Too much supply to fill a good demand. Pricing before this recent run up was very close to that of 20 years ago. Call it what you will, but too much production, weather from Canada or here, or other imports will keep pricing very low. The increase is due to real cuts in production at the mill level.

Actually the run up in pricing at the wholesale level occurred back in May. It may be just hitting the retail level now due to inventory back up, but as the conspiracy theorists like to speculate the great big timber barons are not doubling pricing just because of a hurricane or the war. Again I am a broker, I buy and sell, I don't work for the large producers.

In fact you can blame the local wholesale distributors getting caught with too low of inventory when the shortage began. They all got lulled to sleep believing at any time they could call their friendly mill or broker and hammer him on price because he knows the volume is there and the mill/broker will drop his pants just to get rid of the inventory. Fast forward to today, many brokers have gone broke, no pun intended, and the mills have cut production and shut down plants and there is not much wood around. So time to pay a fair market price.

In fact the govt Iraqi contracts were a drop in the bucket. OK, volume but not enough to double the market. We have had a good demand for plywood and OSB due to the housing market, but too much production so pricing stayed down. It will top out as it always does and production will rise again to meet and most likely exceed demand, until then, let the lowly plywood trader celebrate for a while, because its been a long time coming. This trader provides liquidity to the market, but has had a tough time paying the bills the last few years.

monoman · 09-29-2003, 01:47 PM

Conn

I love when it works!
The law of supply and demand.

Swamp Puppy · 09-30-2003, 07:58 AM

Quote:

Originally posted by Conn:
until then, let the lowly plywood trader celebrate for a while, because its been a long time coming.

<font size="2" face="verdana,arial,helvetica">you let him celebrate..i am just finishing up framing my house and am currently THOUSANDS of dollars over budget simply because of timber cost increases. mind you, i am not a real estate developer or contractor, just a guy that thought it would be cool to build his own home. demand in iraq???? bah...these guys should be hung with the same criminals that are price gouging us for gasoline. i'll believe "supply" problems as a reason for this price increase just like i believe that a pipeline breaking in phoenix, ariz. caused gas around here to shoot up 20 cents a gallon overnight a week before labor day weekend.

Conn · 09-30-2003, 09:57 AM

Mossberg,

You are entitled to your opinion. I have no idea if the local lumber distributor is price gouging, however I do know that major mills have shut down production because they could not afford to continue to produce what they could not profit from.

Before you imply violence toward people you ought to try to get at least some sort of understanding of what you are talking about. It is very easy to explain away our frustrations by pointing to those in authority.

As I mentioned in my previous post, the pricing for this product has been depressed to 15-20 year lows for three to four years due to overproduction, and competition from composits such as OSB and imports.

These price levels were unsustainable. As with any commodity, production will be reduced until there is sufficient scarcity of supply to increase the price which produces the incentive to increase production. That said, todays levels are also not sustainable, as production will ramp up, and the winter months will slow demand. But, there is so little in the pipeline don't expect retail pricing to drop for some time.

The comment regarding traders celebrating by no means was condoning any price gouging, just my observation of my coleagues who last year at this time were worried about losing their jobs because of no market. Beleive it or not these are hard working individuals looking to better the lives of their families through hard smart work.

It is naive to believe the price increases are due to a few board room types deciding to raise the price of this commodity. If it were it would have been done about four years ago.

Swamp Puppy · 09-30-2003, 07:32 PM

yes, that is quite the story of supply and demand that you weave to help justify the sudden increase in costs for plywood. i was a sales trainer for 8 years prior to leaving to start construction on my house and the first lesson i tought was, "how to justify your price". i have sold my way around exploding tires, knocking engines, bad seatbelts, bad transmissions, and markups so high that they make your wallet hurt just looking at them. with the right story you can get anyone to cash in the kids college funds and strap on payments that rival their mortgage.

i may not have all of the information regarding this situation, but i know a snow job when i see one. as the saying goes, "don't BS a BS'er."

while i hate to think that people would lose jobs because of the pricing situation, that still is no basis or justification for paying almost $40.00 for a sheet of glued together stips of wood. while i am sorry that they suffered for a few lean years, i still see no reason to charge ridiculous prices simply because they have a convenient excuse (Iraq) to do so. the simple fact that you are using the argument that people who once had a hard time in the industry are now suddenly financially sound only helps solidify my feelings that the price increase isn't because of greater costs, but to simply increase profits.

Conn · 10-01-2003, 06:46 AM

Mossberg,

I'm sure your 8 years of sales training in the automotive industry gives you a full understanding of commodities markets. I'll quit BS'ing you.

Straydog · 10-01-2003, 06:56 AM

Quote:

Originally posted by monoman:
In order to make plywood you must cut trees!

<font size="2" face="verdana,arial,helvetica">Next time you get in an airplane and fly south and see what is going on in our watersheds or the next time you travel out of the metro market and see the log trucks on the roads, tell me with a straight face that there are no trees being cut. Then, look at the wood being imported and tell me no trees are being cut....

[ 10-01-2003, 08:01 AM: Message edited by: Straydog ]

Swamp Puppy · 10-01-2003, 07:54 AM

Conn - no, i can honestly say that i am not too well versed in the commodities markets. even my investments have all been stocks or mutual funds. however, it gave me a great understanding of supply and demand. there are very few industries that change as fast as the automotive industry when considering the supply vs demand issues.

my only point is this. don't try to fleece me with stories about how Iraq is the reason for high wood costs, high oil costs or high any costs. i am not directing this at you personally, but at the business world in general. there is no way that supplies of plywood dropped so low so fast as to justify this rapid of a cost increase. my personal belief is that initially there was probably a justified reason for a moderate price hike and then when nobody complained to harshly about it they decided to hike it again to boost the bottom line. all the while crying poor man and blaming it on iraq because the public already hates them (generally speaking) and it makes for a convenient deflection.

Conn · 10-02-2003, 08:13 AM

Mossberg,

I think you and I might be able to partially agree upon this thing. You are correct, anyone saying the jump in pricing was caused by the war is incorrect. This industry pumps out so much volume, and the demand for Iraq was such a minial percentage that it was barely a drop in the bucket. I still stand by my explanation that this has been caused by short supply from mills slowing or shutting down.

Now, at the retail level, HD, Parr, or where ever you go, these guys may be price gouging. I have no idea as I have not checked retail pricing. Raising pricing to what the market will bare is not illegal, however it may **** off your customers enough that they will not come back. I'm sure you might rethink who you purchase from next time. The price run up was definately not caused by the war.

In our business, trading, it is very difficult to gouge as going market pricing is published in the Random Lengths newsletter and the customer has many choices as to whom to buy from. However if we have something we purchased at the bottom of the market and hold until the market is screaming, it is not unethical to sell at the going rate no matter how much profit we make as we get caught owning stuff when the market takes a dump. In a down market no one steps in to help us to sell above our cost, why would they. Its the law...the law of supply and demand.

Remember one thing, production always rises to meet the demand, pricing tops out and goes down. This will happen in due time.