Specialist
Executive at a Florida-based building materials supplier
Agenda
- Pandemic’s impact on lumber material pricing dynamics
- Lead times and normalisation expectations
- Evaluation of key suppliers such as Builders FirstSource (NYSE: BLDR) – differentiators and competitive strengths
- H2 2022-23 supply-demand outlook
Questions
1.
Could you outline the lumber market’s operating environment over the last 18 months, picking out 2-3 key secular trends?
2.
How has the Russia-Ukraine conflict impacted the broader lumber market, and what are your expectations for future impacts?
3.
You mentioned delays. How are freight and energy costs complicating the lumber market today?
4.
The Wall Street Journal recently reported that lumber prices have shed more than 50% since March 2022, but I’m more curious about it saying lumber buyers have slowed orders, wood is piling up at mills, mills are slashing prices and triple-digit discounts will become the rule rather than the exception. Does that sound like an accurate description of the operating environment today, or what would you caveat?
5.
The more interesting part of the Wall Street Journal article was that triple-digit discounts will become the rule rather than the exception. Could you bring in the pricing environment as you see it today? Are you seeing triple-digit discounts?
6.
You alluded to USD 650-1,000 as the bottom for the price of lumber, but how did you reach this number? What does a reasonable price per 1,000 board feet look like and where might that lower limit lie?
7.
How do you expect inventories to trend as a result of what we’re seeing today? Do you expect a further build of inventories as we’ve seen in the past few months, or might we start to see inventory depletions as tariffs are set to lower in August 2022?
8.
Do you expect a structural shift across the board towards holding slightly higher inventory than historically, given the supply chain constraints?
9.
How have the tariffs on Canadian softwood lumber impacted the market? We saw a sharp increase in November 2021 to nearly 18%, and in August 2022, the rate will drop to around 12%.
10.
How should we think about the implications of a stronger US dollar? What could this mean for lumber markets and the Canadian market?
11.
I’ve read there have been some problems in Canada’s western forests – fires, floods, difficulty getting timber, shipping problems, etc. Which of these issues do you expect to persist, and what impact might it have on the lumber market generally?
12.
How have lead times evolved for the various softwood lumber types, such as western spruce, pine wood and fir wood, vs historically? What did they look like at the peak?
13.
How do you expect lead times to evolve over the next year or so, and what key factors are you looking at?
14.
You talked about the issues with trucking and rail, but do any significant supply chain bottlenecks remain that are perhaps less appreciated?
15.
Could you break down where lumber goes across new construction vs R&R [repair and remodel], and then vs single- and multi-family?
16.
Of all lumber procured, what percentage goes to new construction vs R&R?
17.
You mentioned there’s pent-up demand in the DIY or R&R market, which seems contrary to what we’re seeing in the news. Southern yellow pine prices – the favourite lumber type for DIY – have sharply fallen. What are you seeing differently? Why are you seeing pent-up demand? You mentioned the retail side is softening.
18.
I mentioned that southern yellow pine was the indicator for the slowdown in the R&R market. Are there other leading indicators that might be lesser known by outsiders and investors, such as a certain type of wood declining means X for the commercial market?
19.
You mentioned some secular demand shifts, such as bigger homes to include an office, and I believe during the 2000s there was a shift to generally larger homes. Could you outline some of those unique secular demand trends, where you see them emerging, and what it means moving forward?
20.
Some demand could wane for single-family homes given the rising rates, but where might we see demand pick up? You outlined some areas, but are you seeing increases in multi-family housing, build-for-rent or commercial markets that may offset the single family declines?
21.
Within lumber, has there been any notable shift from one type of softwood to another, or have you noticed any material shifts in any market or home type?
22.
How have the various suppliers you’re familiar with performed? Has any supplier better managed the volatile cost swings we’ve seen over the last few years?
23.
There’s a lot of talk in every industry about pricing power and cost pass-through, so how would you describe the pricing power of suppliers? Are you seeing any signs that builders are becoming more resistant to price increases? Generally, how would you describe suppliers ability to pass cost through?
24.
How easy is it for suppliers to pass costs through to you or builders? Does it vary to any extent? Is any channel more difficult to pass cost through to?
25.
What’s your 12-24-month outlook for lumber prices?
26.
You said you would need to see some serious demand disruption to modify your forecast, but what would indicate material demand disruption for you?
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