Issue link: http://palletcentral.uberflip.com/i/507696
palletcentral.com PalletCentral • March-April 2015 25 Between the weeks ending October 31 and January 23, the number of onshore drilling rigs operating in the lower 48 states fell by 16%, according to oilfield services firm Baker Hughes. Christopher Smith, managing editor of Oil & Gas Journal, forecasts 30% less pipeline construction in 2015 than in 2014. Demand for mats and board road has fallen sharply, and mat producers have been doubly impacted by a glut of used mats in the market. Also in late October, residential flooring plants announced they would slow or completely halt lumber receipts in November. Not only had their lumber yards filled up, but flooring sales and selling prices had also begun to erode. Truck trailer flooring plants also pulled in the reins on purchasing. Both flooring sectors remain cautious with purchases, with some residential plants again halting receipts in February. October was a record month for U.S. hardwood lumber exports, but shipments slid 10% in November and another 16% in December. Declines were most severe in the lower grades, particularly Red Oak and White Oak to Asia. Sellers began to push more #2 and #3 Common Oak into domestic markets just as flooring plants were curtailing purchases, and markets were quickly overwhelmed. Consequently, mills shifted as much #2 and #3 Common lumber production into industrial products as log lengths and markets would allow. Pricing Impacts From mid-October through year-end, prices for green 4/4 #2&3A Common Red Oak and White Oak slid $40-$50, and kiln-dried prices fell $50-75. Interestingly, green prices have essentially been flat since early January, while kiln-dried prices have fallen another $45-60. The shift to industrial products helped keep green #2&3A Common Oak markets from getting completely swamped, and long-term contracts between some flooring manufacturers and mills also kept average prices higher than open market prices. From mid-October through year-end, the average price spread between switchties and green #2&3A Common Oak widened from $75 to $136/MBF as #2&3A prices fell. Mills quickly transitioned some #2&3A Common Oak production to switchties, but the relatively small switchtie market quickly filled up and prices have declined 7% since year-end. From mid-October through year-end, the average price spread between crossties and green #2&3A Common Oak also widened, from $34 to $85/MBF. Since most crosstie orders are for 8'6" lengths, however, sawmills couldn't transition as rapidly to cutting crossties as to switchties. Even so, crosstie production bumped up 13% from November to December—the first increase for that period in four years—and crosstie inventories rose at the fastest rate in 12 months, according to the Railway Tie Association (RTA). Crosstie prices have fallen 3% since year- end as production continues to rise. Pallet sales are gradually expanding in parallel with the economy, keeping cant and pallet lumber supplies from getting way out ahead of demand. T.L.B. FOREST PRODUCTS INC. Contact: Gaétan (Ext. 223) or Oliver (Ext. 226) E-mail: gaetan@tlbhardwood.com Tel: 450-492-5130 fax: 450-492-5918 1336, Chemin des Anglais Terrebonne QC J6X 4G3 The Canadian Birch Specialist Ready to Nail Pallet Components www.tlbhardwood.com HARDWOOD LUMBER WHITE BIRCH & ASPEN CANTS AND PRECUT oliver@tlbhardwood.com