RE:RE:A short read following up my looong previous post Dang, no, I rarely do any reading outside of some NSFW magazines personally. But when I do, I make sure to follow those swell media insights blindly.
You're probably being overly generous assuming minimal earnings at $400 given the fiasco that is the BC market pricing system, CFF being an uncompetitive operator, and it's old asset base. But, it begs the question, is July pricing probable to persist? You can probably do more justice to the point considering some of the following:
1) R&R demand attenuated. HD is pricing lumber at $1600 still. That's US. Any pent up demand won't be met until that gets back to 3 digits. This gets back in balance shortly
2) Seasonalty. Sell in May and go away, right. Per 1, and amplified by the constraits affecting near term home building and it's hitting the demand side.
3) Competitive response. That incremental volume and capex that weighs on optics? Not all locked in.
4) Trade. DF logs back to Japan; Euro spf staying Euro.
5) Substituion. Steel hasn't fallen; this bodes well for CLT.
6) Not cherry-picking dodgy data. "Futures" cease to be futures when they expire. That's your datapoint, the expired July contract? All I see is $570 to $625 sept to may. Per the above, and with the more modest housing numbers last out given unusual factors, is that really surprising to you that lumber has fallen closer to
Its maeginal cost?
7) time delay. I don't know, but suspect, the long order files have fallen well off 6+ weeks as they were, but call it half, and about 40% of Q3 is already booked. The debt riddled have the most to gain by this final shot to buy back majorly or fully de-leverage
8) Interest fears are emergent and valid. As smarter people than me say, mills can't overproduce 1.5+ M starts... but they sure can flood a 1.3M environment. So what's it gonna be, high rates and attenuated housing in light of the multimillion unit deficit, or persistent easing... sparked by cheaper wood given it won't near term end up over $1000 imminently? Seems like more houses is likely the better bet from a policy standpoint
So, short this name down for fun and profit! Easy money?? Make sure to keep us degenerates posted if you don't mind. The argument here is likely ongoing gaps in mgmt abilities, more rail delays, going sub $2 to penny stock territory, and other fiascos Who knows, I've been wrong before and likely will continue to be
anyway, here's a better read as to the bigger picture drivers per Corton Capital's June publication.
MONTHLY HIGHLIGHTS
The biggest event in the month was the meteoric drop in lumber prices. However, prices for other wood products, namely OSB and plywood, continued to climb higher.
• WSPF 2X4 lumber prices, as reported by Random Lengths, reached a record high of US$1,630/mfbm in early May before falling 50% to end the month at US$780/mfbm. Prices, however, are still 100% higher than in June 2020. We believe lumber prices are very close to “bottoming out”.
• OSB prices ended the month at US$1,345/msqft – an all-time record high. Last June, OSB was selling for US$285. (see related article).
• The U.S. housing market remained strong in May. On June 16, the U.S. Department of Commerce reported housing starts at a seasonally adjusted annual rate of 1.572 million units in May – an increase of 3.6% from April. Building permits remained high at 1.681 million units. We believe starts would have been higher were it not for shortages of other key building materials, such as, OSB and plywood.
• The recent heat wave in the U.S. Pacific Northwest and in British Columbia has increased the potential for wildfires. With record low log decks at most western sawmills, any disruption (fire bans) on logging operations could likely force temporary mill curtailments. This could trigger a resurgence in lumber prices. In addition, we are closely monitoring the outcome of the B.C. Government’s recently announced plans to reduce the provincial annual allowable cut by 7 million m3/year or 11% of current harvest levels by 2026. This will force the permanent closure of another 5 or more sawmills, particularly in the B.C. Interior