Weekly Market Wrap Yaletown Lumber Industries Ltd. Prepared by Vince Bulic For Week Ending Friday March 20, 2015 Futures Wk. Close Change May July Sep 280.80 279.40 287.00 ↑ 7.30 ↑ 6.00 ↑ 5.60 High 284.00 282.40 289.20 Cash prices as reported by Random Lengths Low 265.50 267.00 275.80 Cash: Overall selling lumber was a struggle this week – product changed hands but prices suffered as sellers were more eager than buyers. There was a brief pick-up in business mid-week but by the end of the week momentum had stalled. Buyers seem to be content to fill needs and not more even with prices (USD prices that is) at levels we have not seen in some time. US February housing starts were down 17% to 897,000 units, but most ascribed this large drop to weather as permits actually rose 3% to 1,065,000. The Random Length Composite Index fell $2 to $333. If it stays down here Canadian mills will be faced with a 10% export tax in May. The April 5% export tax will be the first tax since September 2013. Futures: May started the week under pressure, made a low of $265.50 Tuesday morning and then recovered that afternoon. The rally in the futures has been capped by the reluctance of cash to go along. May futures are for wood two months out so the premium to cash is not surprising. It’s also a sign that it is getting harder and harder to be really pessimistic given that we’ve dropped $60 since December and are at levels that have triggered larger buy ins before. An optimist could find support on the chart at $270 – this was a previous support level in late 2012 and during the 2013 collapse. So maybe futures consolidate above $270 2x4 #2+Btr Base Price Compared to Futures Last Week Last Year $276 Composite May $8 Prem $ 333.00 $282 $366 Cdn $ 1.2586 until real world supply and demand dictates the next move. A rally back up to $300 is also a possibility if those short start covering en masse, but $300 would be really hard to break through easily now. Looking ahead: In 4 of the last 5 years the market has fallen in the 2nd quarter. So the first day of spring has not been a good omen the last few years. Could this year be different? We are definitely starting at much lower levels - last year 2x4 SPF was exactly US$90 higher. The exchange rate has softened the blow for Canadian producers, but no such luck for their US counterparts. China usually steps in when prices get cheap but no sign of them so far. Are the Europeans and Russians stealing the North American producer’s lunch over there? It would seem so along with a Chinese appetite for lumber that may have reached its peak. I remember seeing a chart in a presentation a couple of years ago which showed China as a very large importer of logs from the Pacific Northwest back in the early 1980’s. They were a substantial player in the market and then they just disappeared for 25 years. With the way the global economy has changed I can’t imagine something like that happening again – but heaven help us if it does. Vince Bulic,Yaletown Lumber, Tel: 604-688-1037 Futures Weekly Chart – Could $270 be a new support level and $300 the new resistance point?