SYP traders hoping for more predictability in 2024

What lies ahead for the Southern Pine lumber market in 2024: stability or roller coaster ride of price volatility?

Price volatility in the Southern Pine lumber market eased markedly in 2023 from the pandemic-infused chaos evident in the three previous years. While most traders welcomed that trend, many lamented that the reduced volatility failed to make the market’s near-term shifts any easier to gauge.

In fact, many veteran traders noted that coming trends were as difficult to predict last year as they could remember. The uncertainty discouraged speculative purchases among secondaries and prompted many buyers throughout the distribution pipeline to operate with unusually thin inventories through most of 2023.

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Last year, the Random Lengths Southern Pine Composite Price traded in a $116 range, from the lowest monthly average of $356 in November to the highest of $472 in April. In 2022, the Southern Pine Composite fluctuated $697, peaking in February at $1,128 and hitting bottom for the year in December at $431. The ranges in 2021 and 2020 were $739 and $546, respectively.

Many traders noted that the milder overall price shifts in the Southern Pine market could have potentially emboldened buyers to purchase more heavily beyond immediate necessities. For most, however, that trend never materialized.

Among other factors, buyers spent most of 2023 confident that supplies were readily available at the mill level. Even when prices were rising, buyers were skeptical of the upward trend’s sustainability, noting that production might soon overtake demand. Further, perceptions of production trends in the South appeared somewhat misleading.

Traders and analysts widely anticipated production increases in the South last year, citing new capacity coming online in several locations. However, the latest statistics show that production in the South slipped slightly through the third quarter compared to the first nine months of 2022.

Some observers have noted the unusually chaotic markets that persisted during the pandemic years had a lingering effect on traders’ confidence in identifying coming trends. Many have said it will take time before traditional historical patterns become more reliable indicators, given the anomalies that have surfaced in recent years. 

This story was first issued by Random Lengths International.

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