October 2017 Lumber and Commodity Report

 

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The lumber and commodity markets have tried to digest three major land-falling hurricanes in the United States over the last 30 days, which has been difficult to say the least.  With each passing day in October, the threat of additional storms wane and so should the markets.  Although the runup in price has been very strong, unless there is a sudden ramp up of homebuilding activity nationally these price increases will not have the legs to go further.  Since mid-September, the Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) increased a whopping 10.0 percent to $440.13 per thousand.  Some cracks in pricing for less popular items indicate that this price run may be waning.

The dimensional portion of the Index increased 4.6 percent to $451.80 per thousand, primarily on the popular lengths of 2x4 spruce and 2x12 pine.  Short lengths of 2x4 spruce dropped almost 3.0 percent while 2x4-12’ through 2x4-16’ added 10.5 to 17.1 percent.  2x12 pine added $30-$45 per thousand, with the price going higher for longer lengths.  2x4 treated added $60 per thousand while 2x6 spruce increased almost 9.0 percent.  The price reductions in shorter lengths suggest the market could be running out of steam.

The sheathing portion of the Index did not have any cracks, as all items printed higher.  OSB sheathing was up $73 to $75 per thousand (or $2.40 per sheet) while CDX pine added $30-$45 per thousand.  Other than 15/32” CDX most items were flowing very well to suppliers, and that price retreat may be sooner than later as we enter the holiday season.

A lot of vendors in the building material sector are feeling emboldened to announce price increases in the wake of the hurricanes, but if the building markets do not improve in regards to actual new home construction, these increases may be short-lived.  For instance, a drywall manufacturer has announced a whopping 18.0 percent increase the first of January—that is a lot of money. 

Just like this report indicates, certain items will begin to moderate depending on availability.  Expect some normalcy to enter the market and prices to moderate by mid-November.  Continued political strife in Washington, D.C. could exacerbate this pricing decline, especially if job creation continues to slow.  The rough patch in pricing is probably over—just get ready for spot market volatility.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at  This email address is being protected from spambots. You need JavaScript enabled to view it. .

September 2017 Lumber and Commodity Report

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After two land-falling hurricanes striking the United States, the Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) jumped 8.8 percent to $440.13 per thousand.  The need for sheathings drove the market upward while quieting down the normal building in Texas and Florida.  The structural and building material components generally begin to feel increased volumes a few weeks after the storm.
 
The sheathing portion of the Index increased 17.1 percent (up $65.20 per thousand or $2.09 per sheet on average) as both OSB sheathing and plywood jumped dramatically in price.  For the state of Florida, the trouble is CDX pine plywood as OSB sheathing is not the preferred product in many of the higher wind-zone areas.  Additional hurricane activity could strain an already burdensome market, and this week Florida could actually see a spike in sales from suppliers as power and communications are just being fully restored.  Expect little relief in sheathing prices no time soon.
 
Pricing for the lumber side of the composite was down 0.9 percent to $431.73 per thousand, as general building conditions throughout the country appear to be cooling and there are more indications that the U.S.A.—Canada Softwood Lumber Agreement may get resolved by reducing market share instead of heavy tariffs.  A lot is still to be decided.  Plus there appears to be a greater push for European and Russian spruce at higher prices.  Once the heavy rebuilding in the Houston, Texas area gets in full swing as well as the rebuilding in South Florida cranks up, this market may follow.
 
The real concern for builders should be supply and labor.  Pricing may become an actual secondary issue.  For certain building material items, demand and trade issues could restrict flow and these hurricanes, especially in Texas and Florida, have already made a bad labor issue worse.  This could actually slow jobsite production. 
 
Then there is the reality that hurricane season is not over.  Don’t forget, Hurricane Matthew nearly clobbered Florida the first week of October last year and there are no guarantees the country is done with hurricanes.  Another hurricane threat or direct hit could be devastating to a supply chain that has not fully recovered since the hurricane.
 
Builders should stay in close contact with their suppliers on specialty items.  In addition, they cannot wait until the last minute to order—they must get prompt decisions from their customers.  The next few months could be very challenging for everyone in the building industry in Florida.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

August 2017 Lumber and Commodity Report

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The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) increased 2.3 percent to $404.56 in a market which is best described as mixed.  Strong increases in OSB propelled the Index into positive territory as most species of wood products jockeyed for direction.  It appears this month’s increases are far from cemented into the marketplace and it appears the base is more like shifting sand.  The uncertain environment in business, building, and the U.S.A.—Canada Softwood Lumber Agreement is leaving mills and traders scrambling.

The lumber portion of the Index dropped 0.5 percent to $435.84 per thousand.  2x6 spruce, 2x4-12 spruce, and 2x4-16 treated pine kept the declines to a minimal as the overall market was bearish.  A proposed settlement of the Softwood Lumber Agreement, which restricts imports instead of imposing huge duties, could crater the markets.  Long-term gaps in supply would probably be made up by European and Russian spruce as American producers probably could not handle the load.  This could be a recipe for future shortages if housing were to return to historic levels.

The sheathing part of the Index enjoyed a 4.8 percent increase fueled on a $23 per thousand increase in OSB.  This 74-cent increase in OSB propped the market up as CDX was mixed from $15 down to $10 up, depending on thickness.  If the country makes it through hurricane season unscathed, the sheathing markets probably cannot sustain this level without increased housing activity.

If you can predict the future, you probably can predict the commodity markets.  If conditions settle and there is no hurricane season, expect pricing to remain in a tight range to down.  If uncertainty gets worse and confidence retreats, expect pricing to go down.  Builders should hedge their bets with a Price Adjustment Clause in their contracts and updated bids.  Hold on—the rollercoaster is still moving.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

July 2017 Lumber and Commodity Report

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The Ro-Mac Lumber & Supply, Inc Wood Commodity Index (Index) is firmly strapped in the pricing rollercoaster as it dropped 9.1 percent last month while increasing 7.5 percent this month.  The continued upheaval on the U.S.A—Canada Softwood Lumber Agreement along with duties and tariffs are causing whiplash among buyers and builders.  Rumors of an agreement with reduced levels of importing and lower tariffs have buyers in a tailspin.  Throw an uncertain housing demand into the equation and no one knows where pricing will ultimately end up.

The dimensional lumber portion of the Index increased 8.4 percent to $438.10 per thousand.  SPF led the way upward with strong moves.  2x4-92 5/8 studs were up 9.2 percent (or $42 per thousand).  That translates into more than 22-cents per piece.  2x4 dimensional spruce was up $35 to $50 per thousand while 2x6 SPF soared by the plus $70 per thousand range.  There is little doubt it—the tariffs, duties, rumors, and heightened wildfire season are impacting SPF pricing. 

Oddly, pine dimensional pricing is in retreat.  2x12 pine was down 4.4 to 11.0 percent while 2x4 pine gave back 9.6 percent.  This decline in pine may be a truer indicator of the markets.

The sheathing portion of the Index increased 6.8 percent, with OSB sheathing leading the way with across-the-board $24 per thousand increases.  A 77-cents per sheet increase in OSB sheathing is somewhat sizable.  CDX pine increased in price, but it was not consistent across the board.  15/32” added $25 while 19/32” increased $15 and 3/4 T&G dropped by $15.  The most important takeaway is that the sheathing market gained somewhat.  However, it is still below levels hit in the spring.

 

Commodity pricing is causing inflation in housing.  Since last year, there have been large price increases in the following items:

  • 2x4-92 5/8 Studs up 34.3 percent
  • 2x4-10 #2 Spruce up 32.2 percent
  • 2x4-16 #2 Spruce up 17.1 percent
  • 2x6-10 #2 Spruce up 28.1 percent
  • 2x6-16 #2 Spruce up 36.4 percent

 OSB Sheathing went up 24.5 percent on average.

These are real increases, which are hard to digest by many builders and subcontractors.  The real question is—are these increases and the impending tariffs going to price the housing market out of reach for many buyers?  My real concern is that it will. 

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

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