February 2018 Lumber and Commodity Report

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The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for February increased a whopping 11.1 percent to $456.83 per thousand as wood prices rose in all species and sizes.  It is unclear if this runup in price is a precursor to much higher springtime pricing driven by demand or it is a reaction to trade, trucking and labor concerns.  This increase added to the 4.4 percent increase from the prior month suggests the market may be getting ahead of itself.

 

The dimensional lumber portion of the Index increased 7.4 percent adding on average $36 per thousand.  2x12 #2 pine incurred brutal increases of $78 to $83 per thousand while spruce dimensional ranged from $32 to $43.  This week, the spike in lumber prices seemed to lose some steam and it is way too early to determine if this is the first sign of stabilization or just a breather before the next run.  

 

The wood sheathing portion of the Index increased 14.7 percent to $416.08 as the average price of both CDX and OSB added $53.42 per thousand or $1.71 per sheet.  Those are heavy increases for this time of year and the markets will be hard pressed to continue this pace without some help from the weather.  Plus, sheathing prices are not exactly priced at the low-end of the market.  

 

Too much, too fast may be the best description of the market.  However, builders can afford to speculate—so you must assume the prices will stick and go higher if you are bidding projects for later in the spring.  Housing starts in the next month or so will really determine how much strength is buried in these markets.  Stay close on prices and know what you are bidding in the future.


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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January 2018 Lumber and Commodity Report

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The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for mid-January increased 4.4 percent to $411.25 per thousand, and this reverses two months of nearly 10 percent decreases.  This may be the first flashpoint of a year with significant inflation in the supply chain if housing grows as some predict. The Trump administration’s position on Canadian lumber bolstered the most recent increase in commodity pricing as final duties of 20 percent plus were slapped on two Canadian producers for anti-dumping and countervailing duties.     

The dimensional lumber portion of the Index increased 5.4% to $451.29 per thousand as Canadian spruce increased in all widths and lengths.  Dimensional 2x4 spruce was up $10 to $50 while stud pricing held back only adding $2 to $12 per thousand.  2x4 pine lumber was up 4.6 percent while wide-width pine was flat to a plus 2.5 percent increase.  Overall, the direction of the dimensional wood market was up.

The upward direction is the same motion for the sheathing portion of the Index.  CDX plywood added $30 per thousand (or almost $1 per sheet) while OSB sheathing only added $5 per thousand.  Freight issues on all commodity prices are pushing up numbers as mills must struggle to find trucks and pay more to have loads hauled.  Don’t expect the trucking issue to resolve itself this year.

Pricing going up the first couple of weeks in January amid a major cold snap is not a good sign.  If housing demand continues to improve as does the weather, expect sharp price increases in the next few weeks.  Builders should anticipate higher pricing on jobs being costed for March and April as suppliers will probably struggle to hold any pricing.  

Expect higher prices and anticipate them now.

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. .

December 2017 Lumber and Commodity Report

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The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for mid-December dropped 10.4 percent over the last 30 days, and this is on top of a 9.2 percent decline from the previous month.  The decision by the United States Trade Commission in the continuing United States and Canadian Softwood Trade dispute favored the United States and reduced duties a little, but it also added some degree of pricing uncertainty.  This issue is not resolved, but it did weigh down the spruce markets.  Winter weather and the seasonal slowdown is also having a negative effect on the markets.
 
If you are wondering why your profit margins on projects you built this year have declined, consider this.  Since January 2017, the Index is up 36.8 percent with lumber increasing an ungodly 50.8 percent while sheathings added 25.7 percent.  To make matters worse, these prices in December are off the highs of September and October.
 
As builders and suppliers, many of us did not do a good job getting ahead of these prices and, in many cases, tried to not accept them.  This may be trite but something everyone in the supply chain must realize.  Unless you are a mill or timber owner, you don’t own the timber and you don’t cut the lumber.  Spend your energy managing and anticipating your cost increases instead of being in denial.  These types of increases must be passed to the end user.
 
I expect pricing to be higher in 2018 for two big reasons—labor and trucking, which are expected to continue to escalate.  Trucking is especially tough in Florida as carriers have limited access to hauling goods out of the state given the collapse of the citrus industry.  In addition, there is an extra push of post-hurricane rebuilding in South Florida and the islands. Wood commodity prices could easily see $5-$10 upcharges on trucking.
 
The dimensional lumber portion of the Index dropped to $451.79 per thousand (or 6.1 percent) as spruce gave back increases across the board.  2x4-16 #2 western spruce dropped 7.0 percent while 2x6-16 spruce gave back 5.6 percent.  2x4-16 #2 treated pine jumped 9.9 percent as truss plants and treaters continue to feel the hangover from Hurricane Irma demands.  Wide width pine was flat.
 
The sheathing portion of the Index dropped a whopping 14.2 percent as OSB sheathing continued its downward spiral from the hurricane highs of September.  Over the last 30 days, OSB dropped $70 per thousand (or $2.24 per sheet) while CDX pine gave back $30 per thousand (or $0.96 per sheet).  Oddly, the only price increase was 3/4” CDX, which added $45 and that is probably due to the mix and supply issue from the mills.
 
If the winter weather continues to ice the north as it is doing now, expect prices to stay down for the next few weeks.  In late January to mid-February, builders should probably expect the higher cost of freight to begin pushing numbers back up as well as the suppliers getting prepared for the spring selling season.
 
This forecast is contingent upon no huge national event or political upheaval taking place, which could quickly change the fortunes of housing.
 
My best advice to builders is simple—do not use December’s pricing to bid projects in the spring.  Other building material suppliers, such as window and door manufacturers, drywall products and shingle companies are already announcing spring price increases.  Your local suppliers will not be able to hold prices because the price increases will be so across the board.  Builders should have price escalation clauses in their contracts.
 
I would like to thank the builders, remodelers and subcontractors for supporting Ro-Mac Lumber & Supply.  On behalf of our staff, I would like to wish you a very Merry Christmas and a prosperous New Year.  Enjoy your holidays—you deserve a break.
 
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. .

Novemember 2017 Lumber and Commodity Report

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The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index dropped 9.2 percent as the collapse in sheathing prices drug the entire Index down.  The Index would have dropped significantly more if not for the tariffs and duties slapped on Canadian softwood by the United States from the ongoing dispute regarding the Softwood Lumber Agreement.  Heavy price increases in spruce have impacted the commodity markets and most traders have no idea how this dispute will end. 
 
The dimensional portion of the Index increased 6.5 percent on the strength of dimensional spruce.  2x4 spruce was up 8.3 to 29.8 percent, depending on length.  Harder to secure longer lengths of spruce soared in price.  Most dimensional pine pricing drifted downward 5 to 8 percent.  The United States government is solely responsible for this increase as well as the bad blood being created between the two countries. 
 
The increases in spruce will probably be temporary because winter weather will soon affect the market.  However, these prices will open the door to European and Russian spruce, which will not face these tariffs.  It seems the United States government is creating a crisis to push business away from one of America’s best trading partners.  Ultimately, prices will settle down.
 
The sheathing markets are in full retreat as pricing got way above realistic market numbers.  Over the last 30 days, OSB retreated on average 25 percent (or $127 per thousand) while CDX dropped between 4.7 and 8.3 percent.  The total sheathing portion of the Index dropped a whopping 19.6 percent.  Frankly, there is more pricing to shake out.  The current market does not support pricing at these levels.
 
During the next two months, the drivers will be housing demand, winter weather, and the actions out of Washington, D.C.  None of these instill much confidence that markets will see major price increases.  With markets at higher levels, there is little mills and manufacturers can do to prop up these markets—so expect a general movement downward. 
 
A lot of manufacturers are beginning to announce price increases in January and February.  This is a tricky time for quoting in the long-term and builders should not assume pricing will be stronger in the spring with a weak portion during the winter.  Be careful you don’t get caught—keep in close contact with your suppliers. 
 
Have a happy Thanksgiving and please be safe.
 
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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