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. .

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. .

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