The commodity market’s hard landing in September got a bounce thanks to a Hurricane named Florence. The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for September 2018 increased 3.5 percent to $416.10 per thousand, primarily on the strength of the sheathing portion of the Index, because of the hurricane. At this time, it appears the wood markets will be hard-pressed to continue this upward momentum without additional hurricane activity to bolster housing activity.
The dimensional lumber sector of the Index was down 1.1 percent as demand faltered and attention turned toward the weather and unimpressive housing numbers. 2x4 pine was up double digits, probably because of truss plants loading up. 2x6 spruce added almost 3.0 percent because of demand; however, the rest of the dimensional lumber struggled to stay par with most dropping in price. Wider width pines had pricing drop from 4.6 to 6.7 percent while dimensional spruce was mixed depending on length. Lumber needs housing demand to increase to boost these prices systemically.
The sheathing portion of the Index shows the knee-jerk reaction to a hurricane. CDX pine added $35 to $50 per thousand ($1.50 per sheet) while OSB sheathing on average increased $23 per thousand (74-cents per sheet). Unless more hurricane threats materialize or the damage in the Carolinas becomes more substantial, these markets will probably retreat by mid-October.
Builders should be wary of tariffs. A lot of mouldings and jambs (especially in Florida) are imported from China as well as fasteners and parts to build various items for the home. A threatened 25 percent tariff in the third quarter on Chinese products will have an immediate impact on pricing and possibly supply. In the last half of 2018, tariffs may pose a greater threat to pricing stability than storms.
Builders should put a price adjustment clause in their contracts, and language specifically noting tariffs may be a good idea. Most builders and few suppliers have the ability to swallow 25 percent tariffs. Watch Twitter or the business news to see what happens.
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