The RoMac Building Supply Wood Commodity Index (Index) for November 2018 continued to decline as the Index dropped 10.7 percent to $310.59 per thousand. The declines were similar in both dimensional lumber and sheathings, which varied in length and thickness. This indicates a lot of hand-to-mouth buying as suppliers try to reduce inventories of higher priced materials.
The dimensional lumber portion of the Index dropped 9.5 percent to $348.31 per thousand, including stud items catching up with the prior month’s drops with declines of $33 to $82. Dimensional 2x4 spruce retreated less than $15 with longer lengths of 18’ and 20’ capitulating plus $25. Overall, the demand equation continued to force pricing down.
The sheathing portion of the Index was heavily skewed downward by CDX pine plywood, which gave back about 16 percent (or plus $75). OSB sheathing, which took heavier drops the prior month, only gave back on average $23. CDX was slower to react to the declines.
Wood commodities have given back all increases for the year and the numbers are nearing recessionary numbers. That should concern everyone in the construction industry. Declining commodity markets are the best indicators of housing and construction demand, because the markets are typically fueled by buying, not projections. With winter quickly approaching the northern areas of the country, little improvement in demand is expected.
Mill curtailments have begun. If these prices continue, expect curtailments and layoffs to increase. Although short-term spikes in specific sizes and species of commodity wood products can be expected, the overall trend does not look encouraging. Builders should be slow to drop pricing and bid spring projects at current numbers. In three months, curtailments and increased demand could have the markets spiking upward again. The word of the day is “caution,” beware of these market prices now.
Don Magruder is the Chief Executive Officer of RoMac Building Supply 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