Your August 2013 Home Builders Association Wood Commodity Index (Index) hit bottom and slightly bounced upward after a nearly four month downward spiral in price. The Index increased to $320.63 per thousand or 1.5% on the pricing strength of dimensional lumber. The increase in price is probably due to a combination of the market going too low and a correction of supply to demand. The market is floundering while searching for a direction.
The lumber portion of the Index jumped 4.8% to $358.92 per thousand as gainers led 17-1. The price increase cut across all species and sizes with pine dimensional, especially the wider widths, seeing increases from $26-$50 per thousand. Flooding rains in the south hampered logging efforts on wider-width items. Spruce dimensional increased from the mid-teens to $20 per thousand with some base stud items not moving up as fast. No doubt the market was on an upward move.
The sheathing portion of the Index actually dropped 1.3% to $292.03, and it was the tale of two types of sheathing--OSB and CDX Pine. OSB sheathing in the south dropped $20 per thousand as supply outpaced demand. In other areas of the country, the OSB market remained stronger due to lower manufacturing capabilities. CDX Pine was a different story as prices firmly increased from $20-$40 per thousand. In Florida, the impact of the GP Hawthorne mill closing, which occurred last year, is still being felt and it appears CDX Pine sheathing will continue to be the most volatile.
You can tell the market has some softness as roofing, drywall and other building material wholesalers are offering “specials” and “truckload buys” to bolster sagging sales. Fuel prices have firmed in recent weeks and this could impact the market. Trucking availability continues to be a real problem, especially in Florida, and these increased trucking costs will drive up prices.
Mid-August to the end of September is the worst portion of hurricane season and pricing could become volatile. If there is no substantial hurricane threat, expect pricing to flounder as manufacturers and builders struggle to find the proper demand equation. Locking in pricing and suppliers for big projects in September and October is probably a good play for builders, given the chance for downside risk is minimal. The trap for many builders is when pricing is on the low side like today there is a propensity to quote long-term projects with short-term pricing—so, be careful.
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