May 2016 Lumber and Commodity Index

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The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index for May increased 4.4% to $329.32.  This marks the second month in a row of strong increases even though the rate of increase has slowed to about half as much.

 Most of the activity in the wood market appears to be related to the huge fire in Alberta, Canada, which has scorched more than a half million acres and destroyed more than 2,400 structures.  This is a huge logging area and the concern that this fire could take months to burn out is creating some alarm in the market.

The dimensional lumber portion of the Index increased 5.8% to $355.69 per thousand as all of the products increased in price.  Dimensional spruce price increases fluctuated by size and length, with 2x6-16 spruce adding 1.3% while 2x4-8 spruce jumped a strong 10.2%.  Spruce stud pricing was up from 5.1% to 9.3% based on demand and availability of certain cuts.

The wood sheathing side of the Index was mixed as CDX pine plywood was flat to down about $5 per thousand while OSB sheathing added about $14 per thousand or 5.8%.  Pressure from the availability of Canadian OSB is the root cause.  Because CDX pine is more of a regionally priced item, the question is, “Does its flat-to-down pricing indicate what is really going on in the market?”  It’s hard to say but CDX pricing is unimpressive.

There are two things we know.  The rate of this month’s price increase is less than half as much as April’s price increase and without the Canadian fire I believe the price increase would have been less.  Plus the CDX pricing story may be a better indicator of the market. Based on market information, I am not sure this market will have its pricing legs through June, but it is setting up to be volatile as the country heads into hurricane season.  

Wise builders will be very mindful of holding contract pricing too long—it does not hurt to be a little cautious.  It is a good idea to stay tuned to see what the market is doing in 30 days.

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.

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