Novemember 2017 Lumber and Commodity Report

seedling SPRUCE

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. .

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