Just as I predicted last month, the price increases from October and November did not seem sustainable, and they were not. The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for Central Florida in December declined 3.7 percent to $290.27 per thousand. It was a mixed result, as those items which did not go down in price struggled to hold onto gains, while those retreating did so with few obstacles.
The dimensional lumber portion of the Index dropped 1.9 percent, as spruce gave back some of its gains from the prior months. Stud pricing took the hardest hit with most down nearly $20, and with 2x4 spruce dimensional flat to down in the single digits. $10 to $20 per thousand increases were the range for most 2x12 pine, as wide widths gained an advantage in the supply equation.
The sheathing markets are still split with OSB sheathing pricing in full retreat while CDX pine plywood pricing is moving upward in the 1.5 to 2.5 percent range. Oddly, just a few months ago, the direction of each was opposite. 7/16” OSB gave back almost 60 cents per sheet while 1/2” 4-Ply CDX pine plywood added 32 cents. Manufacturers are really struggling to find the supply balance in the market.
The weather through mid-December has been much warmer than usual. This typically extends the building season in the northern areas, keeping prices up. The better weather appears to be a small catalyst this year, and it may foretell even worsening housing demand as winter begins to grip. There is little evidence that pricing will have much momentum upward as the New Year begins.
Thank you for reading the Ro-Mac Lumber & Supply, Inc. Lumber and Commodity Report. I hope everyone has a Merry Christmas and most prosperous New Year.
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
The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for Central Florida in November increased 7.4% to $301.41 per thousand, as the markets struggled to find a direction. The problem with the late fall run is that half of the items in the market are not participating, which suggests momentum for price increases will wane. Economic reports and terrorism threats, coupled with the holidays and winter, will probably be enough to snuff out any heat in the market.
The dimensional wood portion of the Index increased 6.5% to $307.59, as spruce had solid gains. The gains in spruce were mixed (depending on the size) with odd lengths adding $9 per thousand while the more popular lengths increased $27 per thousand. The supply side of the spruce equation is still in full demand, and mills will be searching for buyers as the snow falls.
The sheathing market has a split personality. OSB sheathing added $27-$36 per thousand (depending on the panel thickness) while CDX pine stayed flat-to-down $6 per thousand over the last 30 days. The move in plywood is troubling, because it suggests the price could be more about supply balance than demand. If CDX plywood prices continue to retreat, expect OSB to follow suit.
The price momentum for the last 30 days does not appear sustainable, and the numbers are indicating a retreat may be at hand. Be careful about long-term quotes. Now is probably not a good time to have a large stocking position.
The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for Central Florida in October increased 2.3%, as the dimensional and sheathing portions of the Index marginally increased. The expiration of the Softwood Lumber Agreement between the United States and Canada is producing a short-term spike in lumber. However, it could have long-term downward implications, as a collapsing worldwide commodity market could create an overabundance of lumber into the U.S. market.
With a volatile stock market, unsettled housing demand, deflated commodity market and approaching winter, I see little impetus for a rising trend in wood commodity pricing. A rash of mill shutdowns and closures could bolster pricing, but those actions are typically taken after the demand equation has been established. Pricing will probably be volatile for the next 30 days, as all of these factors sort out.
The dimensional lumber portion of Index increased 0.5% with dimensional spruce pricing falling or rising, depending on its availability. Wide width pines made the surest retreat with most giving up more than $50 per thousand. Narrow width 2x4 pine added almost $45 per thousand, as supply tightened on fall purchases.
The sheathing portion of the Index increased 3.7% (or $10 per thousand) primarily on the rebound of OSB sheathing. CDX pine plywood dropped from $25-$40 per thousand, based on thickness, while OSB added on average $25 per thousand. It appears to be a rebalancing of demand as CDX buyers could no longer resist the much lower cost of OSB. This looks more like a market correction than a trend.
There are a lot of headwinds for the markets, and unless housing demand surprisingly spikes just before winter, I see little to drive prices up. As compared to last year, the Index is 28.1% down in dimensional lumber and 5.9% down in sheathings. These are huge declines in just one year, and that tells me further downside movement is minimal. At some point, the mills will begin to shutter production.
What everyone needs is a good boost in housing starts for the next three months. Most builders would rather sell more houses at higher building material costs, if given the option.
The beat down of the wood commodity market continued in September as the Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for Central Florida dropped $7.53 per thousand (or 2.7%). Dimensional lumber continues to struggle to find a bottom while plywood and sheathing items have tried to bounce back from last month’s heavier discounts. Overseas demand has diminished, and an uncertain U.S. housing market are keeping many on the sidelines. Many have concerns that interest rates and a sagging stock market could take a toll on the housing forecast over the next few months.
The dimensional lumber portion of the Index declined 9.5% to $287.93 per thousand as everything went down. Not one item held, and most drops were in the $20-$30 per thousand price range. Wide width pines were hit very hard with most giving back $60 plus. A recent mill closure by Canfor may just be the first if pricing and demand don’t soon improve.
Plywood and sheathing pricing went up 3.7% (or about 30 cents per sheet) as manufacturers took better control of the supply-and-demand equation. Some of this clawback may be from an overzealous retreat in pricing from the prior month. It appears the impetus for continued price increases are failing. The best hope for manufacturers is that prices will stabilize and not follow the lead of dimensional lumber.
Make hay while the sun shines applies to the here and now. Winter is just a few months away. Unless demand cranks up for the fall season, this winter could be brutal for builders and suppliers if there is a repeat of last year’s harsh weather. At some point, builders need the demand equation to power the market forward, and I don’t see that at this point.
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