October 2013 Lumber and Commodity Report

LumberandCommodityPic1v2

 

Your Home Builders Association Wood Commodity Index (Index) increased 4.4% to $329.42 per thousand, as slim supply throughout the supply chain kept mills and manufacturers busy.  Housing demand is suspect, given the government shutdown problems; the 36,000-decline in building permits in August; and, the lackluster housing start data, which suggests housing starts remain doggedly below one million.  Add interest rate concerns, and you have a market that is engulfed in uncertainty. 

The only reason why the commodity markets are not down further is due to a supply chain that refuses, or cannot load the wagon because cash is king.  Inventories in the supply chain are “hand-to-mouth” at best, and market volatility is not encouraging risk-taking.

The dimensional lumber composite of the Index increased 4.7% to $391.63 per thousand, as most items experienced double digit increases.  Items lesser in demand, such as 8’ and 10’ lengths, were flat-to-down; however, popular sizes were up $15-$25.  Wide width pines were up $25-$30 while 2x4 treated added almost 11%.

All items in the sheathing portion of the Index, but one, increased.  CDX plywood was up 4.5% plus while OSB sheathings hovered around the 4.0% increase.  It appears mills have done a good job matching production with demand, and limited on-ground inventory by many dealers will keep pricing firm.

In other commodities, drywall companies have begun announcing potential 10%-20% increases for 2014 and cement manufacturers are projecting 6%-9% increases with environmental charges on top.  Window manufacturers are still in charge as demand is overwhelming supply.  So, expect those prices to continue to increase.

The new Department of Transportation rules are limiting drivers’ hours, and trucking has become a real issue.  Expect logistics to get tougher in both pricing and delivery times.  I predict that in 2014 getting special order and custom merchandise on time will probably be one of the biggest problems for most builders.

For the next few months, expect pricing to remain firm-to-down depending on the weather and the folks in Washington, D.C.  If uncertainty remains in the nation’s capital you can expect to see it in the commodity markets.

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. .

September 2013 Lumber and Commodity Report

September 2013 Lumber and Commodity Report

Your Home Builders Association Wood Commodity Index (Index) for September 2013 decreased 1.6% to $315.39 primarily on across-the-board declines in sheathings. Pricing has become spotty in dimensional lumber as availability of specific species and sizes appear to be the main driver.

The lumber portion of the Index increased 4.1% on the strength of dimensional spruce. Spruce pricing ranged from a 0.7% decline in 2x4-8 spruce to a 9.3% increase in 2x6-16 spruce. There are some market analysts who believe demand is improving in China, which could fuel a round of heavy buying. The real problem for price support in lumber continues to be inconsistent trends in housing permits.

A good barometer of overall market demand is the sheathing market, which continues to falter. Over the last 30 days, CDX pricing slid $28-$50 per thousand while OSB sheathing moderated its declines in the $10-$20 per-thousand range. Overall, the sheathing portion of the Index was off 6.9%.

It appears the market is poised to continue its uneven cost advancers and decliners. There aren’t any significant winds pushing the market on a certain path. This could be very frustrating for builders who get caught by higher cost on one particular size or species. This would be a good time for builders to explore options and different species to offset uneven price spikes. For example, if 2x6-16 spruce is up 9.3% maybe a different length could save you 5.0%. Habits generally cost more in uneven markets.

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, visit his contact page.

August 2013 Lumber and Commodity Report

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 This email address is being protected from spambots. You need JavaScript enabled to view it. .

July 2013 Lumber and Commodity Report

Over the last 30 days, your Home Builders Association Wood Commodity Index (Index) has been on a roller coaster with prices initially heading straight down and then over the last two weeks reaching a plateau followed by an upward movement. The Index dropped to $315.73 per thousand, which is down 3.3%; however, it appears a bottom is being cemented as the will of the market appears to have changed upward. The variables remain to be low field supply versus peeks in demand.

The lumber portion of the Index dropped 1.5% to $342.39 per thousand as western spruce studs dropped 6.3%-9.2% but those decreases in prices were offset by an increase in longer lengths in dimension spruce. The more popular sizes were up 3.7%-6.8%. Pine dimension lumber in wide widths headed downward 2.3%-5.9% while narrow pine widths increased 1.1%. Typically, these types of increases in the more popular widths and sizes are the first signs of a general increase as pressure mounts from dealers restocking inventories.

There was a 4.8% decline in the sheathing portion of the Index as OSB sheathing dropped $20 per thousand over the last month. Most of the declines in OSB occurred during the first two weeks of this pricing cycle. For the most part, OSB pricing has stabilized and increased in some areas of the country over the last couple of weeks. CDX pine sheathing was flat to minimally down--$5 per thousand--as the harsh reality of supply issues began to creep back into the market. CDX pine plywood is normally the driver in the entire sheathing market and it is significant that those prices have firmed.

There is a simmering, growing angst among dealers and builders that supply could be an issue in the next few months. An erratic hurricane season, pockets of increased building (like in Florida), extremely wet weather in the South hampering logging and lack of adequate trucking capabilities has many on the edge of their seats. This could be the first signs of a general boosting of inventories on the ground, which in itself could spur pricing forward. Hand-to-mouth inventories by dealers and suppliers could lead to someone not eating.

Most other building commodities are static in price as there is no real impetus moving the market. Shingle manufacturers have announced a price increase for the first of August, but there is some debate whether it will stick or not--I guess it depends upon the weather. In regard to side product issues, door and window manufacturers are pushing for low-single-digit increases, which could stick given the issues with supply.

It appears the wood markets have hit bottom and there could be an upward movement over the next few months. Demand bolstered either by a hurricane or increased housing starts will determine as to how high and how fast. Builders should protect themselves with a price escalation clause in their contracts and, most importantly, have contract and bid prices with “good-thru” pricing dates.  

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. .

Ro-Mac Newsletter Signup