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.
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
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.
Since mid-May, your Home Builders Association Wood Commodity Index (Index) dropped $60.17 per thousand (or 15.6%) as supply outpaced demand and the commodity market adjusted from unsustainable levels. However, the Index remains $12.80 per thousand (or 2.8%) higher than last June. While the month-to-month drop is significant the market is still at levels above the Great Recession. It appears this period in the market is more of a break than a collapse.
The lumber portion of the Index dropped $38.35 per thousand (or 9.9%) as most decreases were across the board. The 2x4 stud material stayed in the single digit drops while construction dimension in both pine and spruce traded down from 9.7%-12.1% with wide widths giving up more. The lumber market pricing is trying to form a bottom and it is hard to imagine the market dropping lower than last year’s benchmarks.
CDX plywood and OSB sheathing took significant hits in pricing as available wood was prevalent throughout the supply chain. The sheathing portion of the Index dropped $76.48 per thousand (or 19.7%) with thicker panels dropping less. It appears mills are jockeying to use their annual summer maintenance shutdowns to firm the markets.
The biggest problems in the supply business at this moment is shingle pricing, which is scheduled to go up the first of August, just in time for hurricane season, and prompt availability of windows with extended lead times due to fewer manufacturers. However, this is subject to change for two primary reasons:
These two factors are why these markets remain volatile. This period is what I call a sucker’s market. Builders will bid projects based on these numbers to get jobs and then two months later when the job starts, pricing is much higher. Be sure to protect yourself with price escalation clauses--don’t trust today’s prices.
Page 15 of 18