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.