The RoMac Building Supply Wood Commodity Index (Index) for November 2018 continued to decline as the Index dropped 10.7 percent to $310.59 per thousand. The declines were similar in both dimensional lumber and sheathings, which varied in length and thickness. This indicates a lot of hand-to-mouth buying as suppliers try to reduce inventories of higher priced materials.
The dimensional lumber portion of the Index dropped 9.5 percent to $348.31 per thousand, including stud items catching up with the prior month’s drops with declines of $33 to $82. Dimensional 2x4 spruce retreated less than $15 with longer lengths of 18’ and 20’ capitulating plus $25. Overall, the demand equation continued to force pricing down.
The sheathing portion of the Index was heavily skewed downward by CDX pine plywood, which gave back about 16 percent (or plus $75). OSB sheathing, which took heavier drops the prior month, only gave back on average $23. CDX was slower to react to the declines.
Wood commodities have given back all increases for the year and the numbers are nearing recessionary numbers. That should concern everyone in the construction industry. Declining commodity markets are the best indicators of housing and construction demand, because the markets are typically fueled by buying, not projections. With winter quickly approaching the northern areas of the country, little improvement in demand is expected.
Mill curtailments have begun. If these prices continue, expect curtailments and layoffs to increase. Although short-term spikes in specific sizes and species of commodity wood products can be expected, the overall trend does not look encouraging. Builders should be slow to drop pricing and bid spring projects at current numbers. In three months, curtailments and increased demand could have the markets spiking upward again. The word of the day is “caution,” beware of these market prices now.
Don Magruder is the Chief Executive Officer of RoMac Building Supply 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 October 2018 cratered 16.4 percent to $347.73 as the hurricane bounce from the prior month quickly deflated. This may be wood commodity history in that CDX pine and OSB sheathing prices declined on the heels of Hurricane Florence, between the threat and devastation of Hurricane Michael. This is stunning and probably speaks volumes to the overall deterioration of the commercial and residential construction markets.
Rising costs, labor costs, tariff issues, and rising interest rates may be causing more damage to the construction industry. Builders should look at real demand and job growth. No doubt—something is amiss in the construction markets.
The dimensional wood portion of the Index declined 15.6 percent as dimensional spruce retreated $80-$115 per thousand or 20 percent plus. Spruce studs were less affected but still had significant declines in the mid-teens. Indications are that there is a lot of wood heading this way without enough buyers. The European Spruce brokers may be hit the hardest.
Normally the threat of a major Category 4 hurricane, not to mention it actually hitting, would artificially pump up the wood sheathing markets. On the contrary, Hurricanes Florence and Michael failed to move the needle. Since mid-September, OSB pricing is down $75 per thousand (21.6-24.2%) and CDX pine plywood is down $30-$55 per thousand. This is something we’ve never seen before—since this Index began almost 30 years ago.
These huge declines in the wood commodity markets could be indicative of the overall health of the construction markets—this should concern commercial and residential builders. If these hurricanes could not move the pricing meter, there is little that could happen between now and year-end that could do so, except for a huge construction boom, and there appears little chance of that.
Expect pricing to settle more and hover in a range much lower than the first of the year. Although this report is good news for pricing, it could be bad news for overall demand for the winter—everyone should 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
The commodity market’s hard landing in September got a bounce thanks to a Hurricane named Florence. The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for September 2018 increased 3.5 percent to $416.10 per thousand, primarily on the strength of the sheathing portion of the Index, because of the hurricane. At this time, it appears the wood markets will be hard-pressed to continue this upward momentum without additional hurricane activity to bolster housing activity.
The dimensional lumber sector of the Index was down 1.1 percent as demand faltered and attention turned toward the weather and unimpressive housing numbers. 2x4 pine was up double digits, probably because of truss plants loading up. 2x6 spruce added almost 3.0 percent because of demand; however, the rest of the dimensional lumber struggled to stay par with most dropping in price. Wider width pines had pricing drop from 4.6 to 6.7 percent while dimensional spruce was mixed depending on length. Lumber needs housing demand to increase to boost these prices systemically.
The sheathing portion of the Index shows the knee-jerk reaction to a hurricane. CDX pine added $35 to $50 per thousand ($1.50 per sheet) while OSB sheathing on average increased $23 per thousand (74-cents per sheet). Unless more hurricane threats materialize or the damage in the Carolinas becomes more substantial, these markets will probably retreat by mid-October.
Builders should be wary of tariffs. A lot of mouldings and jambs (especially in Florida) are imported from China as well as fasteners and parts to build various items for the home. A threatened 25 percent tariff in the third quarter on Chinese products will have an immediate impact on pricing and possibly supply. In the last half of 2018, tariffs may pose a greater threat to pricing stability than storms.
Builders should put a price adjustment clause in their contracts, and language specifically noting tariffs may be a good idea. Most builders and few suppliers have the ability to swallow 25 percent tariffs. Watch Twitter or the business news to see what happens.
The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for April only increased 1.0 percent to $486.84 per thousand, which is a marked improvement compared to increases of 11.1 percent and 5.5 percent over the last two months. The decrease in the rate of inflation in the wood commodity markets is significant and may indicate the markets are topping out or the housing demand equation is faltering. My belief is that both scenarios could be influencing the market.
Winter continues to hang on and record snowfall in April in the Midwest bolsters the excuse makers for housing demand that the spring building season has not kicked off for our peers up North. While spring has not been the warmest, there has been plenty of warmup across the nation and the weather has not been to a point of shutting down willing production.
The dimensional portion of the Index increased a measly 0.4 percent to $535.38 per thousand as 3.2 to 5.2 percent declines in 2x12 wide-width pine and a 4.5 percent drop in 2x6-16 spruce offset across-the-board modest increases in dimensional 2x4 spruce. 2x4 spruce increased 2.0 to 8.7 percent depending on the popularity of the length. Spruce studs were mostly flat to up slightly for the wider widths. There is little debate that pricing momentum in the wood dimensional markets has slowed.
The wood sheathing portion of the Index increased 1.5 percent to $450.58 per thousand on the strength of OSB sheathing. Over the last 30 days, OSB sheathing added $23 per thousand, or 74 cents per sheet, which is about 6.0 percent more on average depending on thickness. CDX pine retreated in price $35 per thousand, or $1.12 per sheet, but the weight of sales in favor of OSB kept the Index up. Typically, CDX is the market leader in sheathing with OSB following suit. It will be interesting to see if OSB sheathing will sustain its move in the opposite direction.
The theory of depressed lumber sales in the northern region is about to really be tested as late spring and early summer are upon the nation. I contend that while the weather has not been ideal over the last month, it hasn’t been shut-down weather either. If warmer weather does prop up wood demand, expect pricing to increase. Otherwise, pricing will probably remain flat to down depending on the production. Keep in perspective the markets are high and that should keep movement narrow.
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 to=
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