June 2016 Lumber and Commodity Report

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The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index for June dropped 2.0% as large declines in pine, especially wide-width, dragged most of the market down. Mills continue to struggle with balancing the long-term supply and demand equation in their favor because the housing market continues to be erratic. The trend for the year has been up but the earlier summer retreat has been a norm since the Great Recession. The question this year will be: Does hurricane season change the norm?

The dimensional portion of the Index dropped 0.7% to $353.14 per thousand as wide-width pine items were in full retreat, with declines of $70-$85 per thousand. Treated 2x4 pine gave back 7.0%, while 2x4 and 2x6 dimensional spruce was flat to up 1.6%. Stud pricing was a little stronger, with pricing averaging a 3.0% increase. No doubt it was a mixed bag over the last 30 days. Builders should keep a close eye on projects that are calling out specific types and sizes because the impact could be greater.

The sheathing portion of the Index declined 3.1% as both CDX and OSB sheathing retreated from last month’s levels. The unison decline of both items has not been typical and this could suggest a softness permeating the market. CDX pricing was down on average almost 4.0%, with OSB staying closer to 3.0%. This could all change suddenly if anywhere in the country a real hurricane threat materializes over the next few months. Builders would be wise to pad quotes and not use the lowest numbers for projects bid in the fall.

There is a lot of uncertainty in the market and the recent workers’ compensation ruling by the Florida Supreme Court will surely add to it. Lifting the cap on attorneys’ fees and expanding the days of disability for injured workers could result in rate increases of 17.1%, according the National Council on Compensation Insurance (NCCI). This is a huge increase that could really increase costs because it will affect building and supply at all levels. This compounding effect, along with increased opportunities for workers’ compensation abuse, could exacerbate an already bad labor market. Potentially, this is the greatest threat facing all builders this fall—adjust your bids and timetables.

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. .

May 2016 Lumber and Commodity Index

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The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index for May increased 4.4% to $329.32.  This marks the second month in a row of strong increases even though the rate of increase has slowed to about half as much.

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April 2016 Lumber & Commodity Report

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The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index for April increased 10.9% to $315.50 as most items felt upward pressure. Over the last month, the first three weeks were the strongest for price increases, with some pricing cracks developing in the last week. The weakness of late could be an indication this market is running out of steam.

Another indication the wood commodity market is running out of steam is March’s Housing Report from the United States Census Bureau. In just released numbers, housing starts were down 8.8% when compared to February. Plus housing permit numbers (an indication of future activity) were down 7.7%. Single-family housing starts took the biggest hit by dropping to 764,000 units annually (or a decline of 9.2%). These numbers are stunning considering the 3.6% interest rate being offered on 30-year fixed mortgages and low unemployment at 5.0%. Housing appears to be stalled during the spring selling season.

Over the last month, the dimensional lumber portion of the Index was up 13.2% as wide-width 2x12 pine shot up a whopping 25.0% plus, with dimensional spruce adding on average 4.0%. 2x4 pine was up 9.3% and studs for the most part were flat to down.  Mills blame the huge increases in wide-widths on too much rain for logging. That should abate as warmer, dryer summer weather takes hold. Stud pricing holding back on increases may indicate a false strength in the market.

The sheathing portion of the Index was mixed as CDX pine was down 7.0%-10.0% while OSB sheathing added $26 per thousand (or on average 11% increase). Better demand in multi-family housing or a move to value could be fueling this market divergence. Whether these opposite directions will continue is debatable considering the OSB production available to the market.

The cracks that started to develop in the markets over the last 10 days could open up into gullies if these bad housing numbers persist. Price run-ups for the last few years have run out of steam in May and this is shaping up to be Déjà vu again. Builders should be mindful of the price increases—protect themselves, but stay close to the market.

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. .

March 2016 Lumber & Commodity Report

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In last month’s report, I said the next 30-45 days would probably give a better indication of the housing market’s direction for the spring.  It appears the housing market is starting to show some life, based on increases in the Wood Commodity Index (Index). Over the last 30 days, the Index is up 5.2% to $299.33 per thousand, with all items but one adding to its wholesale price from just a month ago.  Whether this momentum in the markets can be carried over has yet to be determined.

The dimensional lumber portion of the Index increased 7.8% as double digit increases in spruce and wide-width pine pushed prices forward.  The overall mood of the market was up as the first signs of a warm spring were felt throughout the country.  2x4-16 #2 spruce was up13.9% while 2x12-16 #2 pine added 8.3%, with spruce studs only adding in the single digits.

The sheathing portion of the Index increased 3.1% as OSB sheathing only added about 1.0% while CDX pine was up on average 4.0%.  This lack of price enthusiasm could indicate that the recent price increases in lumber could just be a seasonal fluctuation instead of a real market adjustment.  One huge point is the upward direction of both CDX and OSB shows the market pricing is probably congruent in its values.  Last year, those prices generally moved in opposite directions. 

The housing market needs continued improvement to prop up prices and build momentum.  I am not sure the market has another 5.0% increase in itself for the next 30 days, but it needs it to build on momentum. 

Drywall manufacturers are announcing a 10.0%-15.0% increase as of April 1, 2016.  A real sign of housing strength will be if this increase remains in place until mid-summer.  Rising prices is a great sign for most builders if they prepare by properly bidding or utilizing a price escalation clause in their contracts. 

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. .

 

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