December 2014 Lumber & Commodity Report

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The Home Builders Association and Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) in December dropped for a second consecutive month, as lackluster housing demand and early cold winter breezes tapped down prices.  The Index is comprised of two parts, dimensional lumber and sheathing, which are weighted in a mix frequently used in the Central Florida marketplace.  The total Index dropped 3.3 percent to $320.83 per thousand, as all but three items declined.  The demand portion of the equation will have a more devastating effect this close to Christmas.

Since November, the dimensional portion of the Index dropped 1.1 percent, as a general decline in pricing rippled through all sizes and species.  The only three items that increased in price, did so by low single digits, and was based solely on a general need for a specific tally.  Wide pine pricing was down on average 2.5 percent with spruce dimensional going from plus 1.0 percent to negative 3.4 percent, depending on size.  Until mid-January there appears to be little that could change this downward trend.

The sheathing portion of the Index, which includes OSB sheathing and CDX pine plywood, retreated in full force.  CDX pine plywood gave back 4.6 to 6.6 percent while OSB sheathing handed back 4.1 to 7.9 percent.  Panel thickness dictated the degree of discounting, but oddly, not always was it the thicker panel that dropped the most.  This is probably the best indicator of a market which is affected solely by demand.  With current levels of production in OSB sheathing, expect further drops in pricing, while CDX pine plywood manufacturers will put up a stronger fight to lower pricing. 

Lower fuel costs could hurt pricing in wood commodities, but that may not be all good for builders.  If the markets collapse in pricing, expect mill closures and a retreat in the supply chain.  This is not a good sign for a growing housing market, and could usher in more uncertainty.  The next 30 days will really start to show the true weakness in the housing 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.

November 2014 Lumber & Commodity Report

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The Home Builders Association and Ro-Mac Lumber & Supply Inc. Wood Commodity Index (Index) for November dropped 2.1 percent to $331.78 per thousand as early wintry weather, coupled with lackluster demand, cooled pricing.  2014 has been a struggle for many areas in the housing market as the first quarter started slowly due to heavy winter weather, with the middle of the year never realizing forecasted expectations.  If early winter weather in the fourth quarter hampers demand, that would be the final nail to a year that many expected more from.

The dimensional part of the Index declined 5.7 percent to $379.12 per thousand as mills searched for buyers.  Most dealers and distributors, seeing colder temperatures early, have figured that housing demand will wane during the holiday months—most have no motivation to load warehouses.  Some could make a mistake of running inventories too low as trucking remains an issue and this could bode well for regional two-step distributors.

The sheathing portion of the Index continues to display a split personality. For months, OSB sheathing productions and pine plywood seem to be moving in opposite directions.  CDX pine dropped 1.4-2.5 percent as limited production finally met limited demand.  OSB sheathing enjoyed a 3.8-6.8 percent increase as CDX buyers converted some purchasing away to the much lower priced product.  Overall, the sheathing portion of the Index increased 1.6 percent to $296.42 per thousand.  There is much more available OSB production than CDX pine plywood, and this month may be the first indication that builders are ready to move buying decisions.  For example, the spread between 1/2” OSB sheathing and 15/32” CDX Pine is $287 per thousand or $9.18 per sheet.  Look for more builders to switch to OSB sheathing at these price differences.

If fuel prices remain lower, and the winter weather persists, expect a flat to downward drift for most wood commodities for the rest of 2014.  After the first of the year it will depend solely on demand and weather.  There is also a chorus of first-of-the-year price increases being announced by manufacturers for January, including a huge proposed 20 percent increase by the drywall industry.  It is unclear if the housing market will allow these increases to stick.

I hope everyone has a wonderful and blessed Thanksgiving, full of food, family, and faith. 

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. .

October 2014 Lumber & Commodity Report

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The Home Builders Association Wood Commodity Index (Index) for October increased 0.4% to $338.80 with sheathings going up and lumber going down.  One gives and the other takes away. This minimal price movement is probably an accurate reflection of the mood in both housing and the economy — not much excitement. The mood of the country seems to be infected with an economic virus of uncertainty, which cannot be shaken.

The dimensional portion of the Index dropped at the wholesale price level to $401.89 (2.7%) as decliners led advancers by a 5 to 1 ratio. Wide width pine took the heavy hit with declines in pricing of 11% plus. 2x6 spruce advanced in certain sizes, with $10 plus increases in 2x4 spruce popular sizes. Overall the mood is down, and with winter only weeks away, prospects for a price run look dim as the country exits hurricane and storm season unscathed.

Activity and pricing picked up slightly in the sheathing portion of the Index, with CDX pine plywood pricing remaining very strong, while OSB sheathing floundered at much lower levels. The mills for plywood have done a good job managing supply to demand, but in the case of OSB mills, there is simply too much supply. The spread between 15/32” OSB and CDX sheathing is $308 per thousand or $9.86 per sheet. At that difference, you would expect builders to move away from plywood for residential roofing.

Mills and manufacturers appear to be growing anxious over sales in the last quarter, and builders are beginning to see some cracks in pricing. Whether this continues depends entirely upon how well the supply and demand quotient is managed. There appears to be little in the way of housing demand to push pricing in a sustained, upward trend over the next 30 days. 

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 2014 Lumber & Commodity Report

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The Home Builders Association Wood Commodity Index (Index) for September decreased 1.8% to $337.42, as the concern last month for plywood supply, due to a mill fire in Oregon, waned.  Housing starts in July were up 15.7%; however, it appears the market is struggling to hold onto that gain.  According to RealtyTrac, new foreclosure filings in Florida increased 74%.  This does not bode well for increased housing values, which are essential for new home appraisals.

The dimensional lumber portion of the Index was able to eke out a 0.7% increase last month. Pricing was inconsistent within the same species, because demand for specified lengths dictated the pricing direction.  Pine dimensional lumber pricing increased in the narrower widths, with wider width pine firmly dropping 3.1%-8.2%.  Lackluster demand, coupled with mills trying to manage inventories, created volatilities with species and sizes.

The sheathing portion of the Index firmly dropped, as the pricing drama from August gave way to unimpressive housing demand in September.  Sheathings were down 4.4% to $281.20 per thousand with both OSB sheathing and CDX pine plywood mirroring very similar drops in pricing.  T&G pine plywood bucked the trend in September with a 2.4% increase; however, it will be hard pressed to not have follow-up items.  The real concern by many in the market is the drops in sheathing signaling a significant price adjustment.  Spotty demand could usher in a period of declining prices.

Midway through September, hurricane season looks unnaturally slow and housing appears to be in the doldrums.  Without an event that moves the market in a positive direction, mills and manufacturers will be forced to control supply in order to firm up the market.  A plausible scenario could be that impending world events, and ensuing fears, erode consumer confidence over the next few months, causing the market to slide back to levels reminiscent of last winter. 

Uncertainty abounds. Each person in the supply chain will have to decide how to most effectively manage the impending risks.  For builders, at this point in time, there appears little impetus to move the market forward in price.

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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