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. .

 

August 2014 Lumber and Commodity Report

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The Home Builders Association Wood Commodity Index (Index) for August increased 1.5% primarily on mills and manufacturers controlling supply and a fire that destroyed the Swanson Mill in Springfield, Oregon. Most would agree the tepid and disappointing housing numbers had little to do with the increase. It is probably fair to say that most people in the industry are getting weary of a constant upbeat housing forecast that never materializes. The excuse of blaming the weather earlier in the year has run its course.

The dimensional lumber portion of the Index increased 1.3% to $409.93 per thousand, as mill shutdowns and increased export activities fueled demand in spruce. The degree of price increases varied with demand on particular sizes. Wide width 2x12 pine had major drops in pricing as demand plunged. Retreats from $20 to $45 per thousand in pricing were common, as mills searched for buyers. Narrower width pines such as 2x4 and 2x6 increased almost 6%. This pinpoint in increases by size is a major indicator of just how thin lumber inventories are on the ground.

The wood sheathing segment of the Index was a complete mixed bag. The mill fire in Oregon pushed CDX pine pricing up 8% to 11% depending upon thickness. Keep in mind, that mill produced fir sheathing, not pine, for the west. This is the best example of the state of plywood manufacturing in America and how the shutdown of the plywood mill in Hawthorne, Florida is affecting the Florida market. OSB Sheathing dropped $10 plus per thousand (or 5.1%), as supply was too much for the demand. In my view, the drop in OSB pricing at the beginning of hurricane season best describes the state of this market.

Thin inventories and a supply chain, which is unable to withstand events across the country, are worrisome as hurricane season begins. Builders should be very mindful that a real hurricane threat or strike will immediately drive up pricing. Quotes in mid-August on OSB or CDX could be cheap in late September if a hurricane event occurs. It goes without saying--bid pricing should be price protected. The supply markets have proven, with this fire, there will be no forgiveness.

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. .

July 2014 Lumber and Commodity Report

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July 2014 Lumber and Commodity Report

The Home Builders Association Wood Commodity Index (Index) firmed up in mid-July, as spruce and sheathing products reversed losses from the prior month. The total Index increased 6.6% to $338.51, which is significant given the hot, steamy days of summer. Whether real momentum is beginning, no one knows. However, the market's firmness may be a weak indication of a strengthening housing market, or it could be another false positive.

The wood portion of the Index increased 8.0% to $404.66 per thousand with most of the heavy increases occurring in dimensional spruce. All dimensional spruce items, including studs, increased in price. Stud price increases ranged from 4.8% to 8.3% depending upon length. Dimensional 2x4 spruce averaged increases of nearly 12% while 2x6 spruce jumped 13.2% to 16.4%. Mills doing a better job balancing supply with demand seem to be the main impetus for the increases. Pine prices dragged as rainy weather in the south seems to be tapering demand. 2x4 pine dropped nearly 3% while wider width pines gave up just under 10%. If spruce continues to strengthen, expect the pine markets to wake up.

The sheathing portion of the Index increased 5.1% to $289.10 per thousand with both CDX pine and OSB sheathing moving up. CDX pine was the firmest with prices increasing 5%-8%; OSB added on average $6 per thousand or 3% on average. The OSB market declined too much over the last quarter, and this reversal is probably a welcome sign for the housing market.

Although many builders may not like it, an increasing market is actually the best barometer of the housing market, barring extraneous events like hurricanes or other national disasters. The two challenges over the next few months will be hurricane season and momentum. Another year without a hurricane will keep the markets trading in a narrower range, while momentum will indicate a more robust economy. Builders should be wary that July may be the lowest point of the market for the next quarter, and bid accordingly.

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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