In last month’s column, I expressed concerns about the declines in the wood commodity markets noting that these markets were the best indicator as to the health and direction of the housing industry. I pointed out that by mid-March the spring selling season, or Christmas, should be in full swing for the markets.
Well, Santa hasn’t come yet. In fact, it is beginning to look as if this scoundrel is on vacation. The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) dropped 4.0 percent, or $12.60 per thousand, to $302.82 on a full retreat in the spruce markets. Many in the industry still open with a weather report when discussing why the housing market continues to remain subdued. Most fail to realize that in the three biggest states in the union the weather has been fine this winter.
The dimensional lumber portion of the Index over the last 30 days dropped 8.5 percent to $332.28 per thousand. The search by mills for buyers pushed pricing lower as expectations for both imports and exports have not materialized for the year. The demand side of the equation is the dominant denominator.
The sheathing side of the Index increased 0.3 percent to $280.81 per thousand. Tighter manufacturing availability pushed CDX pine plywood pricing up 3.1 percent on 5/8-inch. Single-digit increases occurred in the other thicknesses. OSB sheathing pricing drifted flat-to-lower as availability remained plentiful. The spread between pine plywood and OSB sheathing is over $300 per thousand, and it is reaching a point wherein some builders may reconsider the use of OSB products.
The time is now to have a run on pricing. If in the next two weeks, or 30 days, pricing does not catch steam, builders should be real concerned about this year’s housing market. With that said, do not use the prices you have today to quote a project in mid-summer. If the winter weather has been the main deterrent to housing, then prices will rise quickly over the next 30 days. Let’s see if Santa Claus finally arrives for the housing market—we should know quickly.
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
Just imagine you work in a department store, and a couple of weeks before Christmas sales were slow because no one was buying. This is a fairly accurate description of the current wood commodity market. With two weeks, or so, until the main spring selling season the markets are eerily muted with few signs of a hot spring selling season.
The Home Builders Association and Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) in mid-February declined 1.8 percent to $315.42 per thousand on lower than expected exports to China, a lackluster U.S. housing market, and the winter weather.
The declines were basically across the spectrum on the Index. The lumber dimensional portion of the Index declined 2.0 percent to $363.04, as mills searched for buyers. The housing market is underachieving and reports from distributors is business is very spotty. Spruce studs gave up the most at nearly a 6 percent decline, with pine dimensional giving back on average $10 per thousand.
The sheathing portion of the Index dropped 1.5 percent primarily on the weakness in OSB sheathing, which gave back 5 percent on average. Over-supply continues to plague OSB sheathings, and a sluggish market is not helping mills manage that problem any easier. 15/32 CDX pine plywood was up $15 per thousand while thicker panels were up $5 to down just a little. CDX pine plywood continues to remain the driver in the sheathing market.
Concern by all in the construction industry should be increasing, as the markets indicate housing is not starting 2015 with the bang so many expected. In less than 30 days, the country should be in the midst of the spring building and selling season. Unless these markets heat up quickly, it may turn out to be a disappointment. Rarely, do you see these markets decline between January and February.
Let’s hope Christmas begins for building in the next couple of weeks. Keep in mind, if the markets crank up then today’s pricing will go up, especially in light of this month’s decrease. Be very careful bidding items in mid-February for shipment in April or May. All builders should have a price escalation clause included in their contracts.
The Home Builders Association and Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) in January squeezed out a 0.1 percent increase to $321.12 per thousand, as most increases were offset by declines. Demand is not driving price, and the recent decline in fuel and the commodity markets have many manufacturers concerned about the future strength of wood commodities. A struggling world economy and uncertain Chinese export futures are keeping a lid on pricing.
The dimensional lumber portion of the Index dropped 1.1 percent to $370.62 per thousand, as spruce products moved downward on average about 3.0 percent. The declines in spruce products were offset by a firmer pine lumber market with the general trend in the lower to middle single digits. Availability of very specific sizes and species seem to be the only thing moving the market.
The sheathing portion of the Index increased 1.3 percent on a reversal of trends. In the last 30 days, since mid-December, the price of CDX pine plywood dropped about $7 per thousand while OSB sheathing increased almost $9. For months, CDX had increased pricing while OSB struggled to find a floor. I am not real sure if this is a new trend or a post-holiday season burp.
At this point, my crystal ball is completely broken and experts are so varied on the future. One predicts a record year while others are predicting Armageddon. Here is what I do know. Business is about on par thus far with 2014, and if there was going to be a boom, then the banking and real estate industries should be hiring a lot of people. My sources tell me that everything is flat. So, I think it is fair to say right now, expect more of the same with moderate volatility as lumber decks fall short on specific items.
I would be careful about long-term bids this time of the year, because we still have to deal with the historic trend of a winter thaw and tornadoes in the South.
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.
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