December 2017 Lumber and Commodity Report

Lumber 03b

The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for mid-December dropped 10.4 percent over the last 30 days, and this is on top of a 9.2 percent decline from the previous month.  The decision by the United States Trade Commission in the continuing United States and Canadian Softwood Trade dispute favored the United States and reduced duties a little, but it also added some degree of pricing uncertainty.  This issue is not resolved, but it did weigh down the spruce markets.  Winter weather and the seasonal slowdown is also having a negative effect on the markets.
 
If you are wondering why your profit margins on projects you built this year have declined, consider this.  Since January 2017, the Index is up 36.8 percent with lumber increasing an ungodly 50.8 percent while sheathings added 25.7 percent.  To make matters worse, these prices in December are off the highs of September and October.
 
As builders and suppliers, many of us did not do a good job getting ahead of these prices and, in many cases, tried to not accept them.  This may be trite but something everyone in the supply chain must realize.  Unless you are a mill or timber owner, you don’t own the timber and you don’t cut the lumber.  Spend your energy managing and anticipating your cost increases instead of being in denial.  These types of increases must be passed to the end user.
 
I expect pricing to be higher in 2018 for two big reasons—labor and trucking, which are expected to continue to escalate.  Trucking is especially tough in Florida as carriers have limited access to hauling goods out of the state given the collapse of the citrus industry.  In addition, there is an extra push of post-hurricane rebuilding in South Florida and the islands. Wood commodity prices could easily see $5-$10 upcharges on trucking.
 
The dimensional lumber portion of the Index dropped to $451.79 per thousand (or 6.1 percent) as spruce gave back increases across the board.  2x4-16 #2 western spruce dropped 7.0 percent while 2x6-16 spruce gave back 5.6 percent.  2x4-16 #2 treated pine jumped 9.9 percent as truss plants and treaters continue to feel the hangover from Hurricane Irma demands.  Wide width pine was flat.
 
The sheathing portion of the Index dropped a whopping 14.2 percent as OSB sheathing continued its downward spiral from the hurricane highs of September.  Over the last 30 days, OSB dropped $70 per thousand (or $2.24 per sheet) while CDX pine gave back $30 per thousand (or $0.96 per sheet).  Oddly, the only price increase was 3/4” CDX, which added $45 and that is probably due to the mix and supply issue from the mills.
 
If the winter weather continues to ice the north as it is doing now, expect prices to stay down for the next few weeks.  In late January to mid-February, builders should probably expect the higher cost of freight to begin pushing numbers back up as well as the suppliers getting prepared for the spring selling season.
 
This forecast is contingent upon no huge national event or political upheaval taking place, which could quickly change the fortunes of housing.
 
My best advice to builders is simple—do not use December’s pricing to bid projects in the spring.  Other building material suppliers, such as window and door manufacturers, drywall products and shingle companies are already announcing spring price increases.  Your local suppliers will not be able to hold prices because the price increases will be so across the board.  Builders should have price escalation clauses in their contracts.
 
I would like to thank the builders, remodelers and subcontractors for supporting Ro-Mac Lumber & Supply.  On behalf of our staff, I would like to wish you a very Merry Christmas and a prosperous New Year.  Enjoy your holidays—you deserve a break.
 
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. .

Novemember 2017 Lumber and Commodity Report

seedling SPRUCE

The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index dropped 9.2 percent as the collapse in sheathing prices drug the entire Index down.  The Index would have dropped significantly more if not for the tariffs and duties slapped on Canadian softwood by the United States from the ongoing dispute regarding the Softwood Lumber Agreement.  Heavy price increases in spruce have impacted the commodity markets and most traders have no idea how this dispute will end. 
 
The dimensional portion of the Index increased 6.5 percent on the strength of dimensional spruce.  2x4 spruce was up 8.3 to 29.8 percent, depending on length.  Harder to secure longer lengths of spruce soared in price.  Most dimensional pine pricing drifted downward 5 to 8 percent.  The United States government is solely responsible for this increase as well as the bad blood being created between the two countries. 
 
The increases in spruce will probably be temporary because winter weather will soon affect the market.  However, these prices will open the door to European and Russian spruce, which will not face these tariffs.  It seems the United States government is creating a crisis to push business away from one of America’s best trading partners.  Ultimately, prices will settle down.
 
The sheathing markets are in full retreat as pricing got way above realistic market numbers.  Over the last 30 days, OSB retreated on average 25 percent (or $127 per thousand) while CDX dropped between 4.7 and 8.3 percent.  The total sheathing portion of the Index dropped a whopping 19.6 percent.  Frankly, there is more pricing to shake out.  The current market does not support pricing at these levels.
 
During the next two months, the drivers will be housing demand, winter weather, and the actions out of Washington, D.C.  None of these instill much confidence that markets will see major price increases.  With markets at higher levels, there is little mills and manufacturers can do to prop up these markets—so expect a general movement downward. 
 
A lot of manufacturers are beginning to announce price increases in January and February.  This is a tricky time for quoting in the long-term and builders should not assume pricing will be stronger in the spring with a weak portion during the winter.  Be careful you don’t get caught—keep in close contact with your suppliers. 
 
Have a happy Thanksgiving and please be safe.
 
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 2017 Lumber and Commodity Report

 

LumberandCommodityPic3v2

The lumber and commodity markets have tried to digest three major land-falling hurricanes in the United States over the last 30 days, which has been difficult to say the least.  With each passing day in October, the threat of additional storms wane and so should the markets.  Although the runup in price has been very strong, unless there is a sudden ramp up of homebuilding activity nationally these price increases will not have the legs to go further.  Since mid-September, the Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) increased a whopping 10.0 percent to $440.13 per thousand.  Some cracks in pricing for less popular items indicate that this price run may be waning.

The dimensional portion of the Index increased 4.6 percent to $451.80 per thousand, primarily on the popular lengths of 2x4 spruce and 2x12 pine.  Short lengths of 2x4 spruce dropped almost 3.0 percent while 2x4-12’ through 2x4-16’ added 10.5 to 17.1 percent.  2x12 pine added $30-$45 per thousand, with the price going higher for longer lengths.  2x4 treated added $60 per thousand while 2x6 spruce increased almost 9.0 percent.  The price reductions in shorter lengths suggest the market could be running out of steam.

The sheathing portion of the Index did not have any cracks, as all items printed higher.  OSB sheathing was up $73 to $75 per thousand (or $2.40 per sheet) while CDX pine added $30-$45 per thousand.  Other than 15/32” CDX most items were flowing very well to suppliers, and that price retreat may be sooner than later as we enter the holiday season.

A lot of vendors in the building material sector are feeling emboldened to announce price increases in the wake of the hurricanes, but if the building markets do not improve in regards to actual new home construction, these increases may be short-lived.  For instance, a drywall manufacturer has announced a whopping 18.0 percent increase the first of January—that is a lot of money. 

Just like this report indicates, certain items will begin to moderate depending on availability.  Expect some normalcy to enter the market and prices to moderate by mid-November.  Continued political strife in Washington, D.C. could exacerbate this pricing decline, especially if job creation continues to slow.  The rough patch in pricing is probably over—just get ready for spot market volatility.

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 2017 Lumber and Commodity Report

LumberandCommodityPic2v2

After two land-falling hurricanes striking the United States, the Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) jumped 8.8 percent to $440.13 per thousand.  The need for sheathings drove the market upward while quieting down the normal building in Texas and Florida.  The structural and building material components generally begin to feel increased volumes a few weeks after the storm.
 
The sheathing portion of the Index increased 17.1 percent (up $65.20 per thousand or $2.09 per sheet on average) as both OSB sheathing and plywood jumped dramatically in price.  For the state of Florida, the trouble is CDX pine plywood as OSB sheathing is not the preferred product in many of the higher wind-zone areas.  Additional hurricane activity could strain an already burdensome market, and this week Florida could actually see a spike in sales from suppliers as power and communications are just being fully restored.  Expect little relief in sheathing prices no time soon.
 
Pricing for the lumber side of the composite was down 0.9 percent to $431.73 per thousand, as general building conditions throughout the country appear to be cooling and there are more indications that the U.S.A.—Canada Softwood Lumber Agreement may get resolved by reducing market share instead of heavy tariffs.  A lot is still to be decided.  Plus there appears to be a greater push for European and Russian spruce at higher prices.  Once the heavy rebuilding in the Houston, Texas area gets in full swing as well as the rebuilding in South Florida cranks up, this market may follow.
 
The real concern for builders should be supply and labor.  Pricing may become an actual secondary issue.  For certain building material items, demand and trade issues could restrict flow and these hurricanes, especially in Texas and Florida, have already made a bad labor issue worse.  This could actually slow jobsite production. 
 
Then there is the reality that hurricane season is not over.  Don’t forget, Hurricane Matthew nearly clobbered Florida the first week of October last year and there are no guarantees the country is done with hurricanes.  Another hurricane threat or direct hit could be devastating to a supply chain that has not fully recovered since the hurricane.
 
Builders should stay in close contact with their suppliers on specialty items.  In addition, they cannot wait until the last minute to order—they must get prompt decisions from their customers.  The next few months could be very challenging for everyone in the building industry in Florida.

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. .

Ro-Mac Newsletter Signup