April 2013 Lumber and Commodity Report

Lumber Yard


by Don Magruder, CEO of RoMac Building Supply

The Home Builders Association Wood Commodity Index (Index) for mid-April decreased 2.7% to $438.51 per thousand. The Index primarily pushed downward late in the second week of April as the world’s commodity markets sagged and investors grew more uncertain in the sustainability of the recovery. Oddly, the downward push in prices occurred the same week in which the United States Census Bureau announced housing starts had finally reached the plus-million yearly milestone in nearly five years. Then again, who can explain the rationale in many sectors of the building material marketplace?

In the dimensional lumber composite of the Index, pricing dropped 1.8% on significant drops in longer length spruce items and wide width pines. The lumber composite dropped to $434.56 per thousand. Oddly, short length spruce such as studs and 2×4-8’/10’ spruce increased in price from 2.2% to 12.1%. Little doubt though, the lumber composite was in a downward trend.

The plywood composite of the Index is a tale of two products–OSB sheathing and CDX pine plywood. OSB Sheathing dropped $40 per thousand in the last week primarily due to weaker order files and more production coming on line. CDX pine plywood increased $40 to $75 per thousand as demand outstripped production. Overall, because of the weight in sales of OSB sheathing, the plywood composite dropped 3.3% to $441.46; however, the impact of the loss of the Georgia-Pacific mill in Hawthorne, Florida is really becoming very evident.

One lumber expert told me that he expects lumber and plywood to take a short breather in price increases, but noted the huge uptick in housing starts were being driven by multi-family projects. His prediction is that huge block buys to cover these projects will propel pricing higher in May. The issue for many suppliers and dealers is they do not want to buy heavy if, indeed, the market is correcting.

Frankly, my crystal ball is busted, but my guess is the market has more downward risks because of the overall decline in world commodity pricing. I also believe that the markets had gotten over-baked and the high pricing was beginning to kill building projects.

The biggest mover in other building products will probably be roofing shingles. Hail storms in the South and increased demand is pointing the way toward tighter supply and higher prices. Rainy season is good for shingles, and it appears the South is having a much wetter spring.

My advice to all–be careful in a dropping market to not buy high and not quote low. If, indeed, the market turns back up with heavy multi-family projects, buying a long-term quote at today’s numbers could be costly.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (romacfl.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 don.magruder@romaclumber.com.