April 2021 Lumber and Commodity Report
The RoMac Building Supply Wood Commodity Index (Index) for April 2021 increased a whopping 17.8 percent, or $182.53 per thousand, as increasing demand and non-expanding supply are colliding in a country that is slowly moving out of a pandemic. Delays in imported products and the emergence of developing countries across the world coupled with an isolationist trade policy of the last few years have significantly hampered the industry’s ability to expand supply. In short, there is not a quick fix or easy answer to the current disruption in supply. Plus, constraints on labor are exacerbating an already bad situation.
The dimensional lumber portion of the Index jumped 28.1 percent, or $286 per thousand. This number is staggering. In one month, 2×4 dimensional spruce increased in price from 24.2 to 34.4 percent, depending on length, while 2×6 spruce added on average 25 percent. Wide width 2×12 pine pricing was up from 10 to 12.7 percent, and those prices are at an all-time record. Here are some examples to put this into perspective: the wholesale price of one spruce 2×4-92 5/8 stud is around $7.50, and 2×12-16 #2 yellow pine is now over $50 per board. Plus, pricing at mid-week went up again.
The sheathing portion of the Index increased 16.1 percent, or $157.31 per thousand, which translates into an average price per sheet increase of $5.03. CDX increased the most adding 23.1 to 36.5 percent, depending on size, while OSB added a solid $105 per thousand increase, or 12.2 percent. In the last 30 days, CDX pine increased by almost $9 per sheet while OSB added $3.30 per sheet. Those are heavy increases for just one month, which suggests that supply continues to tighten as demand cranks up. A major producer of OSB reported to our group that certain foil boards were being allocated because of shortage resins.
Unless something slows down demand, or a sudden increase in supply happens, the resolution of this disruption will be slow to occur. If anything, the variables will worsen as America emerges from the pandemic and the economic stimulus package takes hold.
My forecast is that pricing and supply will remain tough over the next 30 days. Builders should include a Price Adjustment Clause for Contract in their contracts. There will be few manufacturers or suppliers holding prices or guaranteeing supply because things are getting out of their control. This is the time when a great relationship with your suppliers will pay off.
Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florid, and a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County.