August 2014 Lumber and Commodity Report

LUMBER AND COMMODITY REPORT – August 2014

by Don Magruder, CEO of RoMac Building Supply

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 2×12 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 2×4 and 2×6 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 (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.