August 2015 Lumber & Commodity Report
LUMBER AND COMMODITY REPORT – August 2015
by Don Magruder, CEO of RoMac Building Supply
The wood commodity markets have been brutal for traders over the last 30 days, as most items are in full retreat. The downward spiral in these commodity markets mirrors the current deflationary tone of all commodities throughout the world. Sagging demand and economies in turmoil are leading to falling demand in commodities. It remains to be seen if these sentiments are starting to really depress a very shaky housing recovery in the United States. The extent of the declines indicate housing is cooling.
The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index in August dropped a whopping 5.0% with none of the items in the Index adding in price. The tone is down, and it appears enthusiasm by most in the construction industry is subsiding. Initial reports of a housing slowdown in South Florida could be no more than a late summer wobble, but others fear it is the first signs of something worse.
The dimensional lumber portion of the Index dropped 7.8% as many manufacturers struggled to find a bottom. Stud pricing was down from $8 to $49 per thousand (depending on the size) with dimensional spruce dropping $20 plus in general. Heavy retreats in pine lumber swept through most sizes with many declines greater than $30 per thousand. Nothing in lumber escaped the downward pressure.
Sheathing dropped in pricing over the last 30 days, but that portion of the Index only retreated 2.4% or about 20 cents per sheet on average. CDX pine gave back on average about $10 per thousand with OSB sheathing finding a level about $5 per thousand lower. In the last week of the period there has been a rally in sheathings, but the amount of the rally was not much and not for long. For it to be a real reversal, market analysts need to see some weeks strung together. I suspect many plywood mills are secretly wishing for a little hurricane action to bolster pricing through the fall and winter.
Unless there is a hurricane threat or sudden economic reversal, there is little impetus for rising prices. Prices are low and could go even lower. Consider that since August 2014 (one year ago) based on this Index dimensional lumber pricing is down 22.6% and sheathing pricing is down 13.2%. Overall, the Ro-Mac Lumber Wood Commodity Index is down 18.0%. There is little doubt if housing were strong that these prices would be much stronger.
Builders, don’t base everything on lower prices, as a big hurricane in the next 30 days could change the equation real quick.
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 firstname.lastname@example.org