August 2017 Lumber and Commodity Report
LUMBER AND COMMODITY REPORT – August 2017
by Don Magruder, CEO of RoMac Building Supply
The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) increased 2.3 percent to $404.56 in a market which is best described as mixed. Strong increases in OSB propelled the Index into positive territory as most species of wood products jockeyed for direction. It appears this month’s increases are far from cemented into the marketplace and it appears the base is more like shifting sand. The uncertain environment in business, building, and the U.S.A.—Canada Softwood Lumber Agreement is leaving mills and traders scrambling.
The lumber portion of the Index dropped 0.5 percent to $435.84 per thousand. 2×6 spruce, 2×4-12 spruce, and 2×4-16 treated pine kept the declines to a minimal as the overall market was bearish. A proposed settlement of the Softwood Lumber Agreement, which restricts imports instead of imposing huge duties, could crater the markets. Long-term gaps in supply would probably be made up by European and Russian spruce as American producers probably could not handle the load. This could be a recipe for future shortages if housing were to return to historic levels.
The sheathing part of the Index enjoyed a 4.8 percent increase fueled on a $23 per thousand increase in OSB. This 74-cent increase in OSB propped the market up as CDX was mixed from $15 down to $10 up, depending on thickness. If the country makes it through hurricane season unscathed, the sheathing markets probably cannot sustain this level without increased housing activity.
If you can predict the future, you probably can predict the commodity markets. If conditions settle and there is no hurricane season, expect pricing to remain in a tight range to down. If uncertainty gets worse and confidence retreats, expect pricing to go down. Builders should hedge their bets with a Price Adjustment Clause in their contracts and updated bids. Hold on—the rollercoaster is still moving.
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