August 2020 Lumber and Commodity Report
The wood commodity markets have never risen so much and so fast in a 30-day period.
From mid-July to mid-August, the RoMac Building Supply Wood Commodity Index (Index) increased an astounding 47.7 percent to $737.08 per thousand. To put this in perspective, the average sheet of CDX pine plywood and OSB sheathing increased $7.10 per sheet and the average 2×4-16 piece of dimensional jumped $2.77. All of this in just one month. The prices have gone up so much that construction budgets are being busted and projects delayed. No one—not the suppliers, builders, or project owners—can afford to eat loses on projects budgeted with prices from spring.
The dimensional lumber portion of the Index increased 47.1 percent or about $260.11 per thousand. Increases were measured by one hundred dollars per thousand. Standard 2×4-92 5/8” spruce studs soared 42.5 percent while 2×4-16 spruce jumped 51.6 percent. 2×12 pine added from $128 to $148 per thousand, or plus 30 percent. 2×4 pine products were hard to find and lumber brokers are demanding 35 percent premiums.
The sheathing portion of the Index was up 48.3 percent or $221.77 per thousand. OSB sheathing was up $250 per thousand or $8.00 per sheet, and 5/8” CDX increased $155 per thousand or $4.96 sheet. These increases have taken place before hurricane season, which is predicted to pick up next week.
The huge run up in pricing is just one part of the bad news. The other parts are availability, lead times, and premiums above print. Many mills have nothing to quote; lead times for deliveries are anywhere from two to four weeks longer; and, if you can find wood, brokers are demanding prices above the published industry pricing. In other words, the price increases described above are probably much more for many companies. This is the worst wood commodity market in history.
What should you do as a builder or project owner?
You should have a price escalation clause in your contracts; slow play projects where you are locked into a price; and update all quotes. Even worse—postpone, renegotiate, or kill the project. At these price levels, no company can afford to eat the losses. Depending on the severity of hurricanes season, the next 30 days will probably be sorting out projects that are sustainable.
Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida 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, visit our Contact Us page.