December 2019 Lumber and Commodity Report

Don and Lumber

December 2019 RoMac Lumber and Commodity Report

By Don Magruder

As the weather cools down, so are the wood commodity markets with prices moving downward after a large increase last month. The next few weeks will determine if the housing market has enough strength to stop further decline.

The RoMac Building Supply Wood Commodity Index (Index) for December decreased 2.3 percent to $326.54 per thousand as mill and manufacturing curtailments could not cement a solid market bottom. Dimensional lumber was mixed in pricing while sheathings were solidly down. The closer we get to the holidays and cold winter weather, the chances for market increases diminish.

The dimensional lumber portion of the Index dropped 0.2 percent to $398.75 per thousand. Spruce stud pricing was down 0.5 to 2.2 percent, depending on length and width, while standard 2×4 spruce fluctuated on lengths from an increase of $11 per thousand on 2×4-8 spruce to a $3 per thousand decline on 2×6-10 spruce. This movement suggests that many buyers are doing “just in time” purchasing and trying to manage cash for year-end. Wide-width pine was down $5 per thousand while 2×4 treated declined $25 per thousand. Buyers should monitor pricing, especially if there are needs for a specific size or length.

The sheathing portion of the Index printed down across all sectors. CDX pine plywood dropped $5 to $12 per thousand while OSB sheathing was down $15 per thousand across the board. The decline in pricing in sheathing products occurred later in the 30-day cycle and there is a good chance that more downward pricing takes place before the spring thaw. Little doubt, manufacturers will be trying to manipulate volume to force pricing upward; however, the weather and holiday season may be too much. Once winter begins to abate, this downward pressure will quickly subside.

Compared to the Index in January 2019, the lumber portion of this month’s Index is 11.2 percent more and the sheathing portion is 4.2 percent higher. This is probably a sign that these commodity prices could go down further.

After the first of the year, mills and manufacturers will be pushing hard for higher prices as trucking, fixed costs, and labor prices continue to increase. Builders should not use today’s pricing to bid projects in the spring and it is probably a great idea to add a price escalation cause to your contracts. 2020 could very well be an inflationary time period for the construction supply industry—be careful.

Merry Christmas and Happy New Year from everyone at RoMac Building Supply! May God keep you safe, clothed, and fed in 2020.

Don Magruder is the Chief Executive Officer of RoMac Building Supply 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@romacfl.com.