February 2015 Lumber & Commodity Report

dpc HouseFramed 66304523web


by Don Magruder, CEO of RoMac Building Supply

Just imagine you work in a department store, and a couple of weeks before Christmas sales were slow because no one was buying.  This is a fairly accurate description of the current wood commodity market.  With two weeks, or so, until the main spring selling season the markets are eerily muted with few signs of a hot spring selling season.

The Home Builders Association and Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) in mid-February declined 1.8 percent to $315.42 per thousand on lower than expected exports to China, a lackluster U.S. housing market, and the winter weather.

The declines were basically across the spectrum on the Index.  The lumber dimensional portion of the Index declined 2.0 percent to $363.04, as mills searched for buyers.  The housing market is underachieving and reports from distributors is business is very spotty.  Spruce studs gave up the most at nearly a 6 percent decline, with pine dimensional giving back on average $10 per thousand.

The sheathing portion of the Index dropped 1.5 percent primarily on the weakness in OSB sheathing, which gave back 5 percent on average.  Over-supply continues to plague OSB sheathings, and a sluggish market is not helping mills manage that problem any easier.  15/32 CDX pine plywood was up $15 per thousand while thicker panels were up $5 to down just a little.  CDX pine plywood continues to remain the driver in the sheathing market.

Concern by all in the construction industry should be increasing, as the markets indicate housing is not starting 2015 with the bang so many expected.  In less than 30 days, the country should be in the midst of the spring building and selling season.  Unless these markets heat up quickly, it may turn out to be a disappointment.  Rarely, do you see these markets decline between January and February.

Let’s hope Christmas begins for building in the next couple of weeks.  Keep in mind, if the markets crank up then today’s pricing will go up, especially in light of this month’s decrease.  Be very careful bidding items in mid-February for shipment in April or May.  All builders should have a price escalation clause included in their contracts.

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.