January 2023 Lumber & Commodity Report

By Don Magruder

The RoMac Building Supply Wood Commodity Index (Index) for January dropped 4.0 percent to $344.19 per thousand, and just like inflation readings of late, the decline this month is significantly down which could indicate the bottom in the wood markets may have been reached.  Last January the markets were in a completely different stratosphere of price.  The total Index was $1,013.61, and over the last 12 months decline has been 64.0 percent., These numbers are very close to the range hit in 2018 and 2019 prior to the pandemic.  It sure looks like the bottom is here or very, very close. 

The dimensional lumber portion of the Index dropped 5.0 percent to $380.35 per thousand.  Pine dimensional was down from 2.2 to 7.4 percent while spruce dimensional varied from 1.3 to 12.7 percent down depending on width and length.  This has really been a market driven by demand for specific sizes.  A rash of lumber mill curtailments and closures since the beginning of the year indicates that manufacturers are ready to throw in the towel instead of more price capitulations. 

The Sheathing portion of the Index dropped 3.1 percent to $317.19 per thousand.  OSB only dropped $5 per thousand or about 1 percent while CDX pine printed down $10 to $15 per thousand.  The rate of decreases dramatically slowed in the last 30 days, and based on historical pre-pandemic levels, the prices should be at or near the bottom.

The danger for builders and project owners is the future spring pricing which should be up from these levels.  I expect as the weather warms and building improves nationwide, prices will increase and if you bid a project at today’s pricing, you could lose money in March.  Based on the curtailments and closures, the market could have a quick snap back later in the spring.  This is the time to have a price escalation clause in your contracts.  Don’t get trapped in this market- it will change.   

The RoMac Wood Commodity Index is a weighted lumber and sheathing composite based on usage in Central Florida.  By using wholesale pricing, the Index is a good indicator of the pricing direction for the next 30 days.

Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida, he is a former President of the Southeast Mississippi Home Builders Association, and a past Associate Vice President of the Home Builders Association of Lake County.  To contact Magruder, email him at don.magruder@romacfl.com.

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