July 2013 Lumber and Commodity Report

Etched Wood


by Don Magruder, CEO of RoMac Building Supply

Over the last 30 days, your Home Builders Association Wood Commodity Index (Index) has been on a roller coaster with prices initially heading straight down and then over the last two weeks reaching a plateau followed by an upward movement. The Index dropped to $315.73 per thousand, which is down 3.3%; however, it appears a bottom is being cemented as the will of the market appears to have changed upward. The variables remain to be low field supply versus peeks in demand.

The lumber portion of the Index dropped 1.5% to $342.39 per thousand as western spruce studs dropped 6.3%-9.2% but those decreases in prices were offset by an increase in longer lengths in dimension spruce. The more popular sizes were up 3.7%-6.8%. Pine dimension lumber in wide widths headed downward 2.3%-5.9% while narrow pine widths increased 1.1%. Typically, these types of increases in the more popular widths and sizes are the first signs of a general increase as pressure mounts from dealers restocking inventories.

There was a 4.8% decline in the sheathing portion of the Index as OSB sheathing dropped $20 per thousand over the last month. Most of the declines in OSB occurred during the first two weeks of this pricing cycle. For the most part, OSB pricing has stabilized and increased in some areas of the country over the last couple of weeks. CDX pine sheathing was flat to minimally down–$5 per thousand–as the harsh reality of supply issues began to creep back into the market. CDX pine plywood is normally the driver in the entire sheathing market and it is significant that those prices have firmed.

There is a simmering, growing angst among dealers and builders that supply could be an issue in the next few months. An erratic hurricane season, pockets of increased building (like in Florida), extremely wet weather in the South hampering logging and lack of adequate trucking capabilities has many on the edge of their seats. This could be the first signs of a general boosting of inventories on the ground, which in itself could spur pricing forward. Hand-to-mouth inventories by dealers and suppliers could lead to someone not eating.

Most other building commodities are static in price as there is no real impetus moving the market. Shingle manufacturers have announced a price increase for the first of August, but there is some debate whether it will stick or not–I guess it depends upon the weather. In regard to side product issues, door and window manufacturers are pushing for low-single-digit increases, which could stick given the issues with supply.

It appears the wood markets have hit bottom and there could be an upward movement over the next few months. Demand bolstered either by a hurricane or increased housing starts will determine as to how high and how fast. Builders should protect themselves with a price escalation clause in their contracts and, most importantly, have contract and bid prices with “good-thru” pricing dates.

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.