July 2017 Lumber and Commodity Report

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by Don Magruder, CEO of RoMac Building Supply

The Ro-Mac Lumber & Supply, Inc Wood Commodity Index (Index) is firmly strapped in the pricing rollercoaster as it dropped 9.1 percent last month while increasing 7.5 percent this month.  The continued upheaval on the U.S.A—Canada Softwood Lumber Agreement along with duties and tariffs are causing whiplash among buyers and builders.  Rumors of an agreement with reduced levels of importing and lower tariffs have buyers in a tailspin.  Throw an uncertain housing demand into the equation and no one knows where pricing will ultimately end up.

The dimensional lumber portion of the Index increased 8.4 percent to $438.10 per thousand.  SPF led the way upward with strong moves.  2×4-92 5/8 studs were up 9.2 percent (or $42 per thousand).  That translates into more than 22-cents per piece.  2×4 dimensional spruce was up $35 to $50 per thousand while 2×6 SPF soared by the plus $70 per thousand range.  There is little doubt it—the tariffs, duties, rumors, and heightened wildfire season are impacting SPF pricing.

Oddly, pine dimensional pricing is in retreat.  2×12 pine was down 4.4 to 11.0 percent while 2×4 pine gave back 9.6 percent.  This decline in pine may be a truer indicator of the markets.

The sheathing portion of the Index increased 6.8 percent, with OSB sheathing leading the way with across-the-board $24 per thousand increases.  A 77-cents per sheet increase in OSB sheathing is somewhat sizable.  CDX pine increased in price, but it was not consistent across the board.  15/32” added $25 while 19/32” increased $15 and 3/4 T&G dropped by $15.  The most important takeaway is that the sheathing market gained somewhat.  However, it is still below levels hit in the spring.

Commodity pricing is causing inflation in housing.  Since last year, there have been large price increases in the following items:

  • 2×4-92 5/8 Studs up 34.3 percent
  • 2×4-10 #2 Spruce up 32.2 percent
  • 2×4-16 #2 Spruce up 17.1 percent
  • 2×6-10 #2 Spruce up 28.1 percent
  • 2×6-16 #2 Spruce up 36.4 percent

OSB Sheathing went up 24.5 percent on average.

These are real increases, which are hard to digest by many builders and subcontractors.  The real question is—are these increases and the impending tariffs going to price the housing market out of reach for many buyers?  My real concern is that it will.

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