June 2019 Lumber and Commodity Report

By Don Magruder

The RoMac Building Supply Lumber and Commodity Index (Index) for June 2019 declined again as national housing demand continues to be unremarkable. The Index dropped to $298.87 per thousand or 4.8 percent. The two main drivers of the market over the last 30 days were mill curtailments and closures in British Columbia, which pumped up western dimensional spruce, and the continued oversupply issues in the OSB manufacturing, which is increasing the downward pressure. In both cases, improvement in the housing and commercial construction markets are needed to lift the demand equation.

The dimensional lumber portion of the Index increased 1.3 percent, which almost wiped out last month’s decline. Although dimensional spruce increased 4.9 to 9.7 percent based on length, wide-width pine was down 5.4 to 6.8 percent, and 2×4 pine was off almost ten percent. Spruce studs dropped in price from $2 to $12. Unless there is a pop in housing demand for the summer, these spruce increases may be short-lived considering the amount of European lumber heading to the United States.

The sheathing portion of the Index dropped $29.94 per thousand or 10.8 percent. It seems overproduction and cooling demand in OSB sheathing were too much for the market. In the last 30 days, OSB sheathing dropped $37 per thousand as a shortage of buyers developed. Too many new manufacturing facilities have started up to have this type of market cooling. In response, CDX pine producers had no recourse but to follow, and held their ground a little firmer only retreating $10 for thinner square edge products and $50 per thousand on T&G 3/4”. There is little doubt, producers are not pleased to see declining prices on sheathing heading into the long, hot days of summer.

While tariffs and a very rainy season in Florida are not helping demand, builders can no longer point to the high cost of building materials. Price increases since August 2017 have been wiped out and it appears labor is easing in some areas. The problem is that both are real indications the housing market is cooling. Dimensional spruce may be stronger the next month; however, unless there is a weather event or significant summer increase in housing starts, expect pricing to flounder.

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.