June 2020 Lumber and Commodity Report
Although this month’s increase seems modest after last month’s price explosion in the wood commodity markets, it really is not. The RoMac Building Supply Wood Commodity Index (Index) for June 2020 settled at $396.68, or 5.6 percent more than just 30 days ago. The biggest increase occurred in the dimensional lumber portion of the Index as supply continues to lag demand. Wood treaters have seen a surge in business related to quarantines during the COVID-19 outbreak, which has put pressure on pine.
The lumber portion of the Index increased 8.1 percent to $440.01 per thousand with spruce studs leading the way. Depending on size and width, spruce studs were flat to plus 15.5 percent. It truly is an availability play. Dimensional 2×4 spruce was up $3 to $53 per thousand, depending on length, with premium lengths drawing a much higher price. 2×6 spruce added 8.2 to 11.0 percent while wide-width pine added 1.0 to 3.2 percent. 2×4 pine was under pressure and added 12.1 percent.
The sheathing portion of the Index added 3.5 percent primarily on the strength of CDX pine plywood. 1/2” plywood added 4.4 percent while 5/8 CDX increased 6.3 percent with 3/4 T&G adding 7.9 percent. OSB sheathing was up $8 per thousand, or less than 3.0 percent. While prices are stabilizing, the downturn has not begun, and mills are resistant given the proximity of hurricane season.
The COVID-19 issue has not been resolved and cases are beginning to spike in many states, including Florida. Despite the government reopening states, unless consumers and potential property owners feel confident and safe, there could be a retreat in demand. The pent-up demand from the two-month shutdown will fade over the next few weeks. To sustain these price levels, the markets need organic growth and confidence. Although Florida will be a strong housing market, growth and improvement could be delayed if the Coronavirus issue worsens.
In the short-term, expect prices to hold in a general range as mills fight to hold onto these levels. However, overall weaker demand will push these numbers lower unless a major hurricane threat occurs. Builders should be careful in pricing projects and should not be afraid to update quotes.
Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida 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, visit our Contact Us page.