Lumber and Commodity Report April 2020

By Don Magruder

The RoMac Building Supply Wood Commodity Index (Index) for April 2020 declined 17.9 percent to $301.10, or $65.78 per thousand, from last month. While the decline is significant, it is not catastrophic considering the United States economy in many sectors is shut down.  Consider that one year ago the Index was $320.79 per thousand—this year’s number is only 6.2 percent below that of April 2019. This indicates that mills and manufacturers are being aggressive in curtailing and shutting down production, which is raising concerns they may be turning the spickets off too aggressively.

The lumber portion of the Index declined 8.1 percent to $367.15, which is within one percent of last year. Over the last couple of weeks, the spruce market has made a significant comeback from its lows in late March, which is an indication supply issues may be right around the corner. Major curtailments and closures in Canadian spruce mills have also spread to United States mills in both pine and spruce as social distancing and COVID-19 requirements by the government are naturally creating slowdowns. While the markets could go lower, it appears the bottom is not far.

2×4 spruce studs were off $18 per thousand while dimensional spruce retreated 5.1 to 10.0 percent, depending on length. Oddly, 2×12 wide-width pine was missed as shorter lengths held steady and large declines were felt in longer lengths. 2×4 pine treated gave back 8.1 percent on lower mill costs.

Since mid-March, the panel portion of the Index dropped 26.4 percent, or $90.50 per thousand. This type of pricing decline in the wholesale market usually indicates a panic that may not be warranted given that inventories were low. By historic pricing terms, pricing on panels is cheap and OSB could feel more downward pressure. CDX has some supply issues as it relates to imports and tariffs, so those numbers may improve. CDX was down $80 to $100 depending on thickness while OSB was down $93. It will take several weeks of inventory circulation before builders see the full impact of the declines.

The markets are searching for a direction after these declines, and the junction is very clear—prices will either start firming and moving upward a little or there will be a significant number of more mills closing. In this economic environment, there are few mills or factories willing to remain open and bleed red ink—the risks are too great.

In the next 30 days, be mindful that with all these curtailments and shutdowns supply may be a bigger issue than price. Stay tuned.

Most importantly, continue to be safe. We remain in the midst of the COVID-19 pandemic. Please practice social distancing, wash your hands, and stay away from large crowd gatherings. The end is closer now than 30 days ago—remain patient and do not relent.

God bless everyone!

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, first our contacts page.