March 2020 Lumber and Commodity Report

By Don Magruder

The RoMac Building Supply Wood Commodity Index (Index) from Mid-February to March 20, 2020 declined 2.9 percent or $11.15 per thousand. Considering the recent events involving COVID-19 (coronavirus disease), some of you may have expected the drop to be more. You are correct—this month’s numbers are a little deceiving. Until the last 10 days, the markets were moving upward at a good pace; however, the world changed with “shelter-in-place” orders. In the last 10 days, most of the gains from the previous three weeks were wiped out, leaving the markets in turmoil.

Unless there are wholesale shutdowns and curtailments or some type of transportation disruption, there is little enthusiasm for increased pricing. Until there is clarity on the coronavirus disease, the markets will remain uncertain and in turmoil.  

The lumber portion of the Index declined 9.4 percent as fear gripped the spruce markets.  Closing borders and cities pushed sales downward. There is also a belief that the markets are headed for an adjustment. Distributors and suppliers are not motivated to load yards of lumber not knowing if they will be open for business the next day.  2×4 spruce dropped $70 to $80 per thousand while 2×6 spruce retreated $40 to $58 per thousand. Oddly, pine did not follow as 2x4s were up 6.5 percent with wide widths mixed with up-and-down pricing in the single digits. Although it appears pine is lagging the spruce turndown, there should also be a price capitulation in pine.

The sheathing market was up, then down—meaning this sector had increases the prior three weeks, but has been in a retreat mode for the last 10 days. That is why the monthly numbers do not reflect the real direction of the market. The sheathing portion of the Index is up 3.4 percent with OSB sheathing adding $5 per thousand and CDX pine plywood adding $25 on 15/32” and $40 on 19/32”. Supply and tariff issues provided the impetus for the price increase on CDX, and most are not sure if that can be sustained in the current environment. 

There is no doubt—a significant shutdown and reduction in American GDP is going to negatively affect the markets. It really depends on how bad and for how long.

Builders should be mindful that “shelter-in-place” orders may create delays on some products as factories close. There are still issues with the five-to-six-week shutdown of Chinese manufacturing. Just in time inventories by many distributors and dealers could create a spot shortage. Make sure you place orders ahead of time and expect delays on special orders. 

In the long term, the housing market should pick back up once the coronavirus is resolved, because there remains a shortage in affordable housing and the United States government can fire up the country’s economy through housing. 

Most importantly, please be safe. Practice social distancing, wash your hands, and stay away from large crowd gatherings. My prayer is for this terrible virus to end sooner than later. Together, let us do everything we can to keep people working.

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, email him.