May 2018 Lumber and Commodity Report



by Don Magruder, CEO of RoMac Building Supply

Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for May came in surprisingly strong with a 7.7 percent increase or $37.34 per thousand. The one percent respite in April did not carry over into May and it appears the “Great Price Run” of 2018 continues. The warmer weather in the North coupled with relentless trade instability and trucking shortages are playing havoc on the wood commodity markets. Some traders are starting to worry about supply and on-time delivery.

The dimensional lumber portion of the Index increased a solid 9.8 percent with all lumber sizes and grades moving upward. Dimensional spruce jumped $65 to $82 per thousand while most studs added $40 plus. Tighter availability from Canada may force builders to move from select spruces to hemlock, and the price is reaching a point in which European wood may be more affordable and available. The supply-and-demand equation is out of whack and most of the problem is not driven by demand.

The sheathing portion of the Index was a little more stable; however, both OSB sheathing and CDX pine plywood added $25 to $35 per thousand—that is almost one dollar per sheet. Some OSB mills are off the market and most others are struggling to find trucks to move loads, especially into Florida. Higher prices and longer lead times are forcing more inventory on the ground, which in tandem is burning through cash flow.

Builders need to forecast needs with their suppliers and increase prices on projects, because the signs of pricing weakness have not entered the market. If the northern states continue revving up business there could be little break from a hurricane season, which appears to be active. In short, the pieces are in place for this run to continue.

One caveat will be crossing the affordability line for some projects. If costs continue to rise unabated, expect projects to be canceled. If this occurs that could slow down this run. A lot of “ifs” are in this forecast, because no one really knows what is going to happen. There are too many variables—demand, trucking, tariffs and supply. Hang on! It could get a little bumpy.