May 2020 Lumber and Commodity Report

Lumber in front of an under construction house.

In the immortal words of legendary sportscaster Keith Jackson, “Whoa, Nellie!”

Over the last 30 days, the wood commodity markets have made the largest and quickest jump in pricing—since September 2005 in the immediate aftermath of Hurricane Katrina. Builders, this is sticker shock.

The RoMac Building Supply Wood Commodity Index (Index) for May 2020 increased $74.45 to $375.55 per thousand or 24.7 percent. The Index is composed of two segments—dimensional lumber and sheathings, both of which had significant prices increases.

In last month’s report, I cautioned builders that there was trouble on the horizon in light of mill curtailments and shutdowns coupled with a bleed down of secondary inventories. I wrote, “In the next 30 days, be mindful that with all these curtailments and shutdowns supply may be a bigger issue than price. Stay tuned.”

Supply is tight in many areas and there is a real issue with some spot shortages in specifications, lengths, and grades.

The dimensional portion segment the Index jumped 10.9 percent (or $40.07 per thousand) to $407.22 per thousand. 2×4-92 5/8 spruce studs added 8.0 percent in price while 2×4-16 spruce jumped 12.2 percent. 2×4-16 pine was up 20.4 percent while wider width 2×12-16 pine jumped 13.1 percent. Solid double-digit price increases were across all sectors.

It is important to note that this Index is comprised of the base products used to build a home in Central Florida and the total 10.9 percent increase is a good representation of the increase of an average frame pack. However, if you are doing a commercial project with specific pine lengths and grades the price could be 20-plus percent more. The dimensional lumber market on different grades and specified lengths is higher with less availability. Contact your RoMac Building Supply sales representative or local store manager for specific quotes.

It has been a pricing war in the sheathing portion of the Index, which jumped 39.8 percent to $351.89 per thousand. This whopping increase is comparable what occurred in this Index in September 2005 when this segment jumped 46.3 percent after Hurricane Katrina.

Over the last 30 days, 15/32 CDX pine plywood is up 35.8 percent and 19/32 CDX pine plywood is up 37.1 percent. In terms of actual price per sheet, these two CDX plywood products have gone up from $3.84 to $4.16 per sheet. This is huge and goes against conventional wisdom.

OSB sheathings are following the CDX pine plywood market and they are catching up from steeper drops earlier in the pandemic. Over the last 30 days, OSB sheathings have added $93 per thousand, or $2.98 per sheet. Depending on thickness, the amount of the increase is between 39.2 to 49.7 percent.

Of the two products, CDX—due to trade issues with imported plywood and tariffs—presents to be the product with the most risk in supply and price. OSB production in the south should be able to ramp up quickly.

As states open back up from the COVID-19 (Coronavirus Disease) lockdowns, expect pricing and supply to remain strained over the next 30 days. In addition, Hurricane season starts June 1st, and the forecasters are predicting a bad year. Builders need to protect themselves with a Price Escalation Clause and order early. The future of the Florida market looks good and federal money could create high demand later in the year. Pricing could be a in the long term.

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 get in contact with Magruder, visit our contact page.