November 2012- Lumber and Commodity Report
LUMBER AND COMMODITY REPORT – November 2012
by Don Magruder, CEO of RoMac Building Supply
Your Home Builders Association Wood Commodity Index (Index) for January 2013 increased 11.0% in price to $420.84 per thousand as higher demand pressured narrowing inventories. Many dealers and suppliers have refused to stock heavier inventories fearing a winter collapse in pricing, and this tight supply is adding fuel to an already hot market. It is truly unprecedented to have price increases of this magnitude during this time of year. Not one item in the Index dropped in price over the last 30 days.
The lumber portion of the Index increased 5.7% to $416.40 per thousand with spruce studs increasing from 3.1% to 8.7% while spruce dimension pushed upward a solid 7% plus. Pine dimensional lumber showed the greatest strength with prices jumping in the plus 15% range.
The sheathing portion of the Index increased a whopping 15.1% primarily on the strength of OSB sheathing, which increased on average $73 per thousand–or plus 21%. CDX pine plywood was nowhere near as strong with increases from 1.1% to 6.2% for thicker panels. It is worth noting that normally the swing in increases or decreases between CDX and OSB are not that wide, and this may be an indication the market is overdone.
Not included in many of these prices is the $5 per thousand fuel surcharge, which is being added on many loads after the first of the year. Fuel is definitely creating inflation in the markets in both logistics and manufacturing.
January’s increase in drywall and insulation, coupled with proposed increases in February in roofing and cement, is making a lot of builders have second thoughts. Firm bids from October with these increases will result in heavy losses unless the builder included a price escalation clause in the contract.
A general rule when markets heat up this fast in a short time period–it is usually a sure bet that it will be going down. It is hard to say, but a couple more weeks of watching instead of buying is probably a good idea for dealers and suppliers. The word for everyone is “cautious”.
Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. 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 at email@example.com.