November 2019 RoMac Lumber and Commodity Report

Timber stack of whitewood

November 2019 RoMac Lumber and Commodity Report

By Don Magruder

The RoMac Building Supply Wood Commodity Index (Index) for November increased 12.1 percent to $334.11 per thousand as curtailments in OSB sheathing and dimensional spruce spiked the market. Last month, the Index dropped 5.1 percent. While the increases are significant, it is a minor attempt to claw back pricing lost over the last few months. It appears the first real wave of winter weather is not helping mills and manufacturers hold onto these increases as pricing has stabilized with indications they will move downward. This volatility is the new reality in the market as demand and supply struggle to find out who is the dominant feature.

The dimensional lumber portion of the Index increased 5.3 percent to $398.95 per thousand. 2×4 spruce increased $20 per thousand plus (or 6.3 to 10.5 percent), depending on the length. 2×6 spruce was up 9.5 percent or about $33 per thousand. Pine lumber did not perform as well. 2×4 pine was down 2.4 percent while wider width 2×12 pine gave back 3.8 to 7.8 percent on a shortage of buyers. If prices retreat in the next couple of weeks, it could mean a long winter for many mills.

The sheathing portion of the Index spiked on significant OSB mill closures by Georgia-Pacific. OSB pricing was up a whopping $70 per thousand or $2.24 per sheet. Understand, the new pricing is still very low, just not recessionary low from a month ago. There is little doubt the mills can hold onto these numbers in falling snow. CDX pine plywood was flat to up 3.2 percent with most pricing driven by demand for a specific thickness and a wary eye on the OSB market. Overall, sheathing pricing remains low.

These drastic steps are a sign that manufacturers and mills at all levels are crying uncle on poor operating profits. Expect a flood of price increases after January 1, 2020, and many companies may have the stance of reducing production if they cannot get the numbers they need to make a reasonable profit. If that starts occurring, there could be some gaps in supply. It appears that many of these companies have little appetite to sell products for a loss with the hopes of making it up on volume. I expect firmer stances on price increases in 2020, because most companies will have no other choice.

Happy Thanksgiving and I hope you and your family are truly blessed!

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 at don.magruder@romacfl.com.