November 2020 Lumber and Commodity Report
The RoMac Building Supply Wood Commodity Index (Index) for November 2020 dropped 17.7 percent to $608 per thousand as wood commodities continued to retreat from their late summer high. While the decrease in pricing is significant, the decline has yet to mirror the rapid increases of the previous months. In the last couple of weeks, the markets are putting up resistance to deeper discounts. A warm late fall, early winter weather, and uncertainty over the COVID-19 pandemic are forcing buyers into the market to replenish low inventories.
Fears of manufacturing delays because of the continued COVID-19 issue and an overall view that the markets should be good in 2021 are creating angst over supply. This is coupled with raw material issues and the markets attempting to erect a dam on much lower pricing. The futures market between November and February is suggesting the price resistance maybe stronger than first thought.
The dimensional lumber portion of the Index dropped 29 percent to $595 per thousand. Spruce studs gave back 22.9 to 26.9 percent, depending on the size, while dimensional 2×4 spruce eased down on average 18 percent. Declines in 2×6 spruce were in the low 20 percent range. Wide-width pine was down $95 to $140 per thousand while 2×4 treated pine gave back 39.2 percent on increased supply. These numbers do not reflect the slower pace of a decline over the last couple of weeks, and in some cases an increase.
In the sheathing portion of the Index, OSB gave back $40 per thousand. However, pricing remains very high—over $15 per sheet more than a year ago. CDX pine plywood was down from $10 to $70 per thousand (or about 6 percent). 15/32” CDX pine plywood is now trading less than 1/2″ OSB and this temporary disparity will force deeper discounts in OSB as builders make the switch. Expect CDX pricing to rise or OSB pricing to drop in the future, because these numbers will force market changes.
The COVID-19 pandemic and its effect on supply is the wildcard for the winter outlook on commodities. Chances are, based on the rapid spread of this virus there will be disruptions in supply that keep mills and manufacturers in charge of pricing. Be very careful as pricing and availability are subject to quick changes. Builders should not count on huge discounts. Instead, they should expect delays and increases and price higher when bidding a project.
Happy Thanksgiving to everyone! Please be careful with COVID-19 during this time. Practice safety protocols and protect yourself by wearing your mask, practicing social distance, and washing your hands.
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 contact Magruder, please visit our Contact Us page.