October 2013 Lumber and Commodity Report



by Don Magruder, CEO of RoMac Building Supply

Your Home Builders Association Wood Commodity Index (Index) increased 4.4% to $329.42 per thousand, as slim supply throughout the supply chain kept mills and manufacturers busy.  Housing demand is suspect, given the government shutdown problems; the 36,000-decline in building permits in August; and, the lackluster housing start data, which suggests housing starts remain doggedly below one million.  Add interest rate concerns, and you have a market that is engulfed in uncertainty.

The only reason why the commodity markets are not down further is due to a supply chain that refuses, or cannot load the wagon because cash is king.  Inventories in the supply chain are “hand-to-mouth” at best, and market volatility is not encouraging risk-taking.

The dimensional lumber composite of the Index increased 4.7% to $391.63 per thousand, as most items experienced double digit increases.  Items lesser in demand, such as 8’ and 10’ lengths, were flat-to-down; however, popular sizes were up $15-$25.  Wide width pines were up $25-$30 while 2×4 treated added almost 11%.

All items in the sheathing portion of the Index, but one, increased.  CDX plywood was up 4.5% plus while OSB sheathings hovered around the 4.0% increase.  It appears mills have done a good job matching production with demand, and limited on-ground inventory by many dealers will keep pricing firm.

In other commodities, drywall companies have begun announcing potential 10%-20% increases for 2014 and cement manufacturers are projecting 6%-9% increases with environmental charges on top.  Window manufacturers are still in charge as demand is overwhelming supply.  So, expect those prices to continue to increase.

The new Department of Transportation rules are limiting drivers’ hours, and trucking has become a real issue.  Expect logistics to get tougher in both pricing and delivery times.  I predict that in 2014 getting special order and custom merchandise on time will probably be one of the biggest problems for most builders.

For the next few months, expect pricing to remain firm-to-down depending on the weather and the folks in Washington, D.C.  If uncertainty remains in the nation’s capital you can expect to see it in the commodity markets.

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 don.magruder@romaclumber.com.