October 2018 Lumber and Commodity Report



by Don Magruder, CEO of RoMac Building Supply

The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for October 2018 cratered 16.4 percent to $347.73 as the hurricane bounce from the prior month quickly deflated. This may be wood commodity history in that CDX pine and OSB sheathing prices declined on the heels of Hurricane Florence, between the threat and devastation of Hurricane Michael. This is stunning and probably speaks volumes to the overall deterioration of the commercial and residential construction markets.

Rising costs, labor costs, tariff issues, and rising interest rates may be causing more damage to the construction industry. Builders should look at real demand and job growth. No doubt—something is amiss in the construction markets.

The dimensional wood portion of the Index declined 15.6 percent as dimensional spruce retreated $80-$115 per thousand or 20 percent plus. Spruce studs were less affected but still had significant declines in the mid-teens. Indications are that there is a lot of wood heading this way without enough buyers. The European Spruce brokers may be hit the hardest.

Normally the threat of a major Category 4 hurricane, not to mention it actually hitting, would artificially pump up the wood sheathing markets. On the contrary, Hurricanes Florence and Michael failed to move the needle. Since mid-September, OSB pricing is down $75 per thousand (21.6-24.2%) and CDX pine plywood is down $30-$55 per thousand. This is something we’ve never seen before—since this Index began almost 30 years ago.

These huge declines in the wood commodity markets could be indicative of the overall health of the construction markets—this should concern commercial and residential builders. If these hurricanes could not move the pricing meter, there is little that could happen between now and year-end that could do so, except for a huge construction boom, and there appears little chance of that.

Expect pricing to settle more and hover in a range much lower than the first of the year. Although this report is good news for pricing, it could be bad news for overall demand for the winter—everyone should be careful.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.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.