July 2023 Lumber & Commodity Report
By Don Magruder
The RoMac Building Supply Wood Commodity Index (Index) for July 2023 increased 17.3 percent to $501.97 as the markets felt the pressure of increased demand in the Northern and Midwest portions of the country due to a late arriving spring and low inventory levels at the store level. National housing starts in May were up 21.7 percent versus April and 5.7 percent from the prior year, and with the Federal Reserve pause in interest rate increases, the housing industry finally had some tangible positive news to celebrate. The challenge will be to keep this type of good news flowing.
Here are the notable price movers on the Index this month.
Spruce studs were up 8.2 percent to 15.1 percent as low inventories and surging demand were met.
Dimensional 2x4 spruce added 15.1 to 22.9 percent in price depending on length while 2x6 spruce priced out 9.1 to 10.3 percent higher. Canadian curtailments, fires, and port logistics were subtracted from the supply equation.
2x12 wide-width pine continued to come back to normal price levels with 17.6 to 21.0 percent declines. It appears, 2x12 is close to the bottom.
2x4 pine subtracted another $15 per thousand off last month’s pricing, but like 2x12 pine, the bottom appears close.
OSB sheathing added 31.2 to 36.4 percent over the last 30 days or $120 per thousand or $3.84 per sheet. A combination of a market that retreated too much, improved demand and lower supply prompted the move up. With hurricane season upon the nation, expect sheathings to remain firm to up.
CDX pine plywood reversed its pricing course and has added 2.9 to 7.8 percent in pricing. It was not uncommon to see 19/32” CDX adding a little more than a dollar per sheet.
Interestingly, starts in the southeast did not improve and there continues to be growing concern in Florida due to the tightness in labor brought on by the new immigration laws in Florida. The new law took effect on July 1st and antidotally, there are stories of Hispanic crews leaving the state and making the labor issue that was bad- worse. A slowdown in job site production could raise housing costs in the state and significantly add to the cost of housing as builders compete for less available labor. Hopefully, the effects will be minimal.
Builders in Florida should be mindful that the wood commodity markets are on a definite trend upward and the possibility of increasing labor rates could cut into profits. This would be a good time to ensure price escalation clauses are part of any contract. Keep in mind, a bad hurricane season, and all these prices could go up really fast with no warning. Prepare now and update your quotes.
The RoMac Wood Commodity Index is a weighted lumber and sheathing composite based on usage in Central Florida. By using wholesale pricing, the Index is a good indicator of the pricing direction for the next 30 days.
Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida, he is a former president of the Southeast Mississippi Home Builders Association and a past Associate Vice President of the Home Builders Association of Lake County.