By Don Magruder
Despite continued high-interest rates, the dog days of summer, labor issues, and a Florida hurricane, the Wood Commodity markets continue to strengthen. The RoMac Building Supply Wood Commodity Index (Index) for September 2023 increased .4 percent to $513.83 as most increases were offset by a nearly 8 percent drop in OSB sheathing. Uncertainty continues to frustrate builders and traders as well as keeping a lid on inventories, and these lower inventories will fuel more volatility.
The Dimensional Lumber segment of the Index increased by 3.0 per or $13.61 per thousand as spruce priced up from last month. Short-length 2x4s were mixed from $5 down to $10 up while 2x4-16 spruce added a firm 15% or $60 per thousand. 2x6 spruce was off $10 to $20 per thousand and studs were flat to down $25 depending on length. It really points to a supply-driven price equation. 2x12 pine dropped on average $10 for short lengths and $40 per thousand on 16-foot lengths. 2x4 pine pricing was up $70 per thousand and manufacturers struggled to stay pace with demand in truss and treated lumber.
OSB sheathing dropped $40 per thousand over the last month while CDX pine was up $50 to $85 per thousand. It appears these markets may be settling into a more normal range and the oddities of the same pricing for different thicknesses may be over. Unless there is a significant hurricane strike to the country in September or October, these markets will meander at a certain level as mills manipulate and adjust production.
The markets need a catalyst to firmly move in one direction, like a storm, reduced interest rates, unexpected increase in housing demand, or significant mill curtailments, and without such a catalyst, pricing will be volatile and driven by low inventories on the ground and the ability to quickly replenish. Builders should pad quotes a little as volatility will bite into profits at certain points in the build cycle.
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.