January 2020 RoMac Lumber and Commodity Report
By Don Magruder
Although it is mid-January in Florida, the weather feels like late spring. The good weather in Florida and milder temperatures in the South have not been enough to fire up the wood commodity markets.
The RoMac Building Supply Wood Commodity Index (Index) for January 2020 decreased 0.6 percent to $324.65 per thousand as gains in dimensional lumber were offset by declines in plywood and sheathing products. The markets are struggling to find a direction as demand is not strong enough, even with milder weather, to kick off the spring selling season early. The markets should be gaining pricing steam by month-end, so now is not the time to bid projects at pricing from December or early January.
The dimensional lumber portion of the Index was up 2.1 percent to $398.15 per thousand as spruce increased in pricing from flat to 2.8 percent. Only two items retreated, giving back $1 per thousand, while 2×4-16 treated handed back 1.8 percent. Since last month, wide-width 2×12 pine was up $22 to $37 per thousand, making it the largest price mover in the Index. The run-up in wide-width pine suggests an aggressive spring pricing season.
The sheathing portion of the Index declined $9.52 per thousand (or 3.5 percent) as both OSB sheathing and CDX pine sold for lower prices on the wholesale markets. OSB sheathing was down $10 per thousand while CDX pine plywood was mixed with decreases from $5 to $20 per thousand. This may be a scenario in which the sheathing markets take the lead from lumber and start picking up the pace later in the month. Little doubt, these prices are near the bottom of the market for springtime—they should not be the base pricing for projects bid in March.
The milder weather, strong economy, and continued demand suggest inflation in the short-term. Signs are pointing to a stronger price run-up than that in 2018. Some of this will be driven by mills and manufacturers who have committed to either raising prices or curtailing production. Builders should put a Price Adjustment Clause in their contracts and seek price protection for the next few months as pricing could get much hotter.
Don Magruder is the Chief Executive Officer of RoMac Building Supply 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 firstname.lastname@example.org.