Lumber Costs Continue to Fall But Pricing Remains Uncertain
Futures are higher than current cash prices and no one knows what a new Covid wave might do.
The good news: lumber prices have continued to fall. The cash price for a thousand board feet fell last week to $472 according to Fastmarkets Random Lengths, as reported by Fortune.
But check the futures price at Nasdaq and it’s just over $530. The discrepancy is because of differing time horizons. The cash price mentioned by Fastmarkets is the current price for shipment in the next two weeks, according to Mike Wisnefski, CEO of online commodities marketplace MaterialsXchange. “Futures represents the price of a railcar that is shipping sometime from September 15th to September 30th,” Wisnefski tells GlobeSt.com.
“From years of experience, it is difficult to say why futures prices are where they are,” Wisnefski continues. “So many different parties are involved and each one has its own unique set of circumstances that they are dealing with.”
But these are prices to wholesalers. While the cost to builders has been “slowly coming down,” as Wisnefski points out, “there is a lot of high-priced inventory in the supply chain right now.” That means builders might still be paying more than they’d like.
“The recent drop in the lumber market is most likely due to a cooling off of raw wood materials,” Chip Setzer, director of trading and growth at commodities trading platform Mickey, tells GlobeSt.com.
Even with a new Covid wave, the pressure may still be coming off commodities. “Despite the rise in COVID cases, demand for construction materials and mass-migration to suburban markets has slightly fallen in tandem with lumber prices on the futures market,” David Druey, Florida regional president of Centennial Bank, tells GlobeSt.com. “I don’t anticipate lumber retail prices to return to pre-pandemic levels because of inflation and residential consumer behavioral shifts, but I think they will level-off in the coming months.”
Prices or availability on other necessary commodities are still strained. “It’s amazing to see something as simple as OSB [oriented strand board] skyrocket from what once was around $12.50 a sheet to $60 a sheet,” Alex Rabens, CEO of Mickey, tells GlobeSt.com. ISO foam insulation board time from order to delivery is taking three to six months, he says.
“Furthermore, most roofing products are oil based such as asphalt shingles,” Rabens says. “When the cost of oil goes up, the cost of shingles increases.” That’s been happening every few months, although availability hasn’t been hampered.
Still, things are better. Thorofare Capital reported that falling prices have made it easier to negotiate guaranteed maximum price contracts. Previously, the firm saw several projects repriced or cancelled due to the growth of lumber prices, from the fourth quarter of 2020 through the last quarter of this year.