Two area lumber companies weighed in last week, following diminished supply from sawmills along the Gulf of Mexico, and a spike in demand for lumber in those areas as people flooded out by Hurricane Katrina prepare to rebuild.
At Dukes Lumber Company, Russ Dukes said Oriented Strand Board (OSB) had run up between $5 and $6 over the last week. “What’s happened is, a lot of builders are concerned about shortage,” Dukes said. “That’s created some fear, panic in the market.
“Two things drive the market — fear, and supply,” Dukes continued. “Right now, we have both things going on.” He said some of the Dukes Lumber suppliers had pulled back to let the market run, and probably wouldn’t offer quotes for another week or so, until they could see where things were going.
Necessarily, Dukes said they were following suit. “Our quotes are only good for what’s available in stock — and right now, we do have a shortage of inventory,” he confirmed.
However, Dukes said rising fuel costs had become more problematic than dealing with suppliers. “No one can absorb these prices — surcharges are either in place, or coming,” he said.
The bigger guys seemed to be weathering the supply situation a little better, but echoed Dukes’ comments about fuel. “We’re all certainly facing the same thing, buying from the same mills,” said 84 Lumber’s Jeff Nobers. “There are only so many mills, just like there are only so many oil companies. When you lose seven or eight refineries and demand certainly is not lessened…”
With major suppliers elsewhere (he pointed to the Pacific Northwest and Canada), Nobers didn’t anticipate drastic lumber shortages. However, he did voice concerns regarding delivery, noting problems last year following back-to-back hurricanes in Florida. “It wasn’t the materials, it was getting them into Florida,” Nobers pointed out. “The materials were available.”
He expected mills would adjust their production to keep up with what would likely be, for some time, heightened demand along the Gulf Coast, and the market would settle out eventually.
Dukes expected builders would see the sharpest bottom line increases — and without contract protection, they could feel the most impact.
“Some builders have a clause in their contract, that if the market goes up more than 10 percent, the homeowners are responsible for the increase in materials,” he said. “I think that’s best and most fair, and a lot of builders do it that way.
“Then, a lot of builders have in their contracts that they’re not responsible for any increases in the market,” Dukes continued. “That makes it tough, when you have to go to the bank and tell them you need more money.”