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Diminished global demand12/20
How come, with commodity prices dropping and oil at an all time low, we are not seeing commensurate decreases in the cost of lumber and sheet goods?
Because you keep paying the prices without complaining.
I have the same issue with delivery fuel surcharges that after years and years haven't been worked into the price of the items and now that fuel is back to low pricing fuel surcharges should have been eliminated. But it's pure profit for them now and they don't see any need to get rid of it.
Just like when Chile had that earthquake in 2010 and it damaged the plant that made MDF. The price went from .49/sq to .99/sq. After everything was back to normal, did the price go back down. Heck no. They found out you were willing to pay that much and now we're stuck with the higher pricing.
Commodity prices have certainly been dropping over the last few years, IN GENERAL, but "lumber" as a commodity futures contract (softwood 2x4s as a rail car load, as in 110,000 board feet) has gone nowhere over the last 6 years, other than generally down a bit.
The current price of of about $266 per 1,000 board feet has been seen in each of the last 6 years.
The price of lumber, in general, at least in the U.S. has got little to do with the price of oil because it's produced and consumed here. Transport costs are relatively minor..
Nor does the price of U.S. plywood, again, in general, have anything to do with the price of oil. Unfortunately, except for a brief time in the '90s, there have been no U.S. plywood futures contracts.
Anecdotally, I will note that there has also been no significant change in the price of hardwoods at Home Depot in the last 10 years, for whatever that's worth. And those guys are certainly very price-sensitive.
I can still buy all of the S4S red oak I want for my projects at the same old (somewhat high, but not obnoxious) prices. Veneered 3/4 oak or maple ply? Same deal. Thinking back further, 45 bucks/sheet is the same price I paid back in the '80s.
For anyone who cares about such things, Random Lengths publishes regular wood market numbers here:
Covers 2x4s, ply and OSB. And no doubt a lot of other stuff for which they may require a subscription. The stuff in the link is free.
Oil is not at an all time low.
"Oil is not at an all time low."
You are exactly right. Oil isn't even close to any "all time" low.
Which would be in the area of maybe 5 cents/barrel back in the early 1900s, around $1/bbl around 1970.
Anyone remember the gas price wars of the late '60s? I bought gas as low as 16.9 cents per gallon back then.
$10/bbl as recently as about 1992. $18 in 1999, and about $22 in '02.
We recently broke the '09 low of $40, now sitting around $35-36..
Possible low for this move? Who knows? We could already be there or $20 or much, much less (even $10) could be possible. Markets always go further than anyone thinks possible, in both directions.
It all depends on the reaction of the Saudis and OPEC in general to what US producers do in the event of a further price decline.
What they seem not to have understood so far is that US producers will keep cranking it out from existing sunk-cost wells, no matter the price to generate cash flow to service debt.
Kinda like what OPEC used to do in the good ol' days. That was called cheating on quotas back then, and it was. Often rampant. OPEC's problem is that US producers have no quotas and never will.
A total blow-out down to $10/bbl would be both interesting and fun to watch.
The OPECers would be tearing their hair out long before we get anywhere near $10, US producers would just be sitting back waiting for the dust to settle and prices to recover a bit before drilling even more wells, generating even more production.
Long term? US producers do just fine between $30 and 100/bbl, OPEC needs $100+ to support their welfare obligations
$100+ oil? That's probably gonna take a while, maybe a long, long while.
Things are not looking rosy for OPEC, at all. Even if they bankrupted every US shale driller (they won't) there would just be a new batch ready to drill whenever prices perk up a bit..
I am paying 22.50 for 3/4" domestic white melamine and I am a two man shop that buys 1 bundle at a time. Same price for years. My undercount slides have been very competitively priced for a long time and I only use Blum hardware. Used to be only one vendor for Blum. Know there are 6 or more and my Richelieu salesman has to stay on his toes if he wants my business. Beautiful bifold soft open and close hinges from Turkey are nicer than the Blum Aventos and cost me 20.00 less per door than Blum. These are the lift models and there was never much competition in the higher end hardware. There is now and pricing is dropping. You've got to keep your eyes open and negotiate and sheet goods, cabinet hardware and veneers are all available at great prices.
my sheet goods supplier added a nifty little fuel surcharge to the pricing structure back when the sky was falling.
Somehow that line item has remained, I have brought it up with the delivery driver, who merely laughs
Inflation has bad comparing things on the basis of dollars now & "back then" not valid.
Larry, Average isn't a good index.
A flat screen TV may be a helluva lot cheaper than it used to be but this is not germane.
Have you started charging less because fuel prices went down?
No Kap. We have not reduced price because of decreased fuel costs.
Trucking is not typically a large component of cost for our end of the industry. It is, however, for companies that have trucks on the road all day long. That's why they added the surcharge.
I never increased them because fuel prices went up in the first place. This was something that should have been a temporary workaround while they infused it within their pricing structure. Now it's just another line item money maker.
Fuel has returned to where it was when the fuel surcharges started to be implemented. They had years to get this into the pricing structure. It's just plain old blatant gouging now.
I found that I had to charge alot less when fuel prices went ape$h!...it was how to make it thru the great recession. Downward price pressure
Somehow, the fuel surcharge was tacked on apologetically, and remained there as a fixture.
It is an unfortunate temporary measure.....they said....
now its like a bridge or interstate toll, predictible guaranteed cash cow
wish I had me one of those
That was kind of the point... we adjust our prices quarterly to accommodate for a lot of factors... in the beginning when it was escalating, we didn't increase our costs for fuel, but when it became more long term, we did because there was only one place it was going to come out of if we didn't... if ply prices went up, which they did as a result of the raise in gas prices, did you not charge for the increase?
But once a company has gotten you used to price point, they rarely give it back... Look at all petroleum products pricing back then when it was greater by a factor of 6X, as compared to now... you'll see very little effect on the current pricing... people still will need to buy tires...
Sucks, but my point about asking if you changed your pricing to reflect the drop in gas prices, was just showing that even on a small scale companies aren't giving it back so I wouldn't expect larger companies to do it to any great degree while we're still willing to pay...