OSB MARKETS WEAK
A press release issued this week by Vancouver, B.C.-based International Wood Markets (IWM) Group wasn’t good news for oriented strand board (OSB) producers.
“Between 2006 and the first quarter of 2009, OSB closures and indefinite curtailments have totaled a whopping 25 mills,” explained Russell Taylor, president of IWM. “This means that about 50 per cent of North America’s OSB capacity had closed permanently or indefinitely by the middle of 2009 as compared to the peak industry capacity in 2008.”
IWM, which presented a formal analysis on OSB and plywood in its June issue of Wood Markets International Monthly Report, said Canada has been hit hard by the slowdown in the OSB market with 14 Canadian mills already falling victim to the reduced demand. They predicted the scenario could worsen for Canadian mills as the Canadian dollar has recently strengthened against the U.S. currency, making it more difficult for Canadian exporters to sell into the U.S. market.
The IWM press release also stated, “New OSB capacity following the peak in 2004-2005 started coming on stream just as the housing market was beginning its worst collapse since the Great Depression.”
In addition they said, “The severe oversupply of OSB caused prices to remain at or below cash costs for much of the last 12 months. The strong Canadian dollar and higher transportation costs to market are two of the main reasons higher-cost Canadian OSB mills account for some 70 per cent of the OSB curtailments and closures to date. Still, not enough capacity has yet been closed to allow for a better supply/demand balance.”
Although IWM says, “OSB is certainly near its low point in the cycle on both production and price levels,” they warn that it will be some time before any longer-term balance with supply can be achieved, especially “given that producers have up to two dozen OSB mills waiting to be put back online.”
You will find more of Russell Taylor’s views on the topic in the upcoming issue of Canadian Wood Products, which will be available in print and on-line in late August.
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