OSB 2OO7 r Producers Begin Paring Back

The highs ol2NO took a turn for the worse in 2(N7, as most OSB manufacturers, faced with waning demand and prices, began reining in productlor*a trend that has continued to heat up in recent monhts,

Louisiana-kcific Corp., Nashville, Tn., has been the longtime leader in OSB production with but necessary economic deei$ion," said Jeff Wagner, v.p.-OSB. "Unfortunately, current conditions require these types of action."

One method for coping was converting its millin Houlton, Me., to LSL production. A more efficient, state-of-the-art OSB mill in Clarke County, Al., was recently completed and is "ramping up operations."

BUILDING PRODUCTS

13 OSB plants in North America. Last year, the mills produced 5.5 billion sq. ft. of OSB, 8.57o below 2006 levels, but still enough to account tor 23o/o of all OSB sold in the U.S. and Canada.

However,last year LP was forced to permanently close its OSB mill in St. Michel, P.Q. Last month, the millin Silsbee, Tx., was also shut down, for an indefinite period. "Ongoing turmoil in the market pushed demand for most of our products significantly lower than the same quarter last year,' said c.e.o. Rick Frost in late July.

At the SmartSide mill in Hayward, Wi., production has been curtailed until at least October 31, 2008. 'The curtailment is a difficult

Norbord, Toronto, has gone against the trend to cut back by actually increasing production at its nine OSB millsto rnore than 5 bil, lion sq. ft. in 2007. ltalso attempt' ed to weather the downturn by shipping more OSB to Europe.

*Our management team worked hard to educate European homebuilders on the benefits of using

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'OB OSB & Plywood

(Continued from previous page) with output falling another 37o to 30.87 billion ft.

That outlook is based on the expectation that U.S. single-family and multi-family housing starts will total just 880,000, down from about 910,000 this year. Housing starts are down by more than half since the peak of the housing market boom in 2005. Single-family starts have experienced the most severe declines, falling from 1.716 million in 2005 to an anticipated 610,000 this year.

Softwood plywood production is forecast to total 12.57 billion sq. ft. this year, down nearly l4%o from last year, while OSB output is expected to reach 19.1 billion ft.,a20Vo drop. The larger drop of OSB production is a

osB 20a7

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OSB," said c.e.o. Barrie Shineton. 'We believe that the continuing acceptance of OSB will supPort future growth, especially in Eastern Europe."

Shineton is less optimistic about OSB sales in Nofth America.

'There are several market adjustments that must occur before we see a meaningfulimProvement in housing starts and strong OSB prices," he said.'We believe all these things will happen, but not before 2010."

Weyerhaeusot, Federal Way, Wa., which had enjoyed record, near-capacity OSB Production in 2006, cut back by 18% in 2007, to 3.4 billion sq. ft.

A rreyerhaeuser

Then, during this past summer, Weyco permanently closed three of its nine OSB mills. In July, the company shuttered mills in Drayton Valley, Alb., and Hudson Bay, Sask. Both facilities are being maintained for possible reopening once the market picks up or the company decides to sell them.

"Continued challenges in the reflection of that product's greater reliance on the residential construction market. Approximately 807o of the 12.59 billion sq. ft. of structural wood panels expected to be used in residential construction this year is OSB.

Production of both plywood and OSB next year is forecast to decline an additional 2-3Vo.

Declines are also forecast this year and next for engineered wood framing products, such as glulam timber, wood I-joists, and laminated veneer lumber. Glulam production is expected this year to fall by 22Vo to 300 million bd. ft., I-joist production by 3OVo to 675 million linear ft., and LVL production by 27Vo to 55 million cu. ft.

The still unknown housing market low point remains a forecast wild card. Residential construction remains the single largest market for structural

North American housing market require us to bring supply into balance with demand,'said Phil Dennet, v.p,-strand lechnologies. 'lt is the result of today's challenging business environment.'

In June 2008, unable to find a buyer, Weyco permanently closed its mill in Miramichi, New Brunswick-which has not operated since January 2007.

'We worked hard to sellthe facility for more than one year," said Craig Nesser, president of Canadian operations. "A lack of buyer interest, the continuing poor state of the U.S. housing market, and the high cost of maintaining this idled site led to the company's decision."

Ai nsworth, Vancouver, 8.C., is operating only four of its seven OSB mills. OverallOSB production slipped 16% in 2007 to 2.3 billion sq. ft., and should lallfurther in'08.

Its mill in Grand Rapids, Mi., has been idle since September 2006. The plant in High Level, Alb., which

Atnsworth

is jointly owned with Grant Forest Products, has been down since late last year. lts Cook, Mn., mill went dark this past January.

wood panels, and the percentage of North American production going to residential construction is expected to fall to 40Vo, compared with 48Vo last year and 6l%o in2OO5.

The outlook for next year could be somewhat better if the Housing Recovery Act of 2008 has the desired effect of stemming 400,000 foreclosures, perking up the credit system, and getting more buyers into the market, the forecast suggests. In that case, there might be 100000 additional single-family and multi-family housing starts, resulting in almost one billion square feet of additional structural wood panel demand.

Under that scenario, glulam, wood I-joist, and LVL production also would be expected to rise by 15 million bd. ft., 35 million linear ft., and 5 million cu. ft., respectively.

The company recently emerged from restructuring after three bondholders gained 96% control of the company, usurping Allen, Brian, and Catherine Ainsworth-who were president, chairman, and c.e.o. of the business founded bY their parents in 1950.

Georgia Pacific, Atlanta, Ga., continues to operate seven OSB mills under its own name, as part of Koch Forest Products. Its OSB millin Fordyce, Ar., was down briefly last month, following an early morning fire. Although the facility suffered "significanf damage, production was resumed after machinery was tested.

Grant Forest Products, Earlton, Ont., is adjusting the prod' uct mix at three of its five OSB facilities.

Its flaghip mill in Englehart is producing two new flooring products: Rainblock and Flooring Plus.

ln South Carolina, the

The industry's production to capacity ratio is expected to drop this year to just 737o, down from 86Vo last year and a high of 97Vo during the peak of the housing boom in 2004-2005. The substantially lower demand resulting from collapse of the housing market has made structural wood panels an extremely good bargain over the past several months compared with other building materials. According to the Bureau of Labor Statistics, the cost of steel and concrete products has increased l00%o and 3570, respectively, over the last four years, while the cost of wood products over the same period has fallen 6Vo.

Excluding trans-border shipments between the U.S. and Canada, structural plywood and OSB imports by the two countries are forecast this vear to total 530 million sq. ft., down 37Vo from last year and 807o from 2005. The drop continues a trend that began in 2006 and is most pronounced in the U.S. as a result of the housing market collapse and low valuation of the U.S. dollar, which drives up import costs.

The escalation of transportation costs also is a factor. That trend is expected to reverse direction next year, however, with imports continuing to rise in ensuing years in response to improving U.S. housing market conditions and a strengthening U.S. dollar.

U.S. and Canadian panel exports, again excluding trade between the two countries, are expected this year to total 1.25 billion ft., up just slightly from last year but an increase of 1387o from 2005. That trend, too, is expected to moderate with improving domestic market conditions and a halt in the decline of the value of the U.S dollar.

The longer term forecast is for the U.S. housing market to begin a recovery in 2010, with housing starts rising to 1.55 million in 2011 and 1.9 million two years later. That would help boost North American structural wood panel production to a record 45.4 billion sq. ft. in 2013.

Founded in 1933 and based in Tacoma, Wa., APA represents approximately 160 plywood, OSB, glulam timber, wood I-joist, rim board, and LVL mills throughout the U.S. and Canada. APA's primary functions are quality auditing and testing, applied research, and market support and development.

Allendale County mill is producing 8'x24' jumbo OSB panels for export worldwide. At its new millin Clarendon County, S.C., equipment is being installed to make two new OSB products-Thermoblock and Windblock-once the market picks up.

Its millin Timmons, Ont., remains closed, due to both market conditions and an ongoing strike. The High Level milljointly owned with Ainsworth is also shut down indefinitely.

Huber Engineered Woods, Charlotte, N.C., announced that its five OSB mills

Erucrne:Reo WooDs

will undergo the yearly inspection required for renewal of Sustainable Forestry Initiative certification.

Tolko Industries, Vernon, 8.C., which operates three OSB mills in Canada, indefinitely mothballed its millin High Prairie, Alb., in February.

"Restart will be considered when there are meaningful and sustain- able improvements in the business conditions that prompted this announcement,' said Brad Thorlakson, president of marketing and sales. 'These include improved customer demand in key markets, transportation and energy costs, and competitively priced wood supply." state-of-the-art OSB mill in Oakdale, La., and is now exporting OSB panels to Europe.

In early July, employees moved into the company's new building in downtown Vernon. According to Jim Baskerville, regional operations manager, work on the building was begun two years agHefore the industry was hit with .uncertain market conditions."

Canfor, Vancouver, B.C., planned to indefinitely close one of iis two O$B mills, the PolarBoard OSB mill in Fort Nelson, this summer, once existing log inventories were depleted and finished products were shipped.

Langboard, Quitman, Ga., reports that extra-long lenglhs and other specialty products are selling l:IIl found diflf lll iaranr mor- and are better diversified, which will serve us well when the outlook gets better," said sales manager Chuck Rigoni. "Commercial and multi-family construction is also picking up again."

"As the market

LAr\FiORslump continues without evidence of a tumaround, Canfor must continue to adjust iis production to address reduced market demands," said president and c.e.o. Jim Shephard.

Roy O. Martin, Abxandria, La., sought new markets for its

Arbec Forest Products, St. Leonard, P.Q., reported lhat its single millin St. Georges de Champlin, P.Q., was closed from Aprilto June. Limited production was resumed in July.