Dealers fi ndingvalue in value-added OSB

j'\ver the last several years, faced with a glut of produc- \-ftion and falling prices, OSB manufacturers realized they couldn't sell just commodities. So, they began branding their products and specializing their uses.

Branded products now offer moisture resistance, taller sizes to increase wind resistance, radiant barrier backings, pre-markings, FSC and SFI certification, and more.

"Manufacturer innovations are an excellent way provide more value to customers and a way to keep wood construction in the forefront, because concrete and steel construction remain alternatives for builders," advised Craig Adair, APA-The Engineered Wood Association.

But has the strategy worked? Have dealers been able to find buyers for-and profits in*the branded, value-added OSB products?

The Merchant Magazine asked a random cross-section of LBM dealers:

Mulrrpr,yrNc Vlr,un

Dale Bernard, v.p., George Kellett Building Products, Metairie, La.

Our experience has been very positive with the valueadded products. As a company, we have embraced these items and aggressively promote them to our clients because we believe they do, in fact, provide value well above the extra cost. Of course, we also don't mind making more money on them either!

We stock Huber AdvanTech and their Zip products, LP Techshield and Orange Plus, and Norbord Windstorm.

Ann-Oxs GlIx ManTTsHARE

John Mikkelson, v p.-forest products, ProBuild, Denver, Co.

Enhanced Flooring: The top line premium T&G underlayment has been marketed well over the years and has achieved marketshare gains over its commodity counterpart with a certain manufacturer's product being specified. However, many cost-conscious builders have opted for the mid-grade product over the high-end version due to the economics resulting in this mid-grade product becoming somewhat of a quasi-commodity product. Pull-through from the manufacturers to builders via rebates also plays a part in the increased usage of premium T&G underlayment. Enhanced T&G underlayment tends to be specified by brand.

Radiant Barrier: Radiant barrier sheathing demand over the standard commodity has increased over the last couple of years due to the increased energy requirements in build- ing codes. Builders specifying radiant barrier as standard in their construction has also contributed to increased usage, especially in the South. However, there has been some price erosion over the last several years as more producers are longtime leader in OSB production, has indefinitely closed four of its OSB mills. Total production in 2008 was 3.7 billion sq. ft.-2\o/o of the OSB market in the U.S. and Canada-down from 5.5 billion sq. ft. in 2007.

"Homebuilding and related activity continue at historic lows, driven by the ongoing credit crisis, high unemployment, and generally poor economic conditions," said c.e.o. Rick Frost. "ln 2009, we continued to take a number of significant steps to reduce the losses in our OSB business through market cuftailments and cost reductions."

The company's OSB mills in Carthage and Jasper, Tx.; Dawson Creek, B.C.; Hanceville, Al.; Maniwaki, Quebec; Roxboro, N.C.; Sagola, Mi., and Swan Valley, Mb., remain open. Indefinitely curtailed are mills in Silsbee, Tx.; Chambord, P.Q., and Athens, Ga.

A new mill in Clarke County, Al.-which started operating in March and was closed by an explosion in Mayalso remains closed. Plans to restart the mill in October were derailed by the poor economy and lack of OSB sales. In the meantime, L-P has agreed to pay Clarke Coun$ $500,000 annually for up to three years because the mill is not running as promised.

"We are going to run the plant, we just need to let this current cycle play out," said Jamey Barnes, L-P's v.p. of OSB manufacturing. "This is our flagship plant for OSB.'

Peace Valley OSB, Fort St. John, B.C., is co-owned with Canfor and had a slow first year, but now operates three shifts, five days a week. The state-of-the-art mill produces longer length panels (4xg and 4x10), as well as standard 4x8 panels.

Branded specialty OSB products include:

TechShield radiant barrier

TopNotch sub{looring

SmartSide siding and trim

SFI certified manufacturing radiant barrier, which will probably continue as the product matures.

Oversized Panels: Non-standard panel sizes have gained traction primarily in the coastal areas due to increased wind loads in the building codes. Oversized panels are typically not brand specified and could be considered generic. Costs

, Toronto, Ont., reported that its nine North American OSB mills ran at 60% capacity during the second quarter of this year.

"Lower input prices, higher sales volumes, and our focus on lowering operating working capital led to stronger financial results," said president and c.e.o. Barrie Shineton. "We've been successlul in expanding our sales base by growing with big box and industrial customers. This strategy provides better market balance and reduces our exposure to cyclical new-home con' struction."

Specialty products include:

SolarBoard radiant barrier sheathing

. TallWall oversized sheathing

. Windstorm oversized sheathing

Stabledge sub-flooring

TruFlor sub{looring

Pinnacle FSC or SFI certified sub-flooring

W,Federalreduced OSB production by more than 530 million sq. ft. last year, through curtailments, shift adlustments, and closure of its mills in Hudson Bay, Sk., and Wawa, Ont. Open mills are located in Arcadia, La.; Edson, Ab.; Elkin, N.C.; Grayling, Mi., and Sutton, W.V.

'We continue to reduce costs to make our businesses more competitive and adjust our production levels to meet market demand," said president and c.e.o. Dan Fulton. "Although we've begun to experience some recovery in housing sales and starts, it is not yet clear that this improvement is driven by sustainable shifts in market fundamentals."

During the past year, Weyerhaeuser has been trying to sell its OSB facility in Miramichi, Sk.-which closed in June 2007-to Arbec Forest Products, P.Q. That deal fell apart in April over questions of wood allotments and a defined business plan. In July, Weyerhaeuser signed a letter of intent with an unnamed company that hopes to restart the mill.

"Until we see where these discussions lead, we're obviously not going to take any action on decommissioning," said spokesperson Wayne Roznowski, "even though we have allthe permits in place."

Structurwood radiant barrier sheathing iLevel Structurwood Edge iLevel Structurwood Edge Gold

SFI certified can fluctuate due to the fact that production capabilities and cost effectiveness do not exist at every mill.

Generally speaking, add-ons such as nailing lines, skidresistant backs, etc., are available from most manufacturers and usually don't demand a premium. Sheathing products with a moisture barrier laminated to the board are relatively new and have been met with limited success.

FSC Certification: FSC-certified OSB requirements still tend to be sporadic at best and confined to some high-end custom in certain parts of the country, light commercial, and governmentjobs.

Cusrorvrnns Spnxorxc Dor.r,ans

Matt Jeffries, director of procurement, Parr Lumber Co., Hillsboro. Or.

Using 7/16 OSB as the measurement, the answer would be yes. While wall and roof sheathing has been commoditized, the branded products have been able to bring a higher value over similar commodities.

Weyerhaeuser's Edge Gold and Louisiana-Pacific's TopNotch 350 flooring are valued for their ability to prevail against the wet Northwest climate. LP TechShield radiant barrier is desirable in many of the hotter areas and customers are spending dollars for these OSB products that have additional value.

EnucarroN SBu.s rHE DEAL

Bruce " Buz" Gileau, v.p,, Cov entry Lumber, C oventry, R J There have been some cases in which some companies have touted the "improvements and value added to their products." It really comes down to not only educating the public, but more importantly educating the sales force prior and constantly during the products exposure (no pun intended) to the marketplace.

For example, citing that AdvanTech is made from multiple layers of strand board as compared to one layer pressed and contains more glue than standard OSB helps to educate the consumer. At first this is not enough to sway for the up. Add the fact that the product has a 50-year warranty against

IAII iF'fttt{ot I t lt, Vancouver, B.C., permanently closed its OSB mill in Grand Rapids, Mn., in August 2008. The company's remaining Minnesota mills-in Bemidji and Cook-were permanently closed in January 2009.

"Market conditions since the third quarter of 2009, and the outlook especially for the U.S. housing section, do not warrant making the additional investments required to make these two mills economically viable," said president and c.e.o. Rick Huff.

Production at the mill in Hill Level, Alb., which is jointly owned with Grant Forest Products, Earlton, Ont., has been indefinitely curtailed since December 2007. The company's remaining mills in 100 Mile House, B.C., Grand Prairie, Alb., and Barwick, Ont., are running at full capacity of 1.6 billion sq. ft.

. Thermastrand radiant banier

Durastrand sub-flooring

StediTred stair treads

. FSC or SFI certified delaminating and swelling, and the reluctance fades. Once educated, and tried by the consumer, the product sells itself. Our sales have risen dramatically.

Other products, such as Structurwood by ilevel and Themostat by G-P, have radiant barrier options that are helpful, but we are only beginning to investigate.

Succnss rN BErNG DrprnnnNr

Gregg Stevenson,v.p., Lyons Lumber, Franlcfort, Ky.

We are selling the Zip wall and roof system from Huber to some customers, and I do have 9' coming from Grant.

So there is some success in beins different.

Hrcn Mlms FoR GRrD LrNss

Jerry Stahl, president, Rochester Lumber, Rochester Co., N.v.

I applaud manufacturers always for trying to upgrade their products, such as the Hubers of the world with their AdvenTech line. I see that in Grant with their upgrading FlooringPlus and SheathingPlus.

The markings are an excellent add-on. Honestly, it does give me something to hang my hat on. I've got a better product. A framer's not going to miss a nail. It ends up being to both of our advantage. But is a builder going to pay more for it? Maybe when the economy's better, but right now it's a real challense

Exrnls Wonr Wrr,r,

Dale Boozer,former owner, Boozer Lumber Co., Columbia, s.c.

I think OSB extra product features are a good thing. We had been selling a lot of the foil-covered OSB for attic insulation and it worked well. We liked it.

We also sold a lot of tle pre-coated OSB for use in place of 15-lb. felt on the roof under shingles. That worked well, too, and was better than felt. Taped joints, waterproofed the new homes during construction, and so on.

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Paul Kinser, contractor sales vp., Central Valley Builders Supply, Napa, Ca.

The short answer is yes. Radiant barrier has proven to be a value-added development that really has legs. The popularity of radiant barrier is only going to increase as the pressure to build energy-efficient housing continues to grow, and more importantly, be subsidized.

The 9'and 10' sheets are also very popular and in high

!lFtrftl.rll(d,

Attanta, Ga.. a division of privately held Koch Industries, is bearing down on three years since it suspended OSB production at its millin Dudley, N.C.

Its six other OSB mills continue producing:

Thermostat radiant banier sheathing

. Blue Ribbon sheathing

Nautilus building wrap-covered sheathing

Blue Ribbon Sturd-l-Floor subjlooring

DryGuard moisture-resistant sub-flooring

SFI certified demand as it require less cutting and labor because you don't have the shear breaks to fill in. You can run 10' shear from sill to rim board without a break on a 9' ceiling height, which has been the trend, down from 10' ceilings, for obvious reasons, lf I lz I I ll alt 1*-t I - ltlr lt l;t l\-t, Earlton, Ont., recently sought protection under Canada's Companies Creditors Arrangement Act.

FSC is also gaining strength. Even though it is still a very small segment of the industry, it too will be the recipient of government dough.

"We're doing everything we can to protect jobs," said president Peter Grant Jr. "This is a proactive step to reorganize the company in a way that will help ensure our future success."

The High Level, Alb., mill that Grant jointly owns with Ainsworth is closed, as is its mill in Timmons, Ont. lts mill in Englehart, Ont., re-opened in July and is now running at full capacity.

Grant's new mill in Allendale County, S.C., is also running at full capacity. A second mill in Clarendon County, S.C., was completed last winter but never began producing due to market conditions.

. ThermoBlock radiant barrier

SheathingPlus

TitanXL oversize sheathing

. WindBlock oversize sheathing

Signature Flooring sub-flooring

FlooringPlus

RainBlock moisture-resistant sub-flooring

FSC and SFI certified

WoN'r Pev ron FSC

Iohn A. Saunders, Economy Lumber, Campbell, Ca.

Many of our contractor customers understand the benefits of value-added products and will gladly pay the price. Some, however, do not look beyond the price at the bottom of the quote. They do not or cannot understand the "downstream" benefits and cost savings resulting from use of the product(s). Much depends on the level ofexperience ofeach

individual.

We're finding that while the FSC concept may be a good one, many customers are not willing to pay the significantly higher price associated with FSC-certified products. This is especially true when they learn that many of the products we sell come from sources with sound environmental policies and practices. In many cases these exceed FSC guidelines and standards.

SouB BnNnprr

Mark Borghesani, general manager, Kelseyville Lumber, Kelseyville, Ca.

Out here I have seen some benefit for producers. Probably the i-Level Edge Gold subfloor is the product most specified by our customers. Ainsworth's radiant barrier has been asked for by customers, also.

FSC does pop up now and then, but not too much yet. I think that for products that serve a special need or carry a warranty, the name branding really helps identify what it is. Other products like the OSB with grid lines for nailing are great, but when you tell the customer it costs more, then they usually don't want to pay the upcharge.

No CoupluNTs FoR OSB

Lynn Bethurum, product manager- structural panels, Ganahl Lumber C o., Anaheim, Ca.

The effort that has been put forth establishing OSB has been primarily a cost-saving effort with the exception of flooring. Customers seem to pay a little more for a no-sandguaranteed product. Field+ested brands usually take priority over products that have failed in our market.

Ganahl has had only one complaint on OSB performance in seven years. The producer is no longer a top 10 vendor, as they failed to cover the problem. By comparison, all of the other complaints involved structural plywood that delaminated when exposed to even the slightest moisture

STOCKING PRE-MEASURED, pre-marked panels, such as The Grid System kom RoyOMartin, help dealers stand out by providing a great service for their pro customers.

Charlotte, N.C., produces specialty OSB at its five mills in Broken Bow, Ok.; Commerce, Ga.; Crystal Hill, Va.; Eastern, Me., and Spring City, Tn.

"Homebuyers want a quiet, stiff floor and a living environment that offers superior moisture protection," said product general manager Charlie Robinson. "Even in this economy, research shows they are willing to more for building materials that deliver on performance features."

The company's two lines recently earned the Green Approved mark from the National Association of Home Builders research center and can contribute points toward certification under the association's national green building standard:

AdvanTech sub{looring and sheathing

. Zip System sheathing with water-resistive barrier

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Vernon, 8.C., produced 661 million sq. ft. of OSB last year, after indefinitely closing its old mills in High Prairie (February 2008) and Slave Lake, Alb. (March 2007).

"This was a difficult, but, unfortunately, necessary decision that reflects the dramatic decline of U.S. housing starts, the strong Canadian dollar, and uncompetitive operating costs," said Brad Thorlakson, president of marketing and sales.

Earlier this year, the company announced that its new OSB mill in Slave Lake would cease production as of February 13, 2009. "The ramp-up of any large-scale facility is difficult at any time," said Thorlakson. "The Athabasca Division had the additional challenge of coming online during a down-market cycle unprecedented in its severity and duration."

As a result of the closures, the mill in Meadow Lake, Sk., returned to full capacity in April 2009. "While we look fonrvard to the restart of Athabasca Divison," said Thorlakson. "we are confident Meadow Lake will allow us to serve our customer's strand-based needs until a more robust and sustained demand occurs within the North American market."

Tolko OSB

conditions, including fog.

I think that most producers attempt to overdesign their products to eliminate field issues.

OSB Srrll l Corvrrvroony

John B. Mensinger, president, American Lumber Co., Modesto, Ca.

At the moment it seems to me that OSB is still a commodity with us and our customers.

Gene Wolff, v.p.-purchasing, Kleet Lumber Co., Huntington, N.Y.

OSB has been a strictly commodity item with no advertising, marketing or merchandising techniques used on it at all. Even though I used it on my house l0 years ago, many builders look at it as an inferior product to plywood.

I have never seen it used on floors or walls on any houses bigger than 3900 to 4,000 sq. ft. I'm not under the impression that there is much that could be done to make it a more desirable item.

hrcn RsNaNr,{s Dncrornc Flcron

Mike White, general mnnager, Big Creek Lumber, Davenport, Ca.

We have two market areas where OSB is extensively used, California's Central Valley and San Luis Obisbo County. It is a commodity in these markets, and price is pretty much the major factor in making a sale.

There is little value placed upon anything value-added as it pertains to OSB. The radiant barrier is a good product and is being specified where a higher R-value is needed.

We have some Bay Area yards, too. They are primarily plywood markets. OSB is used, too; however, it's not nearly as widely accepted by builders.

Ryan Ringer, general manoger, Gold Beach Lumber, Gold Beach, Or.

Our stores have had no reaction to the branding of OSB products. The customers are more interested in price point than product features with OSB.

Matt Peterson, vp., Mead Clark Lumber, Santa Rosa, Ca.

Too late. With the downturn in new residential building, everyone is all about price. All the OSB producers are having to improve their boards just to stay even with the others.

OSB North American Capacity & Production

to produce OSB products at its two-year-old facility in Oakdale, La.

The company's newest entry is Eclipse Weather Guard, which integrates the efficiency of a radiant barrier with a vapor diffusion banier that eliminates the need for a separate house wrap.

. Eclipse radiant banier

Eclipse Weather Guard radianVvapor banier

. Tuff Strand OSB

StructWall premium sheathing

StructWall XL oversize sheathing

WindBrace oversize aL'^^rLi-^

The Grid pr"-tarkr':"Equ'rrr rv fTN .FSCcertiiied oo"'"'t llllll! I !I.t, | 1. t, euitman, ea" iilg:ff€ but has shut down ror.L*ii'Jr-# '*tilllE to reduce inventory. At this point, its lli singte mittis runnins

, Vancouver, 8.C., continued the indefinite closure of its PolarBoard mill in Fort Nelson, 8.C., which began last summer after a year of curtailments.

"We are determined to weather this storm and position the company to take full advantage of the recovery when it comes," said president and c.e.o. Jim Shepard.

Its remaining OSB facility is one jointly owned with LP, the Peace Valley OSB mill in Fort St. John, B.C., which now operates three shifts, five days a week, producing regular and longer-length OSB panels.

. Langboard OSB

In April, the company decided against buying Weyerhaeuser's closed millin Miramichi, Sk.