OSB Producers Looking Up

Article by Dan Shell, Managing Editor, Panel World May 2017

The LP Clarke OSB plant profiled in this issue and the story of its origin, derailment and ultimate resurgence serves as an analogy for the panel and home building products industry during the past decade: Big plans and a startup halted by a fire and historically bad panel markets, but an eventual rebound and restart in 2013 as business conditions grew more favorable.

Looking back now, with the benefit of hindsight, the warning signs of America’s biggest economic downturn since the Great Depression were already there a decade ago: By 2004, U.S. homeownership had peaked at 70%. Then, during the last quarter of 2005, home prices started to fall, which led to a 40% decline in the U.S. Home Construction Index during 2006. During February and March 2007, more than 25 subprime lenders filed for bankruptcy.

In late 2006, APA Chairman Jonathan Martin, CEO of RoyOMartin and whose company was about to start up a brand new OSB plant, saw the signs: At the APA—The Engineered Wood Assn. annual meeting, Martin exclaimed in a presentation that “We need more demand. Housing is slower. Capacity is rising.”

Going into the downturn, Martco started up its OSB plant at Oakdale, La. and LP started up about a year later in Thomasville, Ala. In previous years Huber had started up in Broken Bow, Okla., GP in Hosford, Fla., LP/Slocan at Fort St. John, BC, Tolko Industries at Meadow Lake, Saskatchewan, and some others as well.

In such a situation as the extreme downturn of 2007-8-9, there’s no hiding under a rock. Despite weakening markets, panel producers had to adjust and make the best decisions they could while hoping the worst didn’t get worse. Survivors from that period are well-versed in what happened next as a run of definite and indefinite plant closures was accompanied by widespread shift reductions.

And while it seemed every piece of industry news when describing bad markets, housing starts and overall business prospects during that period included the phrase “not seen since the Depression,” the sun did creep out again.

Markets returned—to an extent. Prices are certainly better. And while housing starts haven’t recovered from the highs of 2004-5, the current 1.2-1.3 million starts sure look better than 400,000 in 2010.

In recent years, several mills re-opened, such as Arbec Forest Products at Miramichi, New Brunswick, GP at Clarendon, SC, Tolko at Slave Lake, Alberta, LP at Thomasville. Other OSB operations jostled into position, including Norbord’s acquisition of Ainsworth. Now we’re hearing talk of possible restarts at Norbord in Huguley, Ala., Tolko at High Prairie, Alberta, Huber at Spring City, Tenn. And don’t forget Martco’s new greenfield OSB plant in Corrigan, Tex. that is expected to start up later this year.

Along the way, North America OSB production has rebounded, going from 16.78 billion SF in 2012 to 21.84 billion SF in 2016. There’s renewed optimism with what’s expected to be a pro-business administration in Washington, DC.

But actions speak louder than words, and in the OSB sector, companies like Martco, LP and others are letting their actions speak for themselves.

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