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Weak Housing Market Makes for Structural Wood Panel Bargains
Nov 13, 2006


Weak Housing Market Makes for Structural Wood Panel Bargains

The recent decline in U.S. housing starts has reversed the relationship between the supply of and demand for structural wood panels (plywood and oriented strand board) and other engineered wood products, yielding extremely good bargains for those products compared to the recent past. 

The structural wood panel composite price in October was $260 per thousand square feet, the lowest since April 2003, 3-1/2 years ago, according to data compiled by Eugene, Oregon-based Random Lengths Publications, Inc.  The composite price through the first 10 months of 2006 was $325 per thousand, down more than 20 percent from the 2005 yearly average and down almost 30 percent from 2004. 

“Structural engineered wood products are clearly a great value,” noted Dennis Hardman, president of APA—The Engineered Wood Association, Tacoma, Washington.   “The soft housing market has had a major moderating effect on demand for the products, and the market has adjusted accordingly,” he said. 

More than half of U.S. and Canadian structural wood panel production is consumed by new residential construction.  According to APA’s latest forecast, U.S. housing starts this year are expected to total 1.87 million, down almost 10 percent from the 2.068 starts in 2005, the second highest ever recorded. 

At the peak of the housing market boom in 2004 and 2005, the structural wood panel industry operated at nearly full capacity in attempt to meet record market demand.   With the housing market now substantially cooled, the forecast is for the industry to operate at closer to 90 percent of capacity, which is near the historical average.  

As a trade association operating in strict accordance with antitrust regulations, APA cannot and does not forecast future prices, Hardman emphasized.  But, he said, “like all commodity markets, engineered wood product price fluctuations are a function of constantly changing supply and demand.” 

That changed relationship during the recent past has produced a very favorable value proposition not only for residential builders, but for users and specifiers of the products in the industry’s other major markets, such as nonresidential construction, remodeling, and industrial applications, Hardman said.  Those markets remain strong compared to housing, he added. 

Structural plywood and OSB also are excellent values, Hardman said, because of their numerous performance advantages, including strength and stiffness (especially important in areas subject to high wind or seismic events), superior performance as a nail base for finish siding materials, high impact resistance, ease of installation, and proven durability in all kinds of climates. 

Those attributes led most residential builders to stick with plywood and oriented strand board even when the cost of the products were substantially higher in 2004 and 2005, according to Hardman.  With the recent cost declines, the industry sees reason to expect that many builders, remodelers, industrial fabricators and others now using alternative materials will switch to structural wood panels.

The environmental merits of engineered wood products, which also include wood I-joists, glulam timber and laminated veneer lumber, are another strong selling point, Hardman noted.  “Engineered wood makes more efficient use of the available resource with little waste,” he said. 

“And in this time of heightened concern about global warming and climate change, wood products compare favorably with non-wood products based on such criteria as embodied energy and emissions of carbon dioxide and other pollutants during manufacture.   Trees also generate oxygen while storing carbon.  Once they’re converted into building products, that carbon is stored. 

“In addition, due to aggressive replanting and strict forest management practices, North American forest growth continues to exceed timber harvests by a wide margin.   That’s an important consideration that deserves greater weight in the international debate about the long-term environmental effects of raw material extraction and manufacture,” he noted.

Source: APA

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