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U.S. Structural Wood Panel and Engineered Wood Production Forecast

May 12, 2007

U.S. structural wood panel and engineered wood production forecast

North American structural wood panel (plywood and oriented strand board) production is expected to total 40.2 billion square feet (3/8" basis) this year, down 2.2 billion feet from 2006 and 2.9 billion from the record mark of 43.1 billion feet in 2005, according to the latest annual five-year forecast by APA
CThe Engineered Wood Association.

Declines are also forecast for engineered wood framing products, such as glulam timber, wood I-joists and laminated veneer lumber (LVL).

The outlook is based primarily on the expectation that U.S. single and multifamily housing starts will fall this year to 1.52 million units, compared with 1.8 million last year. New residential construction accounts for 77 percent of I-joist demand, 75 percent of LVL demand, 70 percent of OSB demand, and 61 percent of glulam demand. Softwood plywood, by contrast, is consumed in greater volume by industrial markets, with only about 25 percent of production going to new residential construction.

North American OSB production is forecast this year to total 24.55 billion square feet, down 7 percent from last year. Plywood output is expected to total 15.69 billion feet, off about 1.8 percent from 2006.

Among structural engineered wood products, glulam production is forecast to decline 7 percent, I-joists almost 6 percent, and LVL nearly 12 percent.

The industry's production to capacity ratio also is forecast to drop this year to 89 percent, down from 93 percent last year and from 98 and 97 percent respectively during the peak of the housing boom in 2004 and 2005. This year's ratio, which matches the historical average, is likely to continue about the same over the next five years as substantial new industry production capacity is added to meet rising demand.

Offshore imports of plywood and OSB, which peaked in 2005 at 2.72 billion square feet, fell to 1.77 billion feet last year and are expected to decline further to 1.17 billion feet this year, reflecting the substantially weaker North American market for offshore producers. Nearly 80 percent of panel imports are plywood.

In the longer term, the outlook appears more promising, based primarily on the expectation that the housing market will begin recovery next year and continue to grow in the years that follow. U.S. single and multifamily housing starts are forecast to climb to 1.65 million units in 2008 and to peak again at 1.9 million in 2011.


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