Analysts downgrade OSB price outlook
Purchasing Magazine Staff -- Purchasing, 4/18/2005 2:00:00 AM
Suppliers have been struggling to keep prices strong for oriented strand board (OSB), but mavens now are forecasting softness due to slowing demand and the opening of 500 million square feet of new production capacity. So far this year, the OSB price average of $325 per thousand square feet has been below the previous year’s average of $381 and the analysts’ forecast of $365.
"The current weakness in the OSB market is a signal that this year's seasonal peak will not be as robust as we originally expected," writes analyst John Tumazos of Prudential Financial. If interest rates continue to rise, the housing market, and its appetite for structural panels such as OSB, could be affected further, he says. Stephen Atkinson at BMO Nesbitt Burns also is reacting to the weaker-than-expected OSB market in the face of an annualized 2% supply expansion. He is projecting an annual average OSB price no higher than $260. Oriented strand board, which is made from chips of aspen trees that are pressed and bonded with phenol formaldehyde resins and can be used as a substitute for plywood.While Louisiana-Pacific is closing two OSB mills because of lower profitability, there still are a dozen in operation and a new one, the largest OSB mill in North America, and possibly in the world, is on track to produce its first board in September 2005.
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