Softer Housing Market Expected to Moderate 2005 Engineered Wood Product Demand and Production
North American structural wood panel (plywood and oriented strand board, or OSB) production is expected to finish 2004 at 41.7 billion square feet (3/8" basis), setting a new record for the third consecutive year, according to the latest fall forecast by APA—The Engineered Wood Association.
The predicted total, if reached, would exceed 2003 production by almost 900 million square feet, or two percent.
Production next year is forecast to decline by about one billion square feet to 40.7 billion, reflecting an expected rise in interest rates and a softening of the residential construction market in both the U.S. and Canada. U.S. housing starts are projected in the new forecast to total 1.895 million next year, down by about 160,000 units, while Canadian starts are forecast to slip from a record 227,000 this year to 181,000 in 2005.
Under that scenario, residential market demand for plywood and OSB is expected to fall from 22.9 billion feet this year to 21.7 billion feet next year. That decline is expected to be accompanied by a modest drop in remodeling market demand as well. However, demand in the industrial, nonresidential construction, and export markets is expected to rise by a combined 450 million square feet.
Oriented strand board production next year is forecast to rise by only about 170 million square feet, while plywood production is expected to decline by 1.2 billion feet. The structural wood panel industry as a whole is forecast to operate at 89 percent of capacity, down from 93 percent this year. About 1.1 billion square feet of new industry production capacity is expected to be added next year, compared to only about 350 million feet in 2004. Almost all of the new capacity will be OSB.
Plywood and OSB imports, meanwhile, continue to climb. The U.S. is forecast to import 1.64 billion feet of structural wood panels this year, excluding shipments from Canada. Most of that—1.36 billion feet—will be plywood, with most of that volume coming from Brazil, followed by Chile and China. U.S. plywood imports are expected to climb another 4.5 percent next year and to continue rising for the next several years. Plywood imports as recently as 2000 were only about 115 million square feet.
Among other engineered wood products, production of glulam timber, wood I-joists and laminated veneer lumber (LVL) is forecast to rise by roughly 7, 11 and 24 percent this year compared to 2003. Of those three categories of products, only LVL production is expected to increase next year, and by only about 2.5 percent. That increase is expected to come from market share gains. Glulam timber and wood I-joist output is forecast to slip about five percent, reflecting the somewhat weaker residential construction market.
