Report by ERA Research

Amid a sluggish US housing market and macroeconomic challenges, demand for structural panels and virtually all solid-wood products is languishing. North American panel producers have carefully managed supply through reduced operating rates, mill curtailments, and delayed capacity expansions to keep markets somewhat tensioned. However, an influx of offshore imports threatens to undermine these efforts and push markets into oversupply. Offshore plywood imports jumped to 177MMsf in May, meaning producers Boise Cascade Co and West Fraser Timber Co Ltd must monitor South American supply closely as weakening domestic demand cannot easily absorb a material increase. Conversely, offshore OSB imports plummeted to less than 1MMsf, keeping the supply balance tensioned for producers such as Louisiana-Pacific Corp, WFG, and Weyerhaeuser Co. Moving into the summer doldrums, investors should maintain caution on all solid-wood leveraged names given an expected seasonal slowdown, keeping in mind that plywood holds more downside risk now.

Report by ERA Research

North American OSB markets have shifted into high gear, with benchmark North Central 7/13” prices up by $145, to $800 over the last three weeks (see chart). While demand has been robust, supply shortages have had greater impact on the market. Despite two OSB mill restarts in 2021, prices have not begun cycling back closer to historical averages and higher prices are here to stay for another couple of years. To play it, go for West Fraser Timber and Louisiana-Pacific Corp.