Russia forges ahead

12 April 2019


The trend seen last year has continued, with rising demand, and rising production capacities, for OSB around the world outside North America. Mike Botting reports

In this report, we cover the production capacity of, and the market for, OSB in all of Europe, South America and Asia.

The production capacity of OSB in Europe presents a dramatic story of rising demand pushing rising capacities, especially when seen in the context of the last 23 years.

In 1996, production capacity globally was around 20 million m3; in western Europe it was only around 995,000m3.

At the end of 2018, global capacity was around 35.5 million m3 and all-Europe capacity 9,403,000m3, with other countries outside North America adding a further 1,360,000m3 for a Rest of the World total (excluding North America) of 11,648,000m3.

Of course, North America has been producing OSB for a long time, but it took time to catch on in the rest of the world.

In the mid-1990s, Europe made a very slow start in demand for, and therefore production of, OSB and went through several years of over-capacity, especially as soon as any new lines were added in a fragile, developing, market.

At that time, manufacture of this board was also confined to western Europe. Now, eastern Europe is producing a substantial proportion of the continent's OSB (see Table 1) with new mills, or additional capacity in existing mills, still in the pipeline, particularly in Russia (Table 2).

Total current capacity for western Europe is 4.08 million m3 now exceeded by eastern European countries, at 5.32 million m3.

Asia was a latecomer to the market, but is showing continuing capacity growth.

China's first volume OSB producer was Hubei Baoyuan in 2010 and its founder, Mr Cai Weijin, whose experience up to then had been in MDF, was considered by some of his panel manufacturing competitors to be making a very big mistake with his 220,000m3 a year line, using a Dieffenbacher continuous press.

Now there are five producers active in China, with a total capacity of 1,210,000m3 and one in Malaysia (aptly named Pioneer OSB), bringing the Asian total to 1,360,000m3. Further mills are reliably reported to be in preparation in China, too, including one for Hui Dian, of which more later in this story.

Not such a mistake after all then, Mr Cai?! South America has been making OSB at least since the 1990s, though by 1996 there was only a very small capacity, made by Berneck & Cie (40,000m3), but other mills were tentatively planned, in both Brazil and Chile.

This region is still a small player, with, for several years, a total of only 620,000m3 annual capacity, in Brazil and Chile.

However, in October 2018, L-P started up a new line at Panguipulli, Chile, increasing its output there by 265,000m3, giving a regional total of 885,000m3. More on that later in this report, too.

In its annual report for 2017/18, the European Panel Federation (EPF) chairman, Dr Paolo Fantoni, said: "2017 was without question a positive year for the European panel industry. Production of nearly all European wood panel types grew in 2017 (compared to 2016) led by plywood (+7.8%) and softboard (+6.9%), followed by OSB (+3.3%), particleboard (+2.7%) and MDF (+1.5%).

"Overall, this gave a combined production growth of the European panel industry of 3%; nearly double the previous year’s increase of 1.7%.....OSB capacity grew in 2017 by 6.5%," said Dr Fantoni.

"Signs of increasing wood scarcity were increasingly evident in most of the European regions, except for Scandinavia, although, even in Sweden, concerns over wood availability have been raised. The driver of the shortage is, of course, the increasing use of biomass for renewable energy. Great Britain, notably, is close to reaching the sad record of 20 million tons of wood annually being sent to power plants that have been converted from coal to biomass.

"This priority – to secure appropriate wood resource (both primary and secondary) for panel production – has become the central point for our Federation’s activities and follows a period during which European environmental and energy politics have crossed and complicated industrial strategies for wood based panels," continued the EPF chairman.

"A similar topic is shared by our members whose panels are used in the construction sector. Un-harmonised national building regulations have prevented the development of pan-European constructors of wooden buildings. This, in turn, has blocked the acceleration of building with wood; an activity that would greatly contribute to the prevention of climate change in Europe.

"The EPF hopes to see a dramatic change in this field and trusts that the recognition of the beneficial long-term carbon-sink properties of harvested wood products, as endorsed in the LULUCF regulation, will deliver a boost to construction with wood," continued Dr Fantoni.

"Approximately one third of EPF wood based panels are today used in the building sector. As consumers turn away from carbon-intensive products, and as member states look to reduce greenhouse gas emissions, the use of wood based panels in construction is set to be a growth area, so long as it is not further delayed by individual national interests.

"In 2017, the wood consumption by the European OSB industry amounted to 4.7 million dry tonnes under bark. This consumption was exclusively composed of roundwood, especially pine (51%) and spruce (32%). The average purchasing distance in 2017 was 188km – stable compared to 2016 – with maximum distance reaching 350km for some OSB producers," said Dr Fantoni.

According to the EPF figures, Germany and Romania had the largest European OSB production capacities. Following expansions in 2017, Poland and the United Kingdom now complete the top four of OSB producing countries, measured by capacity, followed by the Czech Republic, Ireland and Latvia.

Turning to consumption, Dr Fantoni said that, after several years of contraction, in 2017 building activity experienced a continued improvement across Europe, leading to a sharp increase in OSB consumption (+9%).

"Most European OSB is traded within Europe and with EFTA countries. Regarding extra-European trade, after surging by 44% in 2016, exports from the EPF member countries towards the Far East, the main destination of OSB exports, declined by 10% in 2017, compared to the previous year.

Exports to the Middle East and Africa also declined. However, exports increased by more than six times to America; and almost doubled to Oceania. Total shipments to destinations outside Europe increased by 18% in 2017, compared to 2016."

According to Eurostat, said the chairman, the top 12 extra-EU destinations for EU OSB exports in 2017 were Turkey, China, Japan, Switzerland, Norway, Ukraine, South Korea, Australia, United States, Serbia, Chile and Russia, in decreasing order of importance.

This was expected to remain similar in 2018. Russia and Belarus were the largest OSB suppliers to Europe in 2017, largely due to the depreciation of their currencies relative to the Euro.

"Thanks to those extensions of capacity in Poland and the UK, the European production capacity of OSB increased significantly in 2017; by 6.5%. In 2018, [in western Europe] new capacity was opened only in Luxembourg.

"Load-bearing panels suitable for structural use in humid conditions, OSB3, continue to be the major category of OSB produced. These accounted for approximately 77% of the European OSB output in 2017," said the chairman.

"OSB2 panels, ie panels suitable for structural and non-structural use in dry conditions, accounted for 15% of the 2017 production. Six percent of European OSB production was devoted to OSB4; these heavy-duty load-bearing panels are suitable for structural use in dry and humid conditions, where lots of swell-resistance and strength are required," concluded Dr Fantoni.

Western Europe

Starting with the big question: 'Is Kronospan going to build an OSB line at its site in Chirk in the UK?', the answer is still 'maybe/ probably'. A spokesperson said that the company did not wish to comment at this stage, so it appears that such a line is still under consideration. As its prospects are still vague, we have not included it in Table 2, New mills/additional capacity.

As we reported in this survey last year, Kronospan Chirk chairman Mike McKenna told the Shropshire Star newspaper, in 2017, that as part of its '2020 Vision', Chirk was investing £200m in updating its facilities and that as part of that investment, it would like to start producing OSB.

Other commentators outside the company said in 2018 that there were "issues surrounding planning and fibre supply" and one even suggested that the site may have to close an MDF line in order to open an OSB one.

As it is now 2019, that 'Vision 2020' is getting very close, so we can only assume that a decision will be made soon, one way or the other.

In its recent annual report, Norbord said that, at its OSB factory in Inverness, Scotland, UK, it completed the new finishing line during the fourth quarter of 2018. The company had previously announced on January 28, 2016, a US$135m investment to modernise and expand the mill – including moving the unused second press from its Grande Prairie, Alberta mill – and the new OSB line was started up in October 2017. This mill has a stated annual capacity of 720 million square feet (3/3in basis), or about 580,000m3 and is still ramping up to that level.

Norbord, of course, operates in North America; and in Europe at Inverness in the UK and Genk in Belgium.

In that annual report, Norbord said its sales revenues by geographic segment are determined based on the origin of shipment and in 2018, 79% of Norbord’s sales originated from North America (2017, 80%) with 21% coming from Europe (2017, 20%). Shipments from Europe as a percentage of total shipments was 22% in 2018, compared with 24% in 2017.

Annual production capacity at Genk, Belgium was stated as 450MMSF (3/3in), or about 395,000m3 (slightly up on our figure in last year's table and amended for this report).

Norbord's statement said that: "OSB’s significant cost advantage over plywood continues to support long-term OSB market growth. Most of Norbord’s European products are sold in the UK, Germany and the Benelux region, where it competes primarily with other European producers".

In Norbord's Q4 2018 report, CEO Peter Wijnbergen said : "The picture in Europe is even more favourable. Strong demand growth, driven by increasing substitution for imported panels, contributed to our outstanding European results in 2018, and we expect this trend to continue.

"The new finishing end at our Inverness OSB mill is now complete and will unlock the capacity of the modernised and expanded press line. Further, our managing board has approved an incremental £35m investment at Inverness to add a second stranding and drying line to the mill.

"The expanded mill layout was predisposed for this next phase of growth, which will allow us to continue steadily increasing our production volume in each of the next five years, to support our European customers’ growing needs.

Meanwhile, across the water in the Republic of Ireland, the recent Siempelkamp ContiRoll continuous line at Smartply's mill in Waterford, which started production in Q2 2016, continues to produce well with a nameplate capacity of around 500,000m3 per year. We were advised in February 2019 that the mill is currently producing at a figure of around 350-400,000m3 a year, but that further investment in the green end is ongoing as part of the original three-phase plan and it is not yet certain when that nameplate capacity will be reached.

This is one of a trio of quite recent expansions in western Europe: Smartply; Norbord Inverness; and Kronolux in Luxembourg.

A spokesman at Smartply said that UK apparent consumption of OSB stands at around 700,000m3, some of which is supplied by imports.

He added that the UK has seen – and is continuing to see – a dramatic rise in timber frame construction, and modular construction using wood, and that prices at the beginning of 2019 were strong and that he expected them to continue that way.

"OSB has established itself in its own right in construction; and substitution for other panel products, notably plywood – both softwood and hardwood – is ongoing."

One subject that is hard to avoid, especially as this report was written prior to March 29th, is Brexit: Britain's departure from the European Union. The feeling among suppliers to the UK market was that there would probably be no significant effect – rather like the forecast doom to be wrought by the Millennium Bug on January 1st, 2000.

Nothing happened....

Moving across the sea to the continent of Europe, one northern producer, in response to the question as to whether his company was planning to increase capacity, said: "Everybody has plans to increase – it depends on the available resources and their willingness to invest. In the short- to midterm, I think capacity will increase faster than demand. There is definitely the potential [for increase], but it takes time.

"In the last two- to two-and-a-half years, demand was higher than capacity, but then several manufacturers in eastern and western Europe decided to invest in increasing capacity. Further increases will come, but the market is fairly calm at the moment.

"Basically I see demand continuing to grow in west and east Europe and there is still potential for substituting other panel types. There is increasing demand for housebuilding across Europe and the acceptance of timber frame construction is growing. For instance, in Germany there is a quota of 19.5% for timber frame – and it has gained 6% in the last four or five years. This is a good development and it hasn't ended yet."

I asked him about wood supply issues and he said his mill was still able to get the wood it needed, but that there was volatility in the market, but he could be flexible about the assortments of wood available.

"The price over the last 18 months has increased a lot for both wood and resins, but there is more stability now. Biomass for energy production is, of course, a major competitor in wood purchasing for the whole branch and resources have become more and more tight. Resin (pMDI) has seen problems in supply, but manufacturers have increased capacity and the price has now stabilised.

"We expect our OSB prices to remain stable now [February], as the winter is the weakest market, but we expect demand in April/May to increase and we are really confident that we will be able to maintain, or maybe increase, our prices."

On the subject of value-added products, he said that his company's EN300 OSB4 did not simply meet the standards, but exceeded them and that this was important for increasingly sophisticated timber frame constructions, where high strength is required.

Another German producer was far less upbeat about the market: "The market is decreasing. Our order books are normally full at this time [interviewed in February] as Spring is coming," he said. "I am assuming that [the market] will not be as good as last year".

When asked about OSB prices, the spokesman said: "Prices are under pressure now, but that is normal, especially because of the increased capacity in both west and east Europe; there is a lot of Europeanmade board on the market. However, our concentration is on quality, not volume. I expect to achieve similar prices to last year, but obviously it depends on supply and demand for OSB panels, as ever".

When asked about costs, he said: "The [pMDI] resin market was strange last year, but prices have now stabilised. Wood costs have risen over the last year. All the forests and wood supply from our area is PEFC and FSC certified and I don't think the biomass [wood burnt for energy] issue has affected us too much".

The main story from western continental Europe for this report is the new Dieffenbacher CPS continuous press line at Kronolux in Sanem, Luxembourg. This replaces an old Siempelkamp eight-daylight press line, which had a capacity of around 210,000m3. The annual nameplate capacity of the new line is around 600,000m3, but ramping-up is ongoing.

Kronolux has installed new waste wood preparation machinery, which started operating in January 2019.

According to industry newsletter Euwid, "....this line differs from the production method customarily used in the OSB industry, particularly in terms of the wood and drying process it uses. The company wants to use both fresh wood strands, fine fractions from strand preparation, and coarse chips made out of waste wood, in the core".

"Wood that cannot be used to make OSB will be extracted and incinerated to generate energy at one of two planned biomass power plants at the site. Waste wood processed to make OSB will be turned into coarse chips, using a specially developed knife ring flaker, and then used in the core layer. Kronospan says it is taking this approach in an effort to raise its recycled wood fraction in OSB production to around 50% in the medium term. The fresh wood strands used mainly for the outer faces, and the different fractions for the core, will be dried in a belt dryer.

Eastern Europe

With the Luxembourg line up and running, Kronospan has said that it intends also to increase the capacities of its OSB lines in Jihlava (Czech Republic), Strelzce Opolski (Poland) and Riga (Latvia), with a mixture of de-bottlenecking and press extensions.

The company also intends to add OSB to its particleboard production at Novovolynsk (Ukraine), as it did at Ufa (Russia) in 2018. Kronospan is also rumoured to be investing in additional capacity at its existing OSB factory in Belarus.

All four are scheduled for confirmation in 2019, but details, as so often with Kronospan, are hard to come by, and they are not included in this year's Table 2 of upcoming capacity.

Meanwhile, the Swiss Krono Group has stated its intention to install two new OSB production lines at its existing locations in Russia and the Ukraine.

In its 2017/18 financial report, Swiss Krono announced that a key focus of its latest €340m investment plan will be an OSB line at its plant in Sharya (Russia). This is scheduled for production in 2021, with an annual capacity of 600,000m3. Our Russia correspondent, Eugene Gerden, reported in the Feb/March 2019 issue of WBPI that the line will use low-grade wood, sourced in Kostroma and other north-eastern districts of Russia as raw material for its production.

Eugene also reported that another part of that investment programme is that a large scale OSB facility in Russia may soon be built by Swiss Krono. This will eventually produce about 600,000m3 a year of OSB and will probably be one of the largest of its kind in Russia. It was to be built in Krasnokamsk, as stated in our 2018 survey, but the company is now believed to be planning to build it in the Kostroma region instead. Machinery had not been ordered as we went to press.

Also in Russia, in the Volga region, there were plans announced in December 2018 to build a large-scale OSB plant. The project will be jointly implemented by the Chinese Sichuan Railway Investment Group and Real- Invest Group of Companies, one of Russia’s largest investment holdings.

An investment agreement was signed by the companies in 2018, during the Eastern Economic Forum in Vladivostok. The new OSB facility will be located in the Nizhny Novgorod region and have the capacity to produce over 400,000m3 of OSB per year. Production is planned for 2021.

A reported project by Sinosteel and JSC Marinsky for a 120,000m3 a year mill has been suspended awaiting funding and is thus not included in Table 2.

Dieffenbacher supplied the complete plant for a large OSB line to its Russian customer MLT (Modern Lumber Technology) for its site in Torzhok, Russia. At the Torzhok site, MLT already has a large LVL plant known under the brand name 'Taleon Terra', which has been operating since 2009 with a Dieffenbacher CPS press. That line has a capacity of 120,000m3 a year of LVL.

The company always planned to build an OSB plant as well, but had to put that plan on ice when the 2008 financial crisis hit.

The plan was revived in 2011 and, at a site close to its LVL line, MLT now has its OSB line. Contracts were signed with Dieffenbacher in 2013 and the line went into operation in 2016, becoming the 'largest and most complex contract' in Dieffenbacher's 140-year history. The CPS press is 60m long and able to manufacture boards up to 2800m wide. This gives it a nameplate capacity of 600,000m3. The plant operates under the name 'Taleon Arbor' (see Table 1).

It is expected that MLT will build another OSB line as well, but no contracts have yet been placed. Capacity this time would be about 300,000m3, we are reliably informed.

Siempelkamp is supplying a ContiRoll Generation 9 continuous press, with a length of 30.4m and a production width of 8.5ft, to CJSC Murom, located in Murom, about 300km east of Moscow. The company began producing plywood in 1929.

With the new investment, CJSC Murom will produce about 300,000m3 annually, mainly for domestic demand. Installation at the plant began in the fourth quarter of 2018. Commissioning is scheduled for the end of 2019 and regular production will get underway in the spring of 2020.

Yet another rumour suggests that Stroymontazh Technologiya is to build an OSB line in Russia, but again, no concrete information was available as we went to press. So, there is a lot of new capacity coming down the line in Russia – and several rumours of further additions.

South America

On 30 September, 2018, Louisiana-Pacific Corp produced the first OSB on its new production line at its Panguipulli facility in Chile.

According to a release published on 1 October 2018, a total of US$54m – less than the budgeted US$60-65m – was spent on extending the works. Louisiana-Pacific mainly used machinery from its closed-down OSB facilities in North America.

The facility’s second production line, equipped with a 12-opening press, is geared to an annual capacity of 265,000m3, and is to be taken up to full capacity utilisation over a period of two to three years.

The original Panguipulli line, from 2000, can produce about 120,000m3 of OSB and sidings per year. The new line was originally planned back in 2014, but was delayed by the obtaining of the necessary permissions and L-P's board's approval.

We are not aware of any other major developments in this region.

Asia

Major panel producer Vanachai Group Public Limited Company, in Thailand, has decided to enter the OSB market and in September 2018, German-based newspaper Euwid annnounced that Dieffenbacher was set to deliver a drum dryer for an OSB production line to be added to a mill in the province of Surat Thani. That contract includes a 32m-long dryer with a diameter of six metres, as well as the wet chip bunker and automation of the front end, from the debarking system to strand production technology.

Siempelkamp will supply the forming and press line and a 4ft x 48.8m continuous press for the OSB project. This will be the longest 4ft ContiRoll press supplied by the company and will come from its Qingdao factory in China. Siempelkamp says: "The line will have a daily capacity of somewhere between 500-600m3, depending on what kind of OSB product they will produce (OSB 1 to 4), as the resin used will have an immediate impact on the output. Maximum designed throughput of the line is 610m3/day.

"Installation of the press line will be by mid- March this year, so by the end of 2019 there should be some initial production."

Vanachai in fact switched an order for a particleboard line (placed directly with the Chinese firm Siempelkamp (Qingdao) Machinery Co Ltd, based in Qingdao, Shandong Province in October 2017), to OSB during the first quarter of 2018.

In China, as mentioned earlier, since Hubei Baoyuan's brave move, interest in OSB has been growing steadily and Treezo Group is one of the latest to put money into this panel type. In September 2017, the company placed an order with Siempelkamp for an 8ft x 30.4m ContiRoll press line with an (estimated) annual capacity of 200- 220,000m3. We have been unable to obtain a start-up date from Siempelkamp, but a realistic guess would be during Q1or 2, 2019. The plant is located in Tancheng County, Shandong province.

As we went to press, Siempelkamp announced yet another new player in OSB in China, as wood based materials manufacturer Jiangsu Hui Dian New Materials Co Ltd has commissioned Siempelkamp to supply a production plant for OSB. The location for the new plant is Shuyang in the province of Jiangsu. One of the two Siempelkamp Group Chinese factories is situated approximately 350km north of this location, in Qingdao.

The production line includes an 8.5ft x 38.8m ContiRoll 8th generation continuous press. Siempelkamp says the special feature of this plant will be its ability to produce OSB that can be laminated.

While similar to OSB, this new product has a fine particleboard surface layer, comparable to particleboard used in furniture production. The specially-equipped forming line will have five mat-forming machines. The scope of supply also includes the screening system and the EcoPulser for secondary size-reduction of chips.

The installation of the plant is scheduled to start in spring 2020. After becoming fully operational, the new plant will be manufacturing approximately 300,000m3 of OSB, annually. It appears in Table 2. Meanwhile, Dieffenbacher is reported to be expecting two further orders for OSB lines from the Asian region.

In other regions, Australia's consumption of OSB imports rose 50% in 2018, reaching a total of 50,000m3. Obviously not enough to justify building a production line yet, but that is a rapid growth in imports of the panel.

Summary

Eastern Europe, in particular Russia, is definitely the one to watch where new OSB capacity is concerned, with several projects confirmed and several more allegedly in preparation, particularly by Kronospan; and Krono Swiss.

Western Europe does not currently seem to have any major plans to increase capacity further, apart from possible tweaking of lines and de-bottlenecking, although the Kronospan factory at Chirk may well build an OSB line at some point in the not-toodistant future.

Meanwhile, in Asia, China continues to add new capacity and the new line in Thailand is a first for that country.

Table 2 suggests that an additional 4,270,000m3 is in the pipeline for "The rest of the World" over the next two years or so.

The feeling from the industry seems to be that, in Europe as a whole, supply may be set to outstrip demand, at least in the short-term, and prospects for the market seem uncertain, with forecasts of a general slowing in economic growth, globally.

Meanwhile, on the positive side, throughout the continent of Europe, the pressure is definitely on to increase the use of timber frame construction, particularly but not exclusively, for housebuilding.

Thermal insulation properties and ecological life-cycle factors are driving this move, particularly in Germany it seems, so while the immediate future may seem less certain, the long-term future for OSB looks very promising.

As always, it's all about that critical balance of supply and demand.

Hubei Baoyuan had the first large OSB line in China, but several more are now in the pipeline
TABLE 1: Existing mill capacities, excluding North America, at the end of 2018
TABLE 2: New mills/additional capacity 2019 and beyond