Our survey of the OSB industry in 2009 outside North America showed a distinct upturn in both volumes sold and producers’ levels of optimism, compared with a dismal year in 2008.

It now appears that the optimism was not misplaced, because 2010 (the subject of this report) overall has proved to be at least as good as 2009.

On the less positive side, the same problem has tempered that general optimism for the past two years and that is the supply, and cost, of raw material – particularly wood.

Regular readers of WBPI will be well aware of the difficulties that so-called ‘biomass’ electrical energy generation has presented for all panel manufacturers. For ‘biomass’ read ‘wood’ of course.

There are even reports of some mills taking downtime in some parts of the European continent, in spite of strong OSB demand, simply because they could not obtain sufficient logs to maintain production.

In the face of this supply/demand imbalance, wood costs have inevitably spiralled. Of course additional cost pressures have also continued for resins, energy and transportation – all linked to the high price of oil; resins have risen by 15-20% since October 2010, according to one continental mill.

Of some comfort to producers is the fact that they have managed to achieve price increases for their panels overall. Speaking directly to several of those manufacturers, it appears that increases of 30% or more have generally been achieved, though this of course varies between panel type and quantity ordered. It also faltered a bit towards the end of 2010 for some manufacturers.

“We ended last year with record prices – up 30% during 2010 and more than that on 9mm,said a spokesman for Norbord in Sterling in the UK. “Wood prices were more of a problem on the continent than here and we had a good run of it in the UK, really, and I think it will continue.”

He added that his company had become ‘cleverer’ in maximising the market, avoiding holding stock and making panel to order, while competition from plywood seemed to be diminishing. “I genuinely think that we have taken market share from plywood; OSB is cheaper and it does the job,he said.

The spokesman did however bemoan the fact that there is still too much sub-standard imported plywood finding its way onto the UK market.

Timber frame house construction has maintained its market share in the UK, but falling housebuilding numbers meant that half Norbord UK’s OSB went to the continent in 2010.

The company’s Belgian mill had its best year ever last year and apparently managed to produce to its full capacity.

This year is expected to see continuing strong demand for both these Norbord mills.

Kronofrance also reported that it had sold to its full capacity last year and that 2010 was better than 2009 in both volume and price.

“We increased our prices by about 30% but that is still not really enough and we still need to increase prices more in 2011 – we have to, because our costs are increasing incredibly,said a spokesman.

In Luxembourg, Kronolux had talked of increasing its capacity by 10% in 2010 but this did not in the end happen. It remains a possibility for 2011 and would involve ‘tweaking’ of existing machinery rather than investment in new equipment. The company took the opportunity of a scheduled major shutdown in January 2011 to make some preparations for increasing capacity.

Kronolux’s markets fluctuated in 2010, starting strong and finishing weaker as customers’ stocks were brought into balance, said a spokesman, but he saw the situation improving again in early 2011.

“Demand is increasing worldwide. However, there has to be a balance between that demand and the new capacity coming on stream,he said. “It could be another couple of years before that balance is achieved.”

The spokesman also mentioned that customers today are looking for a ‘green’ product: “We focus on that and all our products are certified to PEFC and FSC standards.”

Like most mills, Kronolux achieved price increases last year but found that harder to do later in the year as demand fell off somewhat.

“Sooner or later we will have to increase prices again. When stocks reduce, demand will show us the way,said the spokesman. “I am quite optimistic about the market in 2011.”

Egger’s mill in Wismar produced right up to its 360,000m3 annual capacity in 2010.

“The year was positive and unexpectedly good,said a spokesman. “In mid – to end – 2009 we saw increasing demand and this continued into 2010, though it slowed towards the end due to the bad winter weather.”

The Wismar factory supplies OSB to construction and timber frame housing as well as packaging, formwork, cover panels and several other end-uses.

“The prices for the whole sector developed satisfactorily in 2010 and we increased them by an average of more than 30%, but there was no increase in earnings because cost increases more than consumed the price rises,added the spokesman.

“Southern yellow pine plywood imports fell in 2010 as the demand for the repair of earthquake damage in Chile limited availability, but now there is more competition from the plywood. However, I believe 2011 will be positive from a market point of view. Germany, Austria and Switzerland I believe are all stable markets and will be as good as last year.”

A new product is due to hit the market this year, coming from Poland. Kronopol of Zary has recently launched a fire-retardant grade of OSB and this will also be distributed through sister company Kronofrance. The company sees this as a niche market and hopes for a premium price.

Coming back to plywood, Weyerhaeuser is talking of making big inroads into the European market with its ‘Lumin’ panel, doubling its imports during 2011. The company has “extensively expandedits mill in Uruguay to double production, with “well over 50% of this coming to Europe”.

Future capacity development
There is quite a lot to report this year as a number of projects shape up to bring new production to the market in 2011 to 2013.

China’s first OSB mill went into commercial production on 24th November 2010. The Hubei Baoyuan mill in Jingmen has a Dieffenbacher CPS continuous press, supplied from its German factory, and a capacity at full production of 220,000m3/year.

This capacity is not shown in the listings for 2010 as it will mostly come on stream during 2011 and on a recent visit to the factory, Mr Cai, chairman and general manager of Hubei Baoyuan Group, told WBPI that he anticipates producing 70% of capacity in 2011, reaching 100% in 2012. The quality of the Baoyuan product appeared excellent.

This first continuous line has sparked a lot of interest in China in manufacturing OSB in serious quantities, but had not produced any other definite plans as we went to press.

Baoyuan’s mill did generate some enquiries to the major press manufacturers but only one serious customer has been reported. This company is apparently considering a project utilising fresh wood and veneer waste for a capacity of around 250,000m3 of OSB and it already has a small domestic line, giving cause to think it may be more serious in its intent. It is still carrying out a feasibility study which was not expected to be concluded until maybe April.

Another project under consideration would employ bamboo as the raw material. The company involved has carried out laboratory tests on this material over some years, but has yet to overcome various problems associated with the use of bamboo.

Political support for the utilisation of this raw material may yet provide the impetus to overcome these difficulties, in the view of one China expert.

For conventional OSB, the high cost of fresh wood, and of resin, combined with the strength and price competition of the domestic plywood industry in China, are believed to be limiting factors.

Romania has two new capacities on the starting blocks: Kronospan is expanding its existing line at Brasov from 300,000m3 to 500,000m3 with a completion date of 2012/13.

“Planning permission has been received and the capacity increase is under way,says the company.

Meanwhile, Egger is building a completely new OSB line at its Radauti factory, which currently has a 600,000m3 a year particleboard line, built in 2008.

The OSB line will have a Siempelkamp ContiRoll continuous press of 9ft x 38.7m and an annual capacity of 300,000m3.

Russia has four reported projects underway or planned.

The UPM-Kymmene/Sveza joint venture in Sheksna, in south Vologda, northwest Russia, mentioned in our survey last year, is still undergoing a feasibility study which is not due to complete until the end of 2011. The proposed wood products project could involve a 450,000m3/year OSB mill and this is confirmed as an option still being considered. Plans to build a 500,000m3/year OSB mill, also in the Vologda region, were recently unveiled at a London press conference. The €130m project was shown in detail during a visit of a regional trade delegation and the plant is scheduled for OSB production by 2013.

Two companies – Cherepovets Plywood and Furniture and timber harvesting and processing company Vologda Lumberers (VL) – are embarking on the project, backed by the Vologda region’s government. VL, which cuts about 1.7 million m3 of timber annually, will supply mainly aspen and coniferous species.

The 42ha site is being built on the site of a new industrial complex in Sokol.

Dieffenbacher has been selected as the machinery supplier, with phase one construction expected to start this year, delivering a capacity of 250,000m3 in 2013, with phase two (2017/18) increasing annual production capacity to 500,000m3.

Meanwhile, Kronospan has announced its intention to build a 300,000m3 a year mill in Russia. The location is yet to be confirmed but production is anticipated for 2012.

The fourth planned project is one by Safwood of Italy, which Russian newspaper Lesprom reports is planning to start OSB production in Russia in February 2012. The newspaper says the company is already constructing the mill in Komi Republic.

According to the business plan, the investment will amount to a total of €125m, of which €52.5m will be Safwood’s own funds, with €72.5m being from loans.

The company reportedly says it is going to reach the rated capacity of 376,000m3 of OSB by late 2012.

Safwood already runs two mills in Russia, having acquired the sawmilling activities of Syktyvkarskiy LDK, as well as having a greenfield investment project in Syktyvkar particleboard mill.

Another project suggested for Russia was that of the Sverdlovsk Oblast government (WBPI June/July 2010, p5) but this is so far unconfirmed and has thus not been included in our table. Unless of course you know otherwise…?

Turkey is set to join the ranks of European OSB producers with a new line at SFC Entegre Orman SA in Kastamonu. This company was purchased by Kronospan in 2010. Capacity will be 200,000m3/year and production is scheduled for some time in 2011.

Ukraine will also enter the market for the first time, in the summer of 2011, with the conversion of one of three particleboard lines at Krono-Ukraine LLC (Krono Holdings). Capacity will be 200,000m3 per annum. Press details were requested but not forthcoming.

Latin America
Venezuela is still NOT joining the ranks at this time. The Dieffenbacher continuous press line and associated equipment is reported to be on site in crates at Chaguaramas, Monagas but construction of this planned 200,000m3/year mill is reported to be “indefinitely suspended”.

However, it seems Latin America’s hesitant OSB revolution did take off with renewed vigour in 2010 as key parts of the region threw off recessionary gloom and began to embrace the concept of wood frame housebuilding.

Nature provided Chile’s OSB market with a powerful boost in the shape of dramatic earthquakes, at either end of the year. Demand for the panel accelerated in the aftermath of the biggest earthquake, which hit Chile on 27 February 2010.

As reconstruction got underway, it became clear that many homes built of concrete, stone and mortar had collapsed, while others of wood frame construction survived with little or no damage.

This simple message reinforced a continuing campaign by the region’s main OSB supplier, Louisiana-Pacific Corporation, to convert South America’s construction sector to the wood frame building system.

Thanks to Chile’s reconstruction programme, by the end of last year LP Chile was running its two national OSB mills full out, even though the newer Lautaro plant had been idled in a recession-hit 2009.

“The frame-built structure held up much better during the earthquake than the masonry construction which is the [local] norm, and we believe that that will make frame-built construction practices the standard rather than the exception going forward,LP group CEO Rick Frost said.

“We think that the ’quake completed the conversion process for us [in Chile] and now what we want to do is to be able to maintain our position,Mr Frost added. LP Chile estimates its campaign has already won wood frame a 50% share of the national residential building market. It expects fresh success in 2011 as the Chilean Government aims to subsidise the building of 100,000 new homes this year.

LP’s Chilean offshoot runs its original 120,000m3/year OSB plant in Panguipulli, Chile as well as the two year old 150,000m3/year Lautaro unit, the latter using eucalypt wood fibre. The firm has predicted it will need to continue operating both lines at full capacity for the next couple of years to feed the country’s housing reconstruction programme.

LP set out to follow a similar wood frame ‘conversion’ programme in Brazil. In 2008 it acquired a 75% stake in the 350,000m3/year continuous Dieffenbacher OSB line of Chilean group Masisa at its Ponta Grossa site in Brazil’s Paraná state.

The US group has been modifying the line to make structural OSB, although its production is still directed largely at non-construction applications such as packaging. But Brazil, the region’s most attractive prize, is proving a tougher nut for LP to crack.

In mid 2009, in the teeth of world recession, LP Brasil was operating the Ponta Grossa line at less than 40% of capacity. However, with the economic recovery and Brazil booming once again, LP did grow its volume output “significantly”, and the plant ended 2010 at a rate of over 50%, according to Mr Frost.

LP’s future plans, based on an expected growth of the wood frame concept in Brazil, saw it establish a second, separate plant with a batch press line to make panel specialities like the group’s ‘SmartSide’ siding product. It would dedicate the continuous line to OSB.

However, in the past two years, LP has had to modify its bullish aims in Latin America, at least where Brazil is concerned. “Our strategy there has changed somewhat from the way we thought, which was to be able simply to take our Chilean model of ‘conversion’ to Brazil. But we found that extremely difficult because of the bureaucracy that we have to fight our way through.

“So, late last year we changed the name of our strategy from ‘conversion’ to ‘adaptation’. What we are trying to do now is to find places where OSB will fit into their current building practices until the acceptance of that product becomes greater,the group ceo told analysts in February.

In practice, that has meant LP devising ways of modifying Brazil’s traditional building techniques with the integration of its wood based products. The firm has developed a module for the efficient addition of second floors to houses and is marketing its products, for example for use in interior walls and roofing frames.

As part of its long-term commitment to Latin America, and with one eye firmly fixed on the potential Brazilian housing market, LP is upping its stake in the Brazilian OSB business. This year it is investing up to US$22m to buy the remaining 25% share from Masisa, according to Rick Frost.

LP Brasil is considering pushing up the volume of panels turned out by its Ponta Grossa line in 2011 and expanding its thermal oil supply to allow it to reach full capacity. The government there aims to construct up to four million new homes over the next two years.

LP has been pleasantly surprised at the performance of its OSB operations in South America, which have become an important source of revenue and profit since 2009. The group saw its regional income reach almost US$100m in the first nine months of 2010, up from US$80m in 2009, accounting for 9% of its total sales.

Along with its siding business, LP counts Latin America as a growth area ripe for capital investment. It is already looking ahead to where it should site an additional OSB plant in Chile in less than five years. But the group is also aware that growth could demand a second plant sooner in Brazil, suggested the group ceo.

His company is holding on to redundant US OSB mills which have already proved ideal for shipping down to Latin America where they can still run profitably for LP.

Exports from its plants in the region remain important as the firm cultivates fresh markets for OSB in countries such as Peru and Argentina, but serving the Chinese market from South America with a speciality OSB product has also begun to look a like promising option.