The European OSB industry has been the only bright light in an otherwise gloomy panel market since it began its recovery in 2009.
Last year, the strong markets of the previous three years or so were sustained, with most, if not all, producers reporting full order books throughout 2012 and no sign of that situation changing for the worse in 2013.
The difference in manufacturers’ responses concerning 2012, as compared with 2011, is that they are saying that price increases have been achieved during the year – and those increases seem to have stuck. In 2011, on the other hand, price increases achieved early in the year were often lost later on, while discounts for bulk purchasers also undermined those price rises.
Also in 2011, producers said that increasing costs were not entirely covered by those increased selling prices anyway.
Commenting on 2012, most are saying that not only have they achieved increases, but those increases have covered costs and provided a little more net income for the mills as well.
With only three months of 2013 gone at the time of writing, several western European mills had already achieved further price increases for this year and anticipated more in the next quarter. With these successes in mind, it is not surprising to find that all mills interviewed for this report were producing to their maximum capacity in 2012 – with some comfortably exceeding their nameplate annual volumes.
It should also not be surprising to find that several mills have plans to increase the capacity of their production lines in the near future, with some plans being more advanced than others.
However, there is no evidence that we were able to find that completely new capacity would be built in western Europe – replacement of older capacity with a new line and ‘tweaking’ of existing lines to maximise output certainly seems to be on the cards, but with no announced timetables of which we were aware as we went to press.
Canadian-headquartered company Norbord of course has two European OSB mills (and one each for MDF and particleboard in the UK). One is in Inverness, Scotland, UK, the other in Genk, Belgium (see story on pp36-39).
The company reported that both mills produced above nameplate capacity in 2012 and that the Genk line’s production is fully booked into May this year, while the Inverness plant had two- to three-week delivery times.
Genk’s continuous Dieffenbacher press line has a nominal capacity of 300,000m3 a year and Inverness’s two multi-daylight Siempelkamp lines, 330,000m3.
A spokesman said that he thought the EUTR (EU Timber Regulation), which prohibits the placing of illegally sourced timber on the EU market, may be helping the European OSB industry, which has locally-sourced – and fully traceable – wood supplies.
He also said that he felt Norbord’s North American operations were doing better than many of its competitors, as it had managed to get through the bad times without shutting or mothballing its mills, giving the company a better starting position, now that the upturn has come in the US.
"The infrastructure around the closed plants has gone and some producers robbed them of spare parts for their still-running mills, adding to the normal problems of restarting an idled mill," he said.
The biomass issue is still a problem for UK mills and a threat to the wood products industry there, but the spokesman said he felt that the UK forestry industry was keen to keep its wood processing customers in business because they see it as perhaps having a better long-term future than the biomass industry.
The Inverness mill supplies mainly the UK market and the spokesman said the company wanted to see that market grow to 350,000m3. "Softwood plywood accounts for 600,000m3, so there’s a lot to go for and many end-users could buy OSB instead of softwood plywood and save themselves money.
"And there is scope for one continuous press OSB mill in the UK and I would like it to be us," he said.
As stated in our Norbord feature in this issue, 2012 saw production at Inverness reach about 330,000m3 and in 2013 it is anticipated that even more boards will be produced. However, there must be a limit to how much can be squeezed out of two multiopening press lines and a Norbord executive admitted that plans are under discussion for investment in the Inverness mill. The Genk mill could also be in line for investment to increase its capacity.
No timetable for further investment has yet been set in either case.
In Ireland, Smartply advised us that its capacity is now 350,000m3, up on the previous 325,000m3 per year and that the mill produced to that full capacity in 2012. Markets for the Waterford mill were mixed, said a spokesman, with some up and some down. The mill exports mainly to western Europe, with some increase in sales to Russia in 2012.
"As US demand picks up, their exports to eastern and southern Europe are decreasing," said the spokesman.
He reported that Smartply had had some difficulty in making price increases stick in 2012, but had achieved a small increase already in 2013 and expected another increase in the second quarter.
With its privileged access to Ireland’s rich wood resources, and no significant biomass effect, the spokesman said Smartply is not experiencing any problems in feeding its mill, with supply and demand "nicely balanced".
He also echoed Norbord’s comment in thinking that the EUTR is making a positive difference. "I think the tide is turning against ‘dodgy’ [below stated grade] plywood and the EUTR will make it more and more difficult to obtain the right grade of plywood, whereas OSB’s quality is consistent and it offers a good quality general purpose board."
The spokesman confirmed that the company is still looking into the possibility of a continuous press (currently the mill has a Washington Iron Works 14-daylight unit) but that no decision had yet been taken.
Kronofrance, in Sully-sur-Loire, produced "almost" to its 400,000m3 capacity in 2012 and confirmed that the market had been positive since 2009.
The company is studying possible expansion of capacity at Sully, by making adjustments to the line, and expects to possibly increase it by 25% at some point in the future, but not in 2013.
A spokesman said the company had achieved about a 10% price increase during 2012 as a whole, whilst admitting that wood, resin and energy costs had risen.
Kronofrance is in the same ownership as Kronotex in Germany and Kronopol in Zary, Poland and the spokesman said that the three mills between them export about 30% of their production, to Scandinavia, North Africa and South Africa, Asia and Australia.
He said the future market was a "big guess, but the winter has not been so cold and demand has remained strong and we are fully booked until May, when we have scheduled maintenance downtime in two factories. The signs are that demand will continue strong, at least into the third quarter of 2013.
"As for prices, all our factories are fully booked and we hear that everybody is in the same position and some of our competitors are even enquiring about OSB from us so I think we can be confident of rising prices. Even if we were the first [to increase prices], we would just be leading the way – we are in a good position because we are fully booked and have that routine maintenance downtime coming as well."
Kronolux increased the annual capacity at its Sanem, Luxembourg, mill from 200,000 to 210,000m3 in 2011 and has not added to that figure in 2012. However, a spokesman said that "We could sell more than we make". This is another mill which has achieved a price increase already in 2013 and which expects an increase in demand, and prices, during this year.
The Glunz (Sonae) factory in Nettgau, Germany, also reported that its production was 100% booked in 2012 and a spokesman said: "We are running as fast as we can". The nominal annual capacity of the ContiRoll line is 460,000m3, but it produced around 480,000m3 in 2012, by adjustments to the line.
Glunz’s markets are mainly in western and southern Europe, so the company, like the majority of western European mills, said it had not been adversely affected by competition from the burgeoning eastern European OSB industry. "I thought there would be a decrease [in demand] due to increased capacity in eastern Europe, but it hasn’t happened yet. However, in one or two years, who knows…." said the spokesman.
"We have some ideas to increase capacity but we would need drying capacity [to increase significantly]. There is no chance to increase capacity a lot without big investment and we are not planning on that at present."
Tongued-and-grooved (T&G) board is a big seller for Glunz. however, it is finding that changes to the European standard mean that OSB3, the company’s major grade, can be used anywhere, so OSB4 is not required as much as it used to be. Glunz makes about 5% of its production in OSB4 for specialist end-uses.
Kronotex in Heiligengrabbe, Germany, already increased its capacity, going from a maximum of 400,000m3 a year to 435- 438,000m3 in 2011.
Egger’s factory in Wismar, Germany sold to its full capacity of 360,000m3 in 2012 and reported that it was getting enquiries from all over the world for its board. "We already have indications of activity which is starting now and we think 2013 will be similar to 2012, or maybe better," said a spokeswoman.
Egger’s other mill, in Radauti in Romania, started up in November 2011 with phase 1 capacity of 300,000m3 and produced to full capacity in 2012. The company always planned from the start to increase this capacity to 350,000m3 at some point – and still plans to do so. However, we are advised that no date has yet been decided for that expansion.
Latin America OSB made real progress in Latin America in 2012 as the region’s dominant supplier, Louisiana-Pacific (LP), announced a record performance for its panel operations in Brazil and Chile.
The US group’s South America division reported sales for the year up 16% at US$169m, with operating income of US$18m, against US$12m in 2011. In the final quarter of 2012, board sales surged by 23%, to US$42m.
Growing OSB demand in Chile, where wood frame building now accounts for more than 50% of all new homes, has outstripped local production and continued to suck in exports from Canada, the US and Brazil last year.
"The Chile [market] continues to grow and demand is strong down there," LP Corp’s business development director Mike Kinney told WBPI this March.
However, with a strong US housing market recovery putting pressure on those North American OSB mills still running, Nashville-based LP resolved to invest in fresh production capacity in Latin America.
Apart from redirecting US output to feed increasing domestic demand, the firm is also keen to eliminate the high costs of shipping board to Chile – not only from North America, but also from Brazil.
LP Chile’s two OSB mills at Panguipulli in Valdivia province and Lautaro, 80km to the north in the province of Cautín, have been running at full capacity and are sold out, according to the US group. They have a combined capacity of 270,000m3/year.
As in the case of the existing Chilean lines, LP expects to source primary machinery and equipment for the third plant from amongst the group’s redundant or idle mills across North America.
Since 2005, LP closed down permanently a string of North American OSB mills from Texas to Quebec, Canada. Now it is keen to re-employ the redundant equipment in South America, but is conscious that some of those lines have a bigger capacity than justified for the Chilean market.
The US group is looking at a line capacity of around 310,000 to 350,000m3/yr for the latest Chile plant, its ceo Curt Stevens told analysts at last November’s Q3 results conference call.
Older North American mills suitable for sourcing the machinery include those at Athens, Georgia; Silsbee, Texas and St Michel, Quebec, as well as the Woodland plant in Maine, he suggested.
LP has still to complete the project plan and to cost the work involved in establishing the new OSB production facility. But, late last year, the group ceo estimated the investment over three years could cost around US$50m.
The new facility would have a similar capacity to LP’s Brazilian OSB panel plant (350,000m3) at Ponta Grossa in Paraná state. That line, acquired from the Chilean owned Masisa Brasil, is still large for Brazil’s relatively under-developed and more difficult OSB market.
While effective penetration of the huge Brazilian market by the LP wood frame building system remains firmly in the US group’s sights, the challenge has been tougher than in Chile. LP Brasil saw OSB sales volumes rise in the final quarter of 2012 by 14%, with a 12% increase over the full year.
A sizeable share of Brazilian OSB output has been exported to Argentina, Peru and Colombia, as well as to China. Even so, exports have shrunk in 2012 as sales to China have fallen away, largely due to the slowdown there.
The group’s piecemeal components approach to winning construction business in Brazil is succeeding, though more cautiously than its direct wood frame pitch in Chile.
Last year, reports LP, the Ponta Grossa line was operating at around two thirds of its 350,000m3 capacity.
