As we reported in our survey of the OSB industry outside North America last year (WBPI Feb/March 2008, p22), the producers began to feel the cold wind of change in the latter part of 2007.
It is to be expected that, with the continued decline in the world economic situation during 2008, things would not have improved – and they haven’t.
The general view of the European OSB manufacturers is that the first half of 2008 was not so bad, but after that the market became extremely difficult and mills started to review their working practices and to take additional downtime on top of normal pauses for maintenance.
At the time of writing, there has been one casualty among European producers. The Isorex mill in Chattelerault, France is to close its Siempelkamp six-daylight line permanently in June 2009.
One of the older mills in Europe, owned by Sonae Indústria, Isorex has a small capacity of 110,000m3 and has always relied on niche markets for its production, which includes OSB4 grade.
Meanwhile, additional new capacity has been added – and continues to be added – by the Kronospan (Peter
Kaindl) group.
The company’s Jihlava mill in the Czech Republic came to its full 500,000m3 capability in 2008, while the identical mill in Riga, Latvia also reached full capacity capability towards the end of last year (see WBPI Feb/March 2009, p16). For simplicity, they are shown in the accompanying table as 500,000m3 for 2008.
Jihlava reports that it produced to about 85% capacity in 2008, with “no extraordinary downtime”. In common with just about all mills, sales began to decline in October/November 2008. This resulted in a temporary shutdown in December/January to adjust supply, again in common with many mills.
Due to the exchange rate devaluation in the Czech Republic, Jihlava is currently very competitive in the euro market, according to a spokesman. The mill’s main markets are central and eastern Europe and DIY stores are seen as one area on which it can concentrate sales in the current difficult conditions.
The third member of Kronospan’s trilogy is waiting in the wings to enter the stage around May time. This is a carbon copy of both Riga and Jihlava and will thus, ultimately, add another 500,000m3 to European OSB capacity.
The arrival of this mammoth mill is not anticipated with any eagerness by the rest of Europe’s producers.
With its main markets in Europe being construction and housebuilding, site hoarding and export packaging for heavy machinery, it is inevitable that OSB is not in great demand and that this situation is unlikely to change in the short term.
Another factor this winter was the exceptional snow fall throughout much of central Europe and this will have further dampened demand. It can be assumed that the arrival of Spring may lead to some increase in demand, although it is unlikely to be very significant.
In the meantime, mills are taking extended maintenance shut-downs – and many are regularly shutting down for one week in four or five – in order to avoid unmanageable stocks building up in their warehouses. Others have reduced the number of shifts worked.
As one producer pointed out, this industry is not using furnaces or other equipment that cannot be shut © p30 ß p28 down temporarily without major cost; we are ‘only’ about talking heating systems for presses and about resin systems where temporary shut-downs can be planned relatively easily and cheaply. “It is like a car – it will restart when you need it. Some production guys have egos that are too big and insist on over-producing board,said a spokesman, though he admittedly is in marketing, not production. “We as an industry need to get production in line with demand [at all times] and at the moment, the ‘music has stopped’.”
Of course the market is not entirely dead. The board produced in those working weeks is self-evidently still finding customers; it’s just that there is not enough of that demand. Price is another matter and has to reflect a poor market of course. As one supplier said: “The price is far away from the value of the product”.
Housebuilders in the UK are suffering badly in the downturn and it is quite likely that not all will survive, including some big names, in spite of the boom market they have experienced – and helped to create – for the last 10 years or so. Many must be wishing they had not sat on their substantial land banks for quite so long as those huge assets have now become huge liabilities when they have to be
written down in the company accounts.
There is still some building going on and the UK government is likely to encourage the building of ‘social housing’ for rent, but volumes will remain small.
However, a press release issued on March 10 by UK firm Hamptons stated that: “Figures from Hamptons International, one of the UK’s premier international residential agencies and a subsidiary of Emaar Properties, have revealed signs of hope for the UK property market, with the number of net sales (sales agreed less fall-throughs) being agreed at their highest level for 12 months.
“Although, this increase in activity must be kept in perspective, it highlights that there are clear signs of improvement and some consumer confidence is beginning to return to the residential sector.
“In fact, the uplift in net sales can be directly attributed to a substantial rise in the number of potential buyers – with new applicants currently at the highest level for 10 months.”
It is thought that people are seeing property as the only ‘safe’ form of investment in these times of low interest rates.
However, most people in the UK would probably say that Hamptons is being over-optimistic in its assessment.
Smartply in Eire, owned by state forestry concern Coillte, also found the first half of 2008 to be “not too bad, but we could see the train coming down the track”. Builders did not go back to work after the July holiday season and the market collapsed. Smartply found that demand in eastern Europe held up a little longer than that in the west.
It reported that its line (Europe’s only Washington Iron Works multi-daylight press for OSB) was running at 75-80% capacity in March and had been at that level since mid-2008. The company has avoided laying off workers completely by following the alternative route of reduced hours to retain its skilled staff, some of whom have been there since the line first
started production.
Smartply launched a new product in January this year, called SiteProtect. This is an OSB3 panel coated with a ‘smooth heavy-duty exterior cross-linked polymer surface treatment’. It is intended for use as site hoarding (‘fencing’) and is paintable.
“Lots of companies have tried to produce something like this but the flakes have always shown through in the past,said a spokesman. “We continue to look for opportunities to invest and we plan further investments in the future, including a continuous press, probably in the next three years or so.’
France’s remaining mill is in a very different league to Isorex, with a capacity of 400,000m3, although KronoFrance in Sully-sur-Loire produced closer to 380,000m3 in 2008 and reported that the first half of the year was “much brighter than the second– a commonly stated position for all the European mills.
“I have been in the panel industry for some years and have not experienced anything like this,said a spokesman. “There is a lack of understanding around the world of how to deal with this situation. We are concentrating on increasing the number of applications for our OSB.
“January was quiet for everybody but February was a more normal month.”
France has the added problem of historically not having much of a domestic market for this panel, although the situation was apparently beginning to improve before the economic crisis.
Kronolux in Luxembourg is the only European mill to report that it is increasing its capacity, by around 10% from 200,000 to 220,000m3 during 2009/10, by modifications to its eight-daylight Siempelkamp press line. A spokesman also claimed that the line was running at full capacity in early March, citing the flexibility of product switching possible with this kind of press as an advantage.
“We can do speciality products on this line, but we do need to get a better price for them,he said.
Belgium’s only mill, in Genk and owned by Norbord as is the UK’s only OSB mill, maintains its 285,000m3/year capacity, but, in common with its Inverness sister, is not producing to that capacity this year and is not working full shifts.
Germany is home to the lion’s share of European OSB capacity, with three lines accounting for around 1,230,000m3 of capacity – Egger Wismar, Glunz Nettgau and Kronotex Wittstock/Heiligengrabbe.
Egger reports that it produced almost to capacity in 2008 and that business was not too bad until October, when the escalation of the financial crisis caused an instant impact on its sales, according to a spokesman. He also reported, in early March, that the line was still producing every day although the mill did, like most, take an extended break over Christmas and New Year.
The Glunz mill also reported that it was running normally, with only some days out for routine maintenance.
Kronotex reported that it produced to about 80% of its 420,000m3 capacity in 2008 and was in a similar position in March this year, although still running 24/7. The mill expected to take one or two weeks’ downtime at the end of March/beginning of April.
In eastern Europe, Kronospan’s Bourgas mill in Bulgaria is still operational, with an annual capacity of about 200,000m3, as published previously.
Kronopol in Zary, Poland, still has a capacity of around 400,000m3 and produced without extra downtime in 2008, although at the very end of the year experienced some slowdown in sales in western and eastern Europe (Russia, Ukraine, Lithuania, etc). A spokesman said © the mill was still running full-time in March 2009, with its main markets being Poland, southeast Europe and Japan.
Kronospan’s Bolderaja mill in Riga, Latvia started production on its new Dieffenbacher continuous press line in July 2007. It increased the annualised capacity of the line from 300,000m3 to 500,000m3 by commissioning a second wood preparation area in October 2008 (see WBPI Feb/March 2009, p16).
The mill has thus not completed a full year at its full capacity but for convenience, we have shown the 500,000m3 in 2008 in the accompanying listing. The line was still producing seven days a week in early March, but was running at a lower speed than normal to reduce output, matching supply to demand.
Meanwhile, the identical line in Jihlava, Czech Republic, achieved its full theoretical capacity during 2008.
As mentioned earlier, the third identical line for Kronospan, in Brasov, Romania, was expected to start up in May this year.
Another line was shown as being planned for Romania in our survey last year. This project was by Alprom and was to be built in Pitesti. However, Alprom withdrew its plans early in 2008 due to the large-scale Kronospan plant in Brasov.
Russia has also seen OSB plans cancelled or delayed.
The proposed line by the UPM-Kymmene/Sveza joint venture still awaits a decision, according to UPM, who said in March: “Final investment decision is subject to the outcome of the feasibility study and necessary approvals from authorities. These studies, and the approval process, are still ongoing”.
Another Russian company had placed a contract with Dieffenbacher for a new 60m CPS continuous press line, but cancelled the order. Fortunately, this was before materials had been bought by Dieffenbacher, though not of course before some engineering work had been done. The customer was originally called Arkley, but the company changed its name to Oris and the plant was to be built in the Kirov region of Russia.
South America
Louisiana-Pacific launched its 150,000m3/year OSB mill in Lautaro, Chile, 80 miles north of its existing mill in Panguipulli, in January 2008. The company’s existing Panguipulli mill had been under pressure to meet rapidly growing demand for structural building components in Chile and to feed emerging OSB markets in other South American markets and the Far East. The mill was sold out, with just 15% of Chilean output exported in May 2008, reports WBPI regional correspondent Richard Higgs.
The Lautaro mill, involving an investment of US$50m, includes a modified multi-daylight press from LP’s former Montrose, Colorado mill in the US, as well as some redundant equipment from LP’s OSB plant in Woodland, Maine, US, which closed in 2005.
It reached around 72,000m3/year capacity by June 2008 and in November reached 70% of its total capacity, or about 105,000m3/year.
It aimed to reach 85% of capacity (almost 128,000m3/year) by March this year.
Meanwhile in Brazil, LP agreed in December 2007 to buy a 75% stake in Masisa do Brasil’s Ponta Grossa OSB plant. This is a 350,000m3/year Dieffenbacher continuous line. The first stage of this acquisition was completed in May 2008, with the second stage concluded in October 2008. Louisiana-Pacific took operational control in November of that year.
The company’s ceo, Rick Frost, described the Brazilian plant as “in pretty good shapein November last year, but now LP plans to invest in improving the quality of the OSB panels produced there to increase its use for structural applications.
The Ponta Grossa product was being sold by Masisa for a variety of applications, including a plywood substitute for concrete form, furniture components, heavy duty packaging and pallets, building site hoardings and site walkways etc.
Mr Frost predicted last year there would be a huge potential in structural markets, with the Brazilian population set to grow by 41 million over the next 20 years. Louisiana-Pacific is investing this year in a programme to develop the structural OSB market in Brazil through educating and training architects, engineers and builders to use OSB panels in construction.
In March 2009, LP reported that Brazil, too, was hit by the slowdown in the final three months of 2008 and the group expects lower sales from Brazil than planned even in November last year.
In Venezuela, The state owned Venezuelan joint venture CVG Proforca/PDVSA planned an integrated wood processing complex with six sawmills and an OSB line in Monagas state, eastern Venezuela, to support a major low-cost wood based housing scheme. In 2007, the joint venture ordered the complete 200,000m3/year continuous 24.8m CPS press line from Dieffenbacher, with the press extendable to 44.95m. The contract included log debarking through to panel cut-to-size section.
In mid-2008, Dieffenbacher shipped the equipment to Venezuela for assembly on the site of a sawmill and OSB plant at Chaguaramas. The original plan was for assembly from early 2008 with start-up in second-half 2008. The Venezuelans have now revised the programme, with assembly and launch now planned for 2009.
At the end of 2008, site preparation, including excavation and earth removal and levelling for foundations, was carried out for one of six sawmills, Aserradero Aceital in Aceital del Yabo.
In January/February this year, clearance of forest on the site of the OSB plant and sawmill at Chaguaramas was carried out prior to ground breaking and earth removal ready for construction.
We have been unable to establish an exact date for start up of this line.
Thus total capacity for Europe now stands at around 4.48 million m3, up 75,000m3, net, on the 2007 year-end figure.
Latin America stands at 590,000m3, up 105,000m3 thanks to the first contribution of the Lautaro mill in Chile.
This gives a total capacity for all mills outside North America of 5.07 million m3.
The years 2009/10 could add another 765,000m3, without the UPM-Kymmene/Sveza joint venture, if that comes to fruition.
So where will all this OSB go in the current difficult economic climate? Will there be more mill closures in addition to Isorex? Nobody knows, any more than anybody can make an informed guess as to when the economic situation will improve.
If there is one thing everybody agreed on it is that we are in uncharted waters – nobody has ever been here before.
Perhaps renovation projects, rather than new-build, and government initiatives to increase employment may increase demand for structural panels
in Europe.
Meanwhile in the US, president Obama may stimulate the economy and take some pressure off the market.
Talking of the US, some OSB has come to Europe at very cheap prices, but quality is often seen as an issue and it appears the scale has been small.
What is sure is that there is latent demand for housing in most of Europe which cannot be held back indefinitely.
As one OSB producer interviewed for this report said, probably summing up everyone’s view: “We must hope for the best and plan for the worst.”
