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THE LUMBER MARKET: Housing Outlook and Structural Panel Forecast

We maintain our assumption that the rest of the idled OSB and plywood capacity will not be back up to full production until late 2017/early 2018. Reasons for this include a conservative outlook on the part of producers and the fact that the process of getting the equipment ready to run, hiring/retraining employees, and building log decks will take time.

Over the next few months, we anticipate healthy increases in monthly OSB and plywood prices in the first and second quarters. We expect a seasonal second-half decline, similar to what we saw in 2013, though prices are not expected to get as high.

As a result, annual OSB average prices will be lower ($245-265 in 2014 for 7/16-inch panels versus $280-315 in 2013). We forecast modest increases in prices in 2015 as markets and D/C ratios continue to improve (7/16-inch prices of $270-290). Monthly 2015 prices will generally follow the seasonal pattern seen in 2013-14. Although annual averages in 2014-15 will be lower than 2013, prices over the forecast period will average well above current levels. (Structural panel prices are as reported in Random Lengths, with the exception of the Canadian plywood price, which is as reported by Madison’s Lumber Report.)

LBM Resources

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Monthly prices over the next few years will be volatile, as buyers continue to increase inventory levels, and increases in production and capacity initially lag, then catch up to, the increases in order files and end-use consumption.

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