US housing hits Canada OSB industry hard

04 July 2008 16:58  [Source: ICIS news]

TORONTO (ICIS news)--The ongoing decline in the US housing market is hurting Canada’s oriented strandboard (OSB) industry, with knock-on impacts on formaldehyde and related petrochemical raw materials, an analyst said on Friday.

 

“The North American oriented strandboard (OSB) industry is suffering a catastrophe and Canadian mills are taking a disproportionate share,” John Cummings, an independent Toronto-based petrochemical analyst, said in a research note to clients.

 

“So far there is no end in sight to the US housing and construction crisis, and this impacts directly on OSB.”

 

OSB is used primarily in new single family houses and to a lesser extent in other housing starts.

 

Canadian OSB production was down sharply in the first quarter and capacity utilisation rates in the industry were now around 50-60%, Cummings said.

 

At least eight Canadian plants had been closed, some permanently and some indefinitely until the market recovers, he said.

 

Canadian producers were also disadvantaged by the strong Canadian dollar and high rail freight rates that reduced their competitiveness, especially when compared with competitors in the US southeast, the analyst said.

 

The debacle in the wood products industries rippled back into Canadian production for related petrochemical raw materials.

 

Canadian formaldehyde production dropped to an annualised run rate of 177,000 tonnes for the first four months of 2008, he said.

 

This compares with a production peak of 263,000 tonnes/year in 2004.

 

Producer Arclin decided not to start up its new 50,000 tonne/year new resins plant at Sexsmith in Alberta until conditions improve.

 

“The severe downturn and recession in the US housing market coupled with a strong Canadian Dollar have resulted in a large number of closures of wood products facilities in Western Canadian thereby significantly reducing resin demand," said Arclin CEO Claudio D’Ambrosio.

 

Mississauga, Ontario-based Arclin was founded in 2007 after Ontario Teachers’ Pension Plan acquired specialty resins producer Dynea North America from Finland’s Dynea.

 

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By: Stefan Baumgarten
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