Structural Wood Panel Bargains

The recent decline in U.S. housing starts has reversed the relationship between the supply of and demand for structural wood panels (plywood and oriented strand board) and other engineered wood products. It has yielded extremely good bargains for those products. This includes engineered wood pallets, often used in international shipping.

The structural wood panel composite price in October was $260 per thousand square feet, the lowest since April 2003, according to data compiled by Eugene, Oregon-based, Random Lengths Publications, Inc. The composite price through the first 10 months of 2006 down more than 20% from the 2005 yearly average and down almost 30% from 2004.

“Structural engineered wood products are clearly a great value,” said Dennis Hardman, president of APA—The Engineered Wood Association, Tacoma, Wash. “The soft housing market has had a major moderating effect on demand for the products, and the market has adjusted accordingly.”

More than half of U.S. and Canadian structural wood panel production is consumed by new residential construction. According to APA’s latest forecast, U.S. housing starts this year are expected to total 1.87 million, down almost 10% from starts in 2005, the second highest recorded.

At the peak of the housing market boom in 2004 and 2005, the structural wood panel industry operated at nearly full capacity in attempt to meet record market demand. With the housing market now substantially cooled, the forecast is for the industry to operate at closer to 90% of capacity, which is near its historical average.

As a trade association operating in strict accordance with antitrust regulations, APA cannot and does not forecast future prices, Hardman emphasized. However, he said, “like all commodity markets, engineered wood product price fluctuations are a function of constantly changing supply and demand.”

That changed relationship during the recent past has produced a favorable value proposition for residential builders and for users and specifiers of the products in the industry’s other major markets, such as industrial applications, Hardman said.

Source: APA—Engineered Wood Association

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