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Review of the Canadian Structural Panel Market
The Canadian market for structural panels amounted to 4.42 billion ft2 (3/8¡± basis) in 2005. By product category, this was fairly evenly split between plywood (2.23 billion
ft2) and OSB (2.16 billion ft2). In the first quarter of this year (year-over-year basis), OSB consumption continued to increase moderately in spite of a sagging housing market. On the other hand, plywood consumption fell by an estimated 7% and prices retreated. North American OSB prices also weakened from their almost record-high levels in 2005, but the market still offers good returns to OSB producers.
Panel imports account for 10% of Canadian demand
Imports accounted for less than 10% of Canada¡¯s structural panel demand in 2005 and continued to decline in 2006. Canada imported 176 million ft2 of OSB and 210 million ft2 of plywood in 2005, for a total of 386 million ft2 of structural panels. Over 80% of Canadian OSB imports come from the USA and this share is increasing. The US share of Canadian plywood imports
is about 70% of the total.
Canada claims one-third of N.A. production
Canada produces close to one-third of all North American (including Mexico) structural panels and over 40% of its OSB production. Canada¡¯s total production amounted to 11.9 billion ft2 of OSB plus 2.62 billion ft2 of plywood in 2005, for a total of 14.52 billion ft2 of structural panels. In the first quarter of this year, OSB production surged 14% (year-over-year basis) while plywood production fell 3%.
USA is Canada¡¯s largest OSB market
Overall structural panel exports amounted to 10.49 billion ft2 or 72% of the country¡¯s production in 2005. During the first quarter of 2006, Canadian exports of structural panels grew 17%. Over 98% of Canadian structural panel exports went to the USA in 2005 and continue to grow in 2006.
Canada¡¯s output of OSB exceeds its consumption by a wide margin. Due to the huge production overhang, Canadian OSB mills are very dependent on exports. Last year, 83% of Canada¡¯s OSB production (9.92 billion ft2) was sold in foreign markets, mostly to the USA. Canada¡¯s exports of OSB are 56 times larger than USA¡¯s while those of plywood are 1.4 times higher, for an
average of 18 times larger for overall structural panels.
Canada loses market share in non-US markets
While the USA continues to absorb most of Canadian OSB surplus, ocean freight costs and the growing influx of European and South American OSB in offshore markets remain strong disincentives for OSB overseas sales. Canadian offshore exports fell 40 million ft2 in 2005, extending a five-year trend that has seen exports contract at over 10% a year.
In contrast, Canada¡¯s plywood production is mainly consumed domestically. Canada exported 22% (573 million ft2, 3/8¡± basis) of its plywood production in 2005,mostly to the USA. Nevertheless, Canadian producers continue to face mounting competition from Brazil,which shipped 1.6 billion ft2 to the USA in 2005 (more than tree times the volume from Canada). Brazil, China
and other lower-cost producers have also marginalized Canadian exports to Japan and Europe.
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