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North American Lumber Market

01-15th June 2007


Chevron and Weyerhaeuser to explore production of bio-fuels
In an effort to utilize wood-based by-products for biofuel, Weyerhaeuser and Chevron are teaming up to further research this issue. According to Wood Based Panels International, Weyerhaeuser will be contributing its knowledge and supply of cellulose and Chevron its fuel
technology expertise.

North America sees little growth for particleboard
In contrast to strong Eastern European trends where the capacity growth of particleboard is rapidly expanding, the situation is less strong in North America. Starting in 2000, the North American particleboard industry on this continent entered a transitional phase. Almost all the
major North American forestry companies C including Weyerhaeuser, Georgia Pacific, International Paper and Louisiana Pacific C recently sold or shut down their particleboard and MDF businesses.

In the United States, the ongoing mill closures and restructurings have not yet run its full course. On the other hand, the shrinkage of the production capacity and mill closures in Canada came to an end in 2005 and last year witnessed a reversal of the downward trend. Similarly, in
Mexico, there has been a small upward movement in capacity during the past two years. Despite this trend, the improvements in Canada and Mexico were not enough to counterbalance the decline in the USA in 2006.

As a result of the lackluster investment activity in particleboard, the production capacity of wooden panels was very limited in North America. Generally, producers are more inclined to achieve growth and boost their market share through acquisitions rather than new capital projects in new particleboard mills. The largest particleboard operator in North America is Flakeboard, with over 1.5 million m3 of capacity.

The North American industry is very cautious about the future demand and production costs for particleboard. The usage for particleboard by the furniture industry C suffering under a flood of imports from China and other countries where operational costs are low C is uncertain. Furthermore, some particleboard applications have been negatively affected by the growing popularity of OSB. There are also signs that the slump in residential house building will be longer than anticipated. Unlike MDF, particleboard has no laminate flooring market to stimulate the demand. In addition, costs are rising, particularly for wood and resin.

North American offshore imports of overall engineered wooden panels rose by 47% in 2005 but particleboard is only a minor portion of the total. This product is not economical to ship over long distances. Therefore, some large European corporations may undertake some capital investments in North America, in particular if local supplies should remain limited.

Mixed results for plywood and OSB in 2006
North American structural panel production reached a peak in 2006. Strong repair/remodelling as well as nonresidential construction helped to offset the impact of declining US housing starts. Production in 2006 was up by more than 2% on the previous year.

Production of OSB was up by more than 5% compared with last year. About 57% of the production was located in the United States, and 43% in Canada. The growth of production in the USA was particularly strong, at about 5.5%, while production of Canadian mills advanced by
slightly less than 5%.

In contrast to OSB production, North American plywood production in 2006 was almost 3% less than in 2005. The production decline affected mainly sanded plywood.

Overall, imports of offshore structural panels declined by almost 5% last year, with plywood imports falling the most, well in excess of 10%.

Abbreviations

LM        Loyale Merchant, a grade of log parcel  Cu.m         Cubic Metre
QS         Qualite Superieure    Koku         0.278 Cu.m or 120BF
CI          Choix Industriel                                                       FFR            French Franc
CE         Choix Economique                                                        SQ              Sawmill Quality
CS         Choix Supplimentaire      SSQ            Select Sawmill Quality
FOB      Free-on-Board     FAS            Sawnwood Grade First and
KD        Kiln Dry                               Second 
AD        Air Dry        WBP           Water and Boil Proof
Boule    A Log Sawn Through and Through MR              Moisture Resistant
              the boards from one log are bundled                      pc         per piece      
              together                      ea                each      
BB/CC  Grade B faced and Grade C backed MBF           1000 Board Feet          
              Plywood   MDF           Medium Density Fibreboard
BF         Board Foot F.CFA         CFA Franc        
Sq.Ft     Square Foot               Price has moved up or down

Source: ITTO'  Tropical Timber Market Report

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