Particleboard, MDF and EWP

Transcription

1 Particleboard, MDF and EWP North American Market Updates for 2018 RISI North American Conference October 10, 2018 Steven Honeyman Economist, Wood Products

2 Overview Particleboard Will new capacity create supply issues? MDF Will offshore imports remain a significant source of supply? LVL Demand is growing, will capacity keep pace? Wood I joists What effect will rising input costs have on profitability? 2

3 New Capacity Particleboard Arauco North America Grayling, MI (424 MMSF, 2018) Kronospan LLC Eastaboga, AL (311 MMSF, 2019) Egger Group Lexington, NC ($700 million, 2020) MDF LVL Swiss Krono Barnwell, SC (170 MMSF, 2019) Cal Ag Willows, CA (113 MMSF, 2019) Roseburg Chester, SC (10 MMCF, 2019) 3

4 North American Particleboard: Forecast Summary Demand Demand for particleboard produced in the USA and Canada will grow 2018 and continue increasing in , driven by growth in housing starts and a strengthening furniture market. Capacity Particleboard capacity in the USA and Canada will increase significantly as new mills begin operating in D/C Ratio Demand/Capacity Ratio will surpass the 80% level by 2020 assuming that operational capacity will be actively managed as new mills begin operation. Prices Prices will be relatively flat with rising input costs putting upward pressure on prices as producers look to maintain margins. 4

5 North American Particleboard Consumption Furniture Drives Growth BSF, ¾ inch Basis Furniture R&R Nonres. Const. Residential Other Industrial

6 North American Particleboard Demand Residential Construction Becoming More Significant 6 5 Other Res. Const. Furniture BSF, ¾ inch Basis % 40% 1 52% 41%

7 Source of North American Particleboard Demand for North American particleboard is largely met by domestic producers in the USA and Canada Imports represent a small portion of the total Just 6.3% of total consumption in 2017 (228 MMSF) A strong US dollar has made the North American market more attractive Up from 1.8% of supply in 2013 The import share of supply is unlikely to climb significantly over forecast 7

8 North American Particleboard Offshore Imports Will Remain Flat over the Forecast 0.4 BSF, ¾ Inch Basis

9 North American Particleboard Markets Tighten Operational capacity growing slightly slower than demand Capacity Demand BSF, ¾ Inch

10 New Capacity Increases Nameplate Levels Operational capacity will need to be actively managed Nameplate Capacity Demand BSF, ¾ Inch

11 North American Particleboard Demand/Capacity Ratio 90% 85% 80% 75% 70% 65% 60% 55% 50%

12 Rising Input Costs Squeezing Margins Higher wood and resin costs driving increases US South US West Total Costs $/MSF, ¾ Inch Basis

13 Particleboard Profitability Will Improve The US West still lagging Mill Realization/Average Total Cost Full cost breakeven US South US West

14 North American MDF: Forecast Summary Demand Demand for MDF produced in the USA and Canada will grow steadily over the forecast between , driven by strong growth in residential construction. Capacity MDF capacity in the USA and Canada will grow as a new mills begin operating in D/C Ratio Demand/Capacity Ratio will approach the 85% level by Growing demand will largely be met by capacity growth. Prices Prices will increase modestly as costs push prices higher. Competition from imports will continue to limit producer pricing power. 14

15 North American MDF Consumption Residential uses drive growth Furniture R&R Residential Other Industrial BSF, ¾ inch Basis

16 North American MDF Demand Residential construction is MDF s largest end use 5 Other Res. Const. Furniture 4 BSF, ¾ inch Basis % 51% % 33%

17 North American Particleboard Consumption Will Continue Exceeding MDF 7.0 BSF, ¾ Inch Basis Particleboard MDF

18 Sources of North American MDF MDF imports are a significant share of supply in the North American market In 2017, imports represent 34.8% of total consumption That s 1.2 BSF of imported MDF Up from an average of 28% between 2010 and 2015 Barring further strengthening of the US dollar or significant price increases, the import share will remain flat over the forecast New capacity will add domestic sources of MDF to meet growing demand 18

19 North American Offshore MDF Imports Will Set New Historical High BSF, ¾ Inch Basis

20 North American MDF Markets Tighten Capacity and demand growing at similar rates BSF, ¾ Inch Capacity Demand

21 New Capacity Beginning Operation in 2019 Operational capacity approaching nameplate levels Nameplate Capacity Demand 3.0 BSF, ¾ Inch

22 North American MDF Demand/Capacity Ratio 95% 90% 85% 80% 75% 70% 65% 60% 55% 50%

23 MDF Production Costs Will Rise Wood and resin prices driving costs higher $/MSF, ¾ Inch Basis Total Costs US South US West

24 MDF Profitability Remains Near Historical Highs The US South continues to be higher than the US West Mill Realization/Average Total Cost US South US West Full cost breakeven

25 North American LVL: Forecast Summary Demand Demand for LVL in North America will increase significantly in 2018 and continue growing in , driven by growth in housing starts and as flange material in I joists. Capacity LVL capacity in the USA will increase as the new mill will add nearly 10% to North American nameplate capacity levels and will begin operating in D/C Ratio Demand/Capacity Ratio will rise and approach the 90% level by New capacity in 2019 will prevent the market from tightening further. Prices Prices will rise due to growing demand and tighter markets giving producers pricing power to pass along increased input costs. 25

26 LVL Consumption Driven by Housing Starts Will surpass previous peak in Single Family Multifamily I Joists Other Million Cubic Feet

27 LVL Demand and Capacity Will Set Historical Highs Capacity Demand Million Cubic Feet

28 LVL Capacity Reaching Nameplate Levels Nameplate Capacity Million Cubic Feet

29 LVL Demand/Capacity Ratios Tightening Approaching 90% level

30 LVL Profitability Dips in 2018 Will rise over forecast Price/Variable Cost

31 North American I joist: Forecast Summary Demand Demand for I joists in North America will continue to recover, growing significantly between 2018 and 2020, driven by growth in single family housing starts. Capacity I joist capacity will expand over the forecast and approach nameplate levels by D/C Ratio Demand/Capacity Ratio will increase over the forecast period and approach the 85% level by 2019 and remaining elevated in Prices Prices will trend slightly higher as growing demand allows producers to pass along cost increases. 31

32 I Joist Growth Closely Tracks Single Family Starts Demand will remain below previous peaks 1,400 1,200 Single Family Multifamily Other Millions Linear Feet 1,

33 Wood I Joist Market Still Recovering Demand will remain below previous peaks this cycle Million Linear Feet 1,800 1,600 1,400 1,200 1, Capacity Demand 33

34 Wood I Joist Operational Capacity Reaching Nameplate Levels Million Linear Feet 1,800 1,600 1,400 1,200 1, Nameplate Capacity Demand 34

35 I Joist Demand/Capacity Ratio Tightening

36 I Joist Profitability Will Dip with Higher Input Costs Will remain strong historically Price/Variable Cost Ratio Softwood Flange LVL Flange 36

37 Special Market Analysis Study North American Cross Laminated Timber Study NEW! Analysis of the North American CLT market 15 year forecast of demand and capacity by end use market at the country level Discussion of all active and announced CLT mills 37

38 Conclusions Particleboard: With new capacity coming on line over the forecast, operational capacity will need to be actively managed MDF: Margins will remain historically high, continuing to attract offshore imports LVL: The announced new capacity will be needed as the market tightens over the forecast I Joist: Demand is still recovering, and despite increases in input costs, margins will remain healthy 38

39 Thank you for your attention For more information: Steven Honeyman, North American Lumber & Wood Panels 5 and 15 Year Forecasts Lumber, Structural Panel and PB/MDF Commentaries