2019.08.23 – Forest Products: Prices Higher Than Benchmarks

$ 499 + HST

EXECUTIVE SUMMARY

  • The three major oriented strand board (OSB) producers realized an average of $11 or $10-12/000 sq ft lower in June than March 2019, and $153/000 sq ft below the June 2018 peaks.
  • Their fall to an average of $206/000 sq ft in June from $217 in March for OSB was at the lower end of our $10-$20/000 sq ft expectation published May 8th.
  • There was not too much variation, where WY fell $10, LPX $11 and Norbord $10/000 sq ft in June from March 2019.
  • Implied EBITDA unit costs were not falling as selling prices collapsed as pulp logs, chips or other wood fiber costs rose. Lower volumes also increased unit costs. The EBITDA OSB unit costs in the June quarter were $208 for LPX, $188 for Norbord and $202/000 sq ft for WY.
  • Because of the firmness in unit costs and tighter implied margins, we are raising our long-term estimated OSB price forecast to $245 from $234/000 sq ft. We do not believe the companies will earn a normal margin at $234/000 sq ft due to cost escalations.