Weak Housing Market Makes for 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, yielding extremely good bargains for those products compared to the recent past, according to a release for the APA-Engineered Wood Association.

The structural wood panel composite price in October was $260 per thousand square feet, the lowest since April 2003, 3-1/2 years ago, according to data compiled by Eugene, Oregon-based Random Lengths Publications Inc. The composite price through the first 10 months of 2006 was $325 per thousand, down more than 20 percent from the 2005 yearly average and down almost 30 percent from 2004.

"Structural engineered wood products are clearly a great value," noted 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," he said.

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 percent from the 2.068 starts in 2005, the second highest ever 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 percent of capacity, which is near the historical average.

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