marked as the structural panel of the future

DRODUCT. technology, manufacI turine and marketing advances point to inother record yiar for producers and sellers of OSB.

Having taken over a majority share of such commodity categories as floor, wall and roof sheathing, OSB is now cracking new value-added markets, a development that is expected to further spark demand.

OSB for the first time outstripped plywood by a slim margin in North American structural panel production last year, totaling 40.2 billion sq. ft. (3/8" basis). According to APA-The

Engineered Wood Association, that margin will increase to 5.6 billion sq. ft., a 657o share for OSB, by 2002. The Structural Board Association provides the following factors to explain why OSB will continue to gain major strides:

One - Low cost

OSB has the lowest cost structure of all structural wood panels. That means huge savings for builders and end consumers. In addition, OSB is now one of the most profitable sectors in the wood products industry.

rTt I WO - No Big Glut

This factor is why manufacturers are racing to build new mills. Production is now about 95Vo of capacity, which will drop slightly as new mills are built, but production will remain well above the 1996 low of 797o when there was a huge glut that slashed prices.

Thfee - Environmental Advantages

The erosion of softwood plywood production will switch demand from plywood to OSB. Leonard Guss, Leonard Guss Associates, estimates that at least 6 billion sq. ft. of plywood production will disappear in eight to 10 years, due to mothballing of antiquated plants and the diminishing availability of construction grade plywood.

The scarcity of larger trees has affected plywood, which must be made from individual veneer strips, or peeler logs. OSB is made from strands of small diameter trees such as aspen. The strands are aligned longitudinally and laterally in alternate layers for structural strength and bonded with water resistant resins under heat and pressure.

Using all parts of the log, OSB is an extremely resource-efficient product. It makes the most of fast growing trees, a factor complementing environmental considerations.

FOUf - Product Advantages

OSB, Guss believes, is not only an adequate replacement for plywood but convincingly better. "OSB has unlimited size variation, even up to 8' x 24'. It's good on both sides and offers a broad array of thicknesses," he says.

Guss says OSB's blending process allows for a more thorough distribution of wax and resin on the strand surfaces, improving control of board properties. Its manufacturing process yields consistent panels free of knots, splits and voids, making them easier to saw, drill, nail, plane and sand.

FiVe - Consolidation

Last year two of the largest wood products acquisitions ever occurred. The two largest OSB manufacturers in North America, Louisiana-Pacific and Weyerhaeuser, bought out Le Groupe Forex and MacMillan Bloedel, respectively the second and third largest Canadian OSB makers. Duplicating functions for the combined entities will be cut and efficiency increased.

These moves underscore a new strategy by manufacturers moving toward manufactured wood products to supply higher margin building materials. A decade ago, firms were not pressured to adopt such a strategy because traditional lumber was plentiful and generating good returns.

Six - Technotogy

Consolidation is being accompanied by a frenetic push to upgrade existing mills and develop new mills with the latest technology that increases efficiency and results in lower cost but higher quality panels.

Seven - Performance Manipulation

(Continued on next page)

Louisiana-Prcific Pofiland, Or.

18 phnts: Harrcwille, Al.; Dawson CreeK B,C.; Monlrose, Co.; Athens, Ga.; Houlton, lr4e.; Sagola, Mi.; Tomahawk (3)., Hayward, Wi,; Swan River, Manitoba; Roxboro, N.C.; Jasper, Silsbee-, Carthage, Tx.; Maniwaki, St.-Miche{ Des Saints, Chambord, Quebec.

Past -199ts -1998-

9 olants: Drayton Valley, Edson, Slave Lake, Alberta; Grayling, Mi.; Elkin, N.C.; Sutton, W.V.; Wawa, Ontario (North Superior Forest Products); Miramichi, New Brunswick (Eagle Forest Products); Hudson Bay, Saskatchewan (Sasklor MacMillan).

CreorgiaPacific Corp.

Ailanta, Ga.

6 plants: Brookneal, Skippers, Va.; , Pudey; N.C,;Grenada, Ms.; tr4ount l$pe, lV.V.; W@land, Me.

Norbord Industries

Toronto, Ontario

5 olants: La Sane, Val-d'Or, Quebec; Bemidii, Mn.; Guntown, Ms.; (Joanna, S.C., opened July 2000)

Grant Forest Prducts

Erqleharl, Onbrb

2.planb: Englehart, Timmins, Onhrio,

Huber Engineered Woods Charlotte, N.C.

4 plants: Commerce, Ga.; Easton, Me.; Crystal Hill, Va.; Spring City, Tn.

Potlatch Corp, Spokane, Wa.

3 plants: Bemidji, Cook, Grand Rapids, Mn.

Ainsworlh Lumber Co,, Ltd. 100 Mile House, B.C.

2 planls: 1ffi Mile House; Grand Pnirie, Alberta.

International Paper Co. Purchase, N.Y.

3 plants: Nacogdoches, Jefferson, Tx.: Cordele. Ga.

Tolko Industries High Prairie, Alberta

1 plant: High Prairie.

Slocan Group Richmond, British Columbia

1 plant: Fort Nelson, B.C.

Boise Cascade Boise,ld.

1 plant Banrvick, Ontario.

Martco Partnership Monow, La.

1 olant: Monow.

Willamette Industries Portland,0r.

1 dant Arcadia, La.

Panel Of The Future

Langboard, Inc. Quitman, Ga.

1 plant: Quitman.

Tembec Inc. Grand Mere, Quebec

1 plant Grand Mere.

Current Pasl -1999- -1998-

Change '98-'99

(Continued from previous page )

Manufacturers are mass producing high quality boards with a very high degree of efficiency. Change the process, manipulate resin content and strand orientation and flexible or stiffer panels can be produced. Board dimensions also can be customized from the factory floor to fit the needs of builders, homeowners and valueadded product manufacturers.

Eignt - Marketing & Branding

An interesting trend, with farreaching ramifications, has companies installing whole engineered flooring systems, combining l-joists and OSB panels into a single branded product. There is no end in sight to the expansion of this value-added approach. Firms will race to supply entire OSB roofing, flooring and wall systems in which multiple components will be branded as value-added single products with 25- or 50-year guarantees. No longer can OSB, in this context, be considered a commodity product.

ttlne - Engineered Wood Boom

The boom in engineered wood will further increase OSB demand and accelerate value-added OSB use. A striking example involves wood Ijoists. Composed of a thin OSB web that is bonded to top and bottom flanges of lumber or LVL, I-joists are commonly used in roof and floor systems. From virtually zero market share in the early 1990s, it is estimated that in several years half of all new homes in North America will be supported by wood I-joist floor systems. Energy efficient structural insulated panelsfoam sandwiched by OSB panels-are beginning to catch on, and may make the same sort of impact as I-joists over the long run.

rTt I en - Housing Fundamentals Still Strong

Despite concerns about housing starts slowing, there are no signs of a dramatic downturn. If starts do begin to slow, due to interest rate hikes, the home repair and the remodeling market would take up some of the slack, since potential new buyers would be motivated to hold off on purchases and renovate existing homes. The popularity of engineered wood is dovetailing with shifting residential needs: homes and garages are larger, so more materials, including OSB, are required for each residential unit.