particleboard, mdf and ewp - events.risiinfo.com · north american mdf: forecast summary demand...

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Particleboard, MDF and EWPNorth American Market Updates for 2018

Steven HoneymanEconomist, Wood Products

RISI North American ConferenceOctober 10, 2018

2© Copyright 2018 RISI, Inc. | Proprietary Information

• 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?

Overview


• Particleboard Arauco North America – Grayling, MI (424 MMSF, 2018) Kronospan LLC – Eastaboga, AL (311 MMSF, 2019) Egger Group – Lexington, NC ($700 million, 2020)

• MDF Swiss Krono – Barnwell, SC (170 MMSF, 2019) Cal Ag – Willows, CA (113 MMSF, 2019)

• LVL Roseburg – Chester, SC (10 MMCF, 2019)

New Capacity


North American Particleboard: Forecast Summary

Demand

Prices

Demand for particleboard produced in the USA and Canadawill grow 2018 and continue increasing in 2019‐2020, driven by growth in housing starts and a strengthening furniture market.

Particleboard capacity in the USA and Canada will increase significantly as new mills begin operating in 2018‐2019.

Demand/Capacity Ratio will surpass the 80% level by 2020 assuming that operational capacity will be actively managed as new mills begin operation.

Prices will be relatively flat with rising input costs putting upward pressure on prices as producers look to maintain margins.

D/C Ratio

Capacity


North American Particleboard ConsumptionFurniture Drives Growth

0

1

2

3

4

5

6

7

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

BSF, ¾‐in

ch Basis

Furniture Residential

R&R Other Industrial

Nonres. Const.

North American Particleboard DemandResidential Construction Becoming More Significant


0

1

2

3

4

5

6

2005 2010 2015 2016 2017 2018 2019 2020

BSF, ¾‐in

ch Basis

Other Res. Const. Furniture

35%

52%

41%

40%


• 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

Source of North American Particleboard


North American Particleboard Offshore Imports Will Remain Flat over the Forecast

0.0

0.2

0.4

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

BSF, ¾‐In

ch Basis


North American Particleboard Markets TightenOperational capacity growing slightly slower than demand

0

1

2

3

4

5

6

7

8

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

BSF, ¾‐In

ch

Capacity Demand


New Capacity Increases Nameplate LevelsOperational capacity will need to be actively managed

0

1

2

3

4

5

6

7

8

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

BSF, ¾‐In

ch

Nameplate

Capacity

Demand


North American Particleboard Demand/Capacity Ratio

50%

55%

60%

65%

70%

75%

80%

85%

90%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020


Rising Input Costs Squeezing MarginsHigher wood and resin costs driving increases

150

200

250

300

350

400

450

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$/MSF, ¾

‐Inch Basis

Total Costs

US South

US West


Particleboard Profitability Will ImproveThe US West still lagging

0.800.850.900.951.001.051.101.151.201.251.301.35

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mill Rea

lization/Av

erage Total C

ost US South US West

Full cost breakeven


North American MDF: Forecast Summary

Demand

Prices

Demand for MDF produced in the USA and Canadawill grow steadily over the forecast between 2018‐2020, driven by strong growth in residential construction.

MDF capacity in the USA and Canada will grow as a new mills begin operating in 2019‐2020.

Demand/Capacity Ratio will approach the 85% level by 2019. Growing demand will largely be met by capacity growth.

Prices will increase modestly as costs push prices higher. Competition from imports will continue to limit producer pricing power.

D/C Ratio

Capacity


North American MDF ConsumptionResidential uses drive growth

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

BSF, ¾‐in

ch Basis

Furniture R&R Residential Other Industrial

North American MDF DemandResidential construction is MDF’s largest end use


0

1

2

3

4

5

2005 2010 2015 2016 2017 2018 2019 2020

BSF, ¾‐in

ch Basis

Other Res. Const. Furniture

53%

39% 33%

51%

North American Particleboard Consumption Will Continue Exceeding MDF


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

BSF, ¾‐In

ch Basis

Particleboard 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

Sources of North American MDF


North American Offshore MDF Imports Will Set New Historical High

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

BSF, ¾‐In

ch Basis


North American MDF Markets TightenCapacity and demand growing at similar rates

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

BSF, ¾‐In

ch

Capacity Demand


New Capacity Beginning Operation in 2019Operational capacity approaching nameplate levels

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

BSF, ¾‐In

ch

Nameplate Capacity Demand


North American MDF Demand/Capacity Ratio

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020


MDF Production Costs Will RiseWood and resin prices driving costs higher

150200250300350400450500550600650

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$/MSF, ¾

‐Inch Basis

Total Costs

US South

US West


MDF Profitability Remains Near Historical HighsThe US South continues to be higher than the US West

0.800.850.900.951.001.051.101.151.201.251.301.351.40

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mill Rea

lization/Av

erage Total C

ost US South

US West

Full cost breakeven


North American LVL: Forecast Summary

Demand

Prices

Demand for LVL in North America will increase significantly in 2018 and continue growing in 2019‐2020, driven by growth in housing starts and as flange material in I‐joists.

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 2019.

Demand/Capacity Ratio will rise and approach the 90% level by 2019. New capacity in 2019 will prevent the market from tightening further.

Prices will rise due to growing demand and tighter markets giving producers pricing power to pass along increased input costs.

D/C Ratio

Capacity


LVL Consumption Driven by Housing StartsWill surpass previous peak in 2019

0

20

40

60

80

100

120

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Million Cu

bic Feet

Single‐Family Multifamily I‐Joists Other


LVL Demand and Capacity Will Set Historical Highs

0

20

40

60

80

100

120

Million Cu

bic Feet

Capacity Demand


LVL Capacity Reaching Nameplate Levels

0

20

40

60

80

100

120

Million Cu

bic Feet

Nameplate Capacity


LVL Demand/Capacity Ratios TighteningApproaching 90% level

0.4

0.5

0.6

0.7

0.8

0.9

1.0


LVL Profitability Dips in 2018Will rise over forecast

1.0

1.1

1.2

1.3

1.4

1.5

1.6Price/Variable Cost


North American I‐joist: Forecast Summary

Demand

Prices

Demand for I‐joists in North Americawill continue to recover, growing significantly between 2018 and 2020, driven by growth in single‐family housing starts.

I‐joist capacity will expand over the forecast and approach nameplate levels by 2020.

Demand/Capacity Ratio will increase over the forecast period and approach the 85% level by 2019 and remaining elevated in 2020.

Prices will trend slightly higher as growing demand allows producers to pass along cost increases.

D/C Ratio

Capacity


I‐Joist Growth Closely Tracks Single‐Family StartsDemand will remain below previous peaks

0

200

400

600

800

1,000

1,200

1,400

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Millions Linea

r Fee

t

Single‐Family Multifamily Other


Wood I‐Joist Market Still RecoveringDemand will remain below previous peaks this cycle

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Million Line

ar Fee

t

Capacity Demand


Wood I‐Joist Operational Capacity Reaching Nameplate Levels

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Million Line

ar Fee

t

Nameplate Capacity Demand


I‐Joist Demand/Capacity Ratio Tightening

0.4

0.5

0.6

0.7

0.8

0.9

1.0


I‐Joist Profitability Will Dip with Higher Input CostsWill remain strong historically

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

Price/Va

riable Co

st Ratio

Softwood Flange

LVL Flange

North American Cross‐Laminated Timber Study

37

Special Market Analysis Study

• 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

www.risi.com/CLTNorthAmerica

© Copyright 2018 RISI, Inc. | Proprietary Information

NEW!NEW!


• 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

Conclusions

Thank you for your attentionFor more information:

North American Lumber & Wood Panels 5‐ and 15‐Year Forecastswww.risi.com/lumber5yearwww.risi.com/lumber15yearwww.risi.com/woodpanel5yearwww.risi.com/woodpanel15year

Lumber, Structural Paneland PB/MDF Commentarieswww.risi.com/lumbercommentarywww.risi.com/structuralpanelcommentarywww.risi.com/pbandmdfcommentary

© Copyright 2018 RISI, Inc. | Proprietary Information 39

Steven Honeyman, [email protected]

particleboard, mdf and ewp - events.risiinfo.com · north american mdf: forecast summary demand...

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