In a recent letter, Louisiana Pacific informed its consumers that it plans to re-open a long curtailed OSB mill in Clarke County, Alabama by April 2013. The mill was indefinitely curtailed in the fourth quarter 2008 on declining demand for OSB after being in operation for about a year. The news follows an earlier announcement by Georgia-Pacific (G-P) to start a new OSB facility in Clarendon County, South Carolina early in 2013. The mill is a sister facility of Allendale OSB, which G-P opened in 2010. G-P purchased both Allendale and the unfinished Clarendon facility from Grant Forest Products in early 2010.
Both statements speak to producers’ confidence and expectation for housing recovery next year. Combined with recent builders’ confidence and a rally of housing starts, these announcements indicate that housing is on strong footing and this sector of the economy is set for a near-future turn-around.
But what impact will these openings have on markets for structural panels and, especially, timber markets? The two announced mills will add about 9% to currently operating OSB capacity in US South. The impact of new capacity in each state will be much larger, 44% and 77% in South Carolina and Alabama, respectively. The move may lift pine pulpwood prices in each market, but the impact will be moderate as each facility will likely be gradually reaching its full capacity during 2013. Even at full capacity, the marginal consumption from the new facilities will increase the total demand for pine pulpwood by 7.4% and 6.5% in Alabama and South Carolina, respectively.