20 | Focus on OSB: North America
rosier outlook than NAR, with Wells Fargo predicting the average 30-year fixed rate decline to 6.0% and MBA to 6.1% by the end of 2024. Fannie Mae, the largest mortgage guarantor, has a less optimistic outlook with a prediction of 6.5% by the end of 2024. Despite lingering housing affordability
concerns, the lower interest rates may stimulate home buying enough to keep 2024 starts in Canada and the US at about 2023 levels.
Above: N.A. Housing Starts and OSB Panel Production (2005 to 2023) SOURCE: APA, CANADA MORTGAGE HOUSING CORP, U.S. CENSUS BUREAU
In May 2023, Louisiana Pacific (LP) acquired the idled OSB mill in Wawa, Ontario from Forex. Forex had purchased the mill in April 2022 with the intention of modernizing the OSB manufacturing process. Under the ownership of MacMillan Bloedel (acquired by Weyerhaeuser in 1999), the Wawa mill had operated from 1995 until the 2007 crash of the North American housing market. LP plans to convert mill output from commodity OSB sheathing to value-added siding. Finally, in March 2024 Godfrey Forest Products announced that it will build an OSB factory on the site of a closed paper mill in Jay, Maine. The principal John Godfrey developed mills in Maine, New Brunswick, upstate New York, and Scotland 30 to 40 years ago at the dawn of the OSB industry. For many years Godfrey had attempted to
develop an OSB mill near Flagstaff, Arizona, but bureaucratic inertia stopped the US Forest Service from committing to a fibre supply agreement.
INTELLECTUAL PROPERTY DISPUTES
) more than a panel of commodity OSB, ZIP commands a meaningful premium for
Structural applications in construction use about 70% of OSB, and makers invest in developing variations that sell for a higher price than 4ft x 8ft (1.22m x 2.44m) standard sheathing. Higher value products include wall, roofing, and flooring specialty panels that may be extended-length or foam- insulated, or have fire-resistant, radiant barrier, or weather-resistant properties. For many years a distinctive value-added product has been Huber’s ‘ZIP’ system with a green built-in moisture barrier. Weather resistant OSB saves builders the labour and materials for jobsite installation of an exterior polyethylene moisture barrier. With a price of up to US$5 per panel ($130 per m^3
Huber.
Huber applied for key patents starting in 2005 (issued in 2010) that protect its investment in research and development of an OSB system with a built-in moisture barrier. Nevertheless, Georgia Pacific (GP), Louisiana Pacific (LP), and Roy O Martin (ROM) launched competing water-resistant panels.
In 2017, GP and Huber settled a lawsuit
for patent infringement in which GP made an undisclosed upfront payment plus committed to ongoing royalties for the right to make OSB panels with a built-in moisture barrier.
In 2019, Roy O Martin and Huber settled
a lawsuit for patent infringement in which ROM ceased making OSB with a built-in moisture barrier. Huber filed a civil complaint against LP
in February 2019, shortly after LP launched its ‘WeatherLogic’ brand of OSB with a built-in moisture barrier. Huber alleged that LP infringed on its patents for this product class, while LP argued that Huber’s patents were improperly issued and invalid. Huber and LP finally settled on undisclosed terms in August 2023, with LP continuing to manufacture and sell its brand of water-resistant OSB. The initial Huber patents are scheduled to expire beginning in 2026. The possibility to “evergreen” (extend the monopoly period of patent protection, often by applying for new patents on improvements to existing products) the expiring patents remains undetermined.
FOR 2024
Reputable economists generally forecast that mortgage interest rates will continue falling from the Fall 2023 peak. Wells Fargo and Mortgage Bankers Association have a
WBPI | April/May 2024 |
www.wbpionline.com
ABOUT THE AUTHORS Richard W. (Rich) Baldwin, MBA is Chief Investment Officer of Oak Creek Investments (Texas, USA), and regularly consults for Asian, European, and North American engineered wood products makers. In recent years, he served as a strategic consultant for several project justifications including Winston Plywood & Veneer (Mississippi, USA) and CalPlant I (California, USA). Rich was Visiting Professor at Southwest Forestry University (Kunming, China) and previously worked for two Wall Street firms.
Richard F. (Dick) Baldwin, Ph.D, C.F. is Managing Partner of Oak Creek Investments (Texas, USA), and an investor in wood and non-wood businesses. In recent years, he served as General Manager of Chester Wood Products (South Carolina, USA), Moncure Plywood (North Carolina, USA), Omak Wood Products (Washington, USA), and Winston Plywood & Veneer (Mississippi, USA). Dick is Instructor in the Forestry Department of Oregon State University (Oregon, USA) and author of the 2016 industry primer Plywood and Veneer- Based Products.
“There is pent-up demand among sellers that will be unlocked as rates move lower,” NAR’s Yun said in an interview with Forbes magazine. “All the families with new-born babies, or new marriages, or divorces, have been waiting for rates to come down to move to something that suits them better.” Stable construction would keep 2024 OSB demand about equal with 2023. However, with the recent restart of the South Carolina mill, reopenings of fire-damaged facilities in Alberta and Texas, and greenfield mills starting up in Alabama, Maine, Mississippi, and Texas, significant incremental production will enter the market. Perhaps later than 2024, additional supply
could pressure OSB prices until less efficient mills are forced to close.
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