Arizona Forest
Restoration Products Inc.
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Arizona Forest Restoration Products Inc. |
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Oriented Strand Board Market
The structural wood panel market began in the 1930’s when plywood was introduced as an economic alternative to expensive solid wood based products. With its dimensional stability, strength and durability, plywood dominated other potentially competitive composite materials (particle board and hardboard) for three decades. However, as suitable timber became scarcer and costs to manufacture plywood increased in the 1960’s, OSB became an attractive economic alternative.
Building on the origins of waferboard in the 1950’s, modern OSB was introduced in the early 1980’s. Oriented strand board (OSB) competes directly with plywood, for structural wood panels applications in the residential and commercial construction such as roof, wall and floor sheathing, and over the past 25 years, OSB has emerged as the superior product in most applications. It is approved by all major building codes, and its production now exceeds that of plywood. Source: American Plywood Association Product Guide: OSB, 1999.
Since its introduction, OSB production has increased every year regardless of the cyclicality of the housing market, even when the overall production of all structural panels has decreased.
Source: RISI (2007) Source: RISI North American Panelboard Mill Capacity, 1981-2006
Successive generations of products are first embraced by early adopters and steadily increase their overall penetration as imitators follow the lead of initial users. This growth across products is well understood and follows a well defined curve, called the “Bass Model of Diffusion”. OSB has followed this pattern of increasing penetration and stood at 59% of the total North American Structural Panel market in 2004. According to the latest Crow’s Weekly Market Report, this growth in penetration is continuing and now stands at 65%.
Source: RISI (2006)
As a proven and preferred alternative to plywood, OSB growth is fueled by two drivers: 1) consumption of structural wood panels for housing, and 2) substitution to plywood that is more expensive to manufacture and requires large diameter trees.
Housing market growth-driver
As a structural panel, OSB sees its growth driven by the growth of the residential and commercial construction market. Housing has been and will remain a powerful driver of OSB growth, however it is a cyclical driver well documented for periods of explosive expansion, but also occasional periods of recession. After the slow down of the housing market toward the end of 2006, all indicators currently anticipate a decline in 2007, a weak restart toward the middle of 2008, and a very strong growth from 2009 to 2011.
The current housing cyclical slowdown does not interfere with Arizona Forest Restoration Products’ start-up plan, as 2007 to 2008 will be used for engineering and permitting, 2008 to 2009 for building and starting the plant, with production becoming available for sale in January of 2010 for what is predicted to be a banner year. Further on, Arizona Forest Restoration Products' position as the low cost producer for the Southwest market will make it able to compete profitably in its natural regional market even in the face of predatory pricing during housing market slowdowns.
Plywood substitution growth-driver
Independently from the growth of the entire structured panel market, as driven by the housing market, OSB’s specific growth is also driven by its substitution to plywood within the structured panel market. Despite the slowing of the housing market expected over 2007 and 2008, OSB adoption rate is expected to continue to increase steadily for the foreseeable future as it continues to replace plywood in an increasing number of housing, remodeling, industrial applications etc.
Source: RISI (August 2006)
Arizona Forest Restoration Products' state of the art continuous press manufacturing equipment will allow it to adapt to market demand with OSB varying in thickness from ¼” to over 1”, and in panel sizes from 4’x8’ (traditional American standard) to 4’x10’ or 4’x12’ (emerging American standards); 5’x3’ (Asian standard) etc. . |
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