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Mill shutdowns: What’s hammering the lumber climate?

Norbord is the latest to curtail operations as lumber demand sags.

BY Andy Carlo

Norbord Inc. is one of the latest major Canadian lumber producers to announce a production curtailment.

The Toronto-based company said it will close its 100 Mile Mill in British Columbia starting in August.

Norbord will continue to supply its current customers and meet expected future customer demand with production from its 11 other operating North American OSB mills, including High Level and Grande Prairie, Alberta.

“This is a difficult decision in response to extraordinary circumstances,” said Peter Wijnbergen, Norbord’s President and CEO. “We have a first-rate team in 100 Mile House and this curtailment is in no way a reflection on our employees, their commitment to our customers and suppliers, or the local community.”

With this move, Norbord joins a collection of lumber giants who have been forced to curtail operations, including Canfor, Interfor, West Fraser and Western Forest Products. All of these companies have cited a challenging, soft lumber market as the reasoning behind the temporary shutdowns. More than a dozen mills, primarily in British Columbia, are being temporarily shut down.

Norbord’s 100 Mile House mill has an annual production capacity of 440 million square feet and about 160 employees will be impacted by this curtailment. Norbord operates 17 plant locations in the United States, Canada and Europe.

Steve Sallah, president and CEO of LBM Advantage – one of nation’s largest buying groups serving independent lumber dealers – says the climate of dwindling demand and prices didn’t happen overnight as homebuilding has yet to truly surge in 2019.

“There are some micro and macro trends at work here. From a micro point of view, weather has impacted demand. This alone is contributing significantly to prices being off year to year,” Sallah told HBSDealer.

“Regarding the long-term, there is plenty of lumber coming in from the south. Canadian and U.S. mills have purchased about half the capacity of southern yellow pine mills once controlled by mom and pop operations. They have increased capacity, up to 1.1 billion more board feet since last year, by improving operations and capital investments – all on the theory that demand will grow steadily back to historic levels,” Sallah explained.

As all of this has occurred, European mills have become just as aggressive in selling to the United States. Simultaneously, overall demand has been hurt by a lack of building fueled by a labor shortage, weather, market trends, and a lack of affordable housing.

“A small mismatch in supply and demand in lumber and OSB has an unbelievably leveraged effect on pricing,” Sallah said.

Looking ahead, Sallah believes pricing will increase in the second half of 2019 as weather and labor begin to turn more cooperative.

“Dealers are buying only what they need right now,” he said.

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