Norbord CEO Peter Wijnbergen at the company’s R&D lab in Montreal. The company enjoys an advantage over other Canadian lumber products because OSB is excluded from possible penalties on shipments to the U.S., unlike softwood lumber.Christinne Muschi/The Globe and Mail
For years, it was known as the ugly duckling, cheaper alternative to plywood.
One design maven described it as "like the turkey loaf of building materials."
But oriented strand board – OSB for short – has come into its own as a major player in North American wood-frame housing construction. It has slowly taken command of the market for structural panels with a current share at about 66 per cent, up from 59 per cent a decade ago and from 43 per cent a decade before that. It is also increasingly used for industrial and other applications, getting play on fashionable interior-decoration websites as "shabby-chic" finishing material and seeing growing demand from home builders in Europe and Japan.
Not least, the recent recovery in U.S. housing starts is providing a significant boost to the price of OSB as demand from home builders rises.
Toronto-based Norbord Inc. is positioned to profit from the rise in the OSB benchmark price after years of carefully building its presence in the OSB space. North American OSB prices in the first quarter of 2016 were 17 per cent higher than last year, according to the company.
Structural OSB panels – made of fine wood strands that are resin bonded under high pressure and heat – are mostly used as floor, roofing or wall substrate in home building.
Chris Damas, an analyst and editor of BCMI Report, says the benchmark OSB price is now in the range of $306 (U.S.) per thousand square feet, well above the $229 15-year average.
Once a diversified forestry company, Norbord shed assets over the years to focus on OSB. Now boasting annual sales in the $1.5-billion range and a market capitalization of about $2.4-billion (Canadian), it bills itself as the world's largest producer of OSB.
The $763-million acquisition in 2014 of Vancouver-based Ainsworth Lumber Co. Ltd. gave Norbord – whose operations were concentrated in the U.S. southeast – a strong presence in Western Canada as well as a foothold in the promising Japanese market.
Right now, the steadily growing number of housing starts in the United States is giving Norbord a lift, and low-key, media-shy chief executive officer Peter Wijnbergen says there are major growth opportunities in Europe and Asia.
Under Norbord veteran Mr. Wijnbergen, who took over as CEO 2 1/2 years ago, the company is also noted for its single-minded attention to cost cutting and productivity enhancement at its 15 OSB mills.
"When OSB was first brought to market in the early 1980s, it was originally promoted as a cheap substitute for plywood. Well, of course, that set you down the wrong path from Day 1 and it has taken quite a while to get away from that image that people associate with it," Mr. Wijnbergen said recently in a rare interview, at Norbord's R&D centre in an industrial park in the Montreal suburb of St-Laurent.
Among the factors helping upgrade OSB's popularity are its low cost; innovations that have made it stronger and better suited to a variety of construction and non-construction uses; and the fact it's made from small, fast-growing trees such as aspen or poplar and that the entire tree is used in the production process, thus reducing its environmental impact. Even the bark is used to generate energy at the mills.
Plywood manufacturing, in stark contrast, uses only about 50 per cent of the wood material and relies on bigger slow-growth trees, Mr. Wijnbergen said, who came to Canada as an exchange student from Holland and decided to stay: "We can use smaller, cheaper trees and use all of it and the process is highly automated." Only about 100 employees are needed at Norbord's most productive plants, a fraction of the staff required to churn out a similar volume of plywood, he added.
"They are very efficient in making the widget they produce," U.S. independent research analyst John Tumazos said. "They're very focused."
Norbord's main rivals are all U.S.-based: Louisiana-Pacific Corp., Weyerhaeuser Co. Ltd. and Georgia-Pacific LLC.
Norbord – formerly known as Nexfor and before that as Noranda Forest Inc. – enjoys a big advantage over Canadian lumber producers: OSB is excluded from possible penalties on shipments to the United States, unlike softwood lumber. The previous Canada-U.S. softwood lumber agreement expired last October and there is a one-year grace period allowing Canada to try to negotiate a new deal to avoid a potentially costly trade war with the United States.
Mr. Wijnbergen anticipates a steady, if not spectacular, recovery in U.S. housing starts, rising to about 1.2 million this year from 1.1 million the previous year. But he's also buoyed by the fact that Norbord can better manage growth through a fragile recovery because there are more non-construction end uses for its product. For example, the company supplies customized OSB to the upholstered furniture industry.
"The overall market for us is much more robust than it was [several years ago]," he said.
Staff at the R&D centre are tasked with coming up with new uses and ways to engineer Norbord's products.
"We kept an eye on plant productivity. Now, we're able to look a little more at innovation. The focus is becoming a little more on the product development side," Mr. Wijnbergen said.
Bertrand Marotte