Once-Cheap Plywood Stand-In Hits New Highs Even as Lumber Prices Fall

A run-up in prices of a widely used and once-cheap plywood substitute threatens to keep homebuilding costs elevated even as the lumber market retreats in North America.

Oriented strand board, or OSB, the bonded wood-chip sheets commonly used as sheathing for walls, floors and roofs in new-home construction, is at record highs, in part due to a winter storm in Texas that reduced supplies of resin needed to make the product.

Rebounding demand and rock-bottom borrowing rates surprised the wood industry last year, with construction surging early in the pandemic at a time when lumber and OSB inventories were low. While there are signs that lumber mills are catching up, the combination of a still-strong homebuilding market and tight supplies has lifted prices for some OSB products more than seven-fold in the past year, and is causing delivery delays.

Once-Cheap Plywood Stand-In Hits New Highs Even as Lumber Prices Fall

In Western Canada, OSB that is 7/16th of an inch thick is at $1,700 per 1,000 square feet this week, matching last week’s all-time high, according to Fastmarkets Random Lengths, a closely watched trade magazine. That’s up from $1,660 four weeks ago and the $240 the product fetched a year ago.

On top of this, builders are facing a two- to four-week delay on orders being shipped from mills.

In the Southeast U.S., mills are selling the same type of OSB at a record $1,160 per 1,000 square feet, a level first reached last week. That’s up from $1,115 a month ago and a four-fold increase from $288 a year prior. Orders are taking about two weeks to be shipped from mills, Random Lengths data show.

The resilient rally comes after U.S. lumber futures peaked at $1,733.50 per 1,000 board feet in May, more than quadrupling in price within a year. They have since dropped at a steeper rate than they rose, tumbling roughly 50% over the past six weeks.

©2021 Bloomberg L.P.

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