One of the world’s largest forest companies is betting on higher-value forest products to drive its financial recovery after West Fraser Timber lost US $153 million for the last quarter of 2023 – in what is a continuing downward trend accelerated by weak pulp and paper demand.
It comes after the company exited several pulp assets and paper mills, which it dubbed an “ongoing portfolio optimisation strategy.”
Instead, it is building up its laminated veneer lumber (LVL), medium density particleboard (MDF) and oriented strand boards (or OSB) businesses –Â which has emerged as an alternative to plywood growing in popularity due to its cost-effectiveness and sustainable production.
According to Sean McLaren, West Fraser’s President and incoming CEO, “the fourth quarter of 2023 saw continued weakness in demand for our North American lumber and European panel products.”
Mr McLaren, who replaced long-term CEO Ray Ferris in January, said, “Demand for our North American OSB, plywood and other engineered products experienced resilient demand as new home construction markets were surprisingly robust.”Â
He is inheriting a strategy focused on its wood-building products business. It has seen Mr McLaren accelerate mill closures in Flordia, Arkansas and Fraser Lake in British Columbia and instead focus on flexible, higher-value production.
West Fraser is the world’s largest producer of oriented strand boards, with Mr Ferris last year outlining that the product, along with LVL and MDF, was in the mix as it strived to become “the premier wood-building products company in North America.”
Could OSB overtake Plywood for popularity?
As a substitute for plywood, OSB uses longer and coarser wood to increase mechanical strength and water resistance by compressing layers of wood stands with adhesive to ensure consistent density and waterproofing.
It is frequently used in light steel frame house construction and is a material that is suitable for load-bearing applications in construction.
Already more popular than plywood in the North American structural panel market, global adoption is growing, with the Australian OSB market growing by 29% due to the COVID-19 construction boom.
In February 2021, West Fraser acquired Norbord, then the world’s largest producer of OSB, as part of a US $3 billion buyout – growing its combined operating footprint to 61 manufacturing mills in Canada, the US, England, Scotland and Belgium.
At the time, Mr Ferris said, “Norbord’s OSB production is a perfect complement to the West Fraser portfolio, enabling us to deliver a wider range of wood products and making us a more complete, efficient and valuable partner for our customers.”
“The Norbord business will also bring additional geographic diversity and an expanded opportunity set from its well-established positions in the United Kingdom and Western Europe.”
