The North American OSB and plywood sector is expected to see improving demand and prices over the next five years, but it will be slow coming, according to the latest report from the Wood Markets Group (WMG).

Despite a forecasted slow and steady rebound in housing and the US economy, the large amount of capacity either curtailed or closed and sitting on the sidelines is the big question mark in the sector’s price recovery equation.

WMG’s five-year outlook predicts the supply-demand balance in the OSB sector will more favourable in 2012 and 2013 when the full impact of a US housing recovery is expected and curtailed OSB capacity can be more readily absorbed.

“The collapse in the US housing market completely changed the business case for new OSB mills, resulting in a glut of existing, under-construction and planned OSB capacity swamping the market as demand plummeted,” said Russell Taylor, president of WMG and the report’s author.

OSB demand and output shrank between 2007 and 2009 to almost half its 2006 volume. However, with housing starts expected to improve in 2010, structural panel demand is forecast to improve accordingly; as a result, the WMGs’ OSB consumption forecast doubles between 2009-2014, although it is still well below the levels achieved before the housing slump.

Total US OSB and plywood structural panel demand is forecast to rebound steadily at an average annual increase of 14%.