USG Sees the Future Both Near and Far Term

Implications: USG is cutting labor.  What else are they doing that the rest of the industry will be following?

Analysis: Well the start of the building season has come, but where are the starts and permits? Unfortunately, the answer is they are not coming.  Most of the building supply industry is geared for 1.8 million starts or more.  I don't have to tell you we are nowhere near that.  I will also tell you we will not be there in 2008 either.  So where does that leave the industry?  Simply put, it leaves it with 10 to 15 percent too much product and too many people making and selling it .  It also leaves some parts of the industry with pricing at or below cost of production.  With $300/m wallboard or $350/m OSB even the most outdated mill is a money maker and making all it can.  With the pricing at $160s for wallboard and $140s for OSB, even the newer mills are struggling.  So closures and consolidation have to come.  USG has closed two older plants for wallboard.  But, they have also announced a new California plant and more distribution for the L&W yards.  The difference in the class of the various industries will be the USG test.  Closures will come, but who will step up for the future? We need to watch the coming months to see the pure cost cutters vs the companies with plans for the next coming cycle.