Where Next For Norbord?

Implications: With a housing recession well dug in in the USA, and one around the corner in Europe where are Norbord going to look to make some money? Will the potential closure of the Genk Particleboard plant actually save the company money or will they just lose market share to the other big European panel product manufacturers? 

Analysis: Norbord Inc. the Canadian Panel products manufacturer who have been reliant on their European operations to cover the losses incurred in the North American market have announced they are reviewing operating procedures at their Genk, Belgium facility. This is a double facility that produces both particleboard (or chipboard as the Brits and Aussies call it) and OSB (Oriented Strand Board). Closing a facility such as this in Europe is not the same as pulling the plug in North America. Negotiations, which can often be tortuous, take time and cost money especially when dealing with the local unions who are going to drag negotiations out as long as possible.

Particleboard is still a major constituent in the European building and furniture industries and is not at saturation point by any means with the development of markets in Eastern Europe and Russia. Norbord's European competitors are all either producing product or establishing a presence in this region. One therefore wonders what is the reasoning behind this plan? Could Norbord's senior management be using this as a fix to stave off short-term price cuts in Europe and increase output at their other plants? The feeling is that by the time they have negotiated an expensive settlement with the Belgian workforce particleboard prices will once again be on the increase!

Meanwhile, across the pond as the US housing recession deepens Norbord, and it's competitors plants go onto short time, extended maintenance closures or just shut down. So what happens to the chip contracts all these plants have with the lumber (timber to the Brits) mills? You can't just switch off these contracts and sawmills just can't store them indefinitely. So where next for Norbord? Maybe it could be as a biomass energy producer.