LP-Ainsworth deal lifts stocks of rival wood product firms

Thu Sep 5, 2013 3:38pm EDT
 
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* Deal seen leading to more supply discipline in OSB market

* Expected to reduce price volatility for OSB in N America

* Lifts stocks of Norbord, Canfor, Western Forest, others

By Euan Rocha

TORONTO, Sept 5 (Reuters) - Shares of Canadian wood product companies rallied on Thursday as investors bet that Louisiana-Pacific Corp's purchase of Ainsworth Lumber Co pointed at the potential for further consolidation within the sector.

The C$906 million ($864 million) deal, announced late on Wednesday, is also likely to trim the extreme volatility for the price of oriented strand board, widely used in home building.

The North American forest products industry, which has idled vast amounts of capacity since the U.S. housing market crashed, is notorious for mismanaging supply.

Early signs that the U.S. housing market was recovering prompted a slew of mill restarts late last year, and OSB prices then fell sharply as supply outpaced demand.

The LP-Ainsworth deal expands LP's share of the North American OSB market to roughly 30 percent. The top six OSB producers will now control nearly 90 percent of the market, and investors and analysts hope this will reduce the risk of too many players restarting too much capacity too quickly.   Continued...