* Q4 loss/shr $0.05 vs est loss/shr $0.12
* Q4 net loss $2 mln vs $11 mln last year
* OSB demand to remain flat in 2011
* Sets 2011 capital investments at $25 mln
* Shares down 5 pct (Recasts; adds details, analyst comments, share movement)
By Gowri Jayakumar
BANGALORE, Jan 28 (Reuters) - Canada's wood-panels maker Norbord Inc NBD.TO expects a slow U.S. housing recovery to weigh on demand this year and offset any potential rise in prices of oriented strand boards (OSB), sending its shares down as much as 5 percent.
OSBs, similar to plywood but cheaper, are commonly used to sheath roofs, walls and floors, and Norbord expects demand for them to stay relatively flat.
Groundbreaking for new U.S. homes fell more than expected in December to the lowest in over a year. [ID:nN19195756]
"Demand (housing) will remain at very low levels ... we expect to see a normal seasonal pickup in spring," said James Armstrong, an analyst with Credit Suisse North America. "OSB pricing will pick up as much as it did last year."
North Central benchmark OSB prices rose $19 to average $191 in the fourth quarter, and in the South East region -- where over half of Norbord's North American capacity is located -- prices averaged $165, up $11 from last year.
However, an increase in prices of raw materials including resin, fiber and energy, which account for about 65 percent of Norbord's cash production costs, offset higher margins.
The company, which also makes plywood and a range of other engineered wood products, said it could be difficult to pass on higher raw material costs as housing recovery could lag the broader economy.
On Thursday, rival Tembec Inc (TMB.TO) said lumber prices could go up due to improvements in U.S. housing starts and Chinese demand. [ID:nSGE70P07H]
"The entire supply chain in this industry has been completely destroyed. So any pick up in demand will allow pricing to rebound very sharply," analyst Armstrong said.
Norbord's full-year sales rose 33 percent in North America -- its main market, and 13 percent in Europe.
"The beneficiaries are going to be lumber and OSB producers, who are converters of trees. We still don't see the value of trees going up," Armstrong said.
Norbord, which posted a narrower-than-expected fourth-quarter loss, expects to run its European mills at full capacity this year.
The company's shares fell to a low of C$14.76, but pared some losses and were down 2 percent at C$15.20 in midday trade on Friday on the Toronto Stock Exchange. (Reporting by Gowri Jayakumar; Editing by Anne Pallivathuckal, Unnikrishnan Nair)