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Plywood, The Home Depot, Inc. (HD), Lowe’s Companies, Inc. (LOW): Foundation of the Building Boom

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In the world of building materials, people are starting to party like its 2004. That was when the last building boom drove demand and prices through the roof for critical construction materials like cement, copper, nails and plywood. Producers of these commodities benefited big time, before the boom turned bust and stayed that way for eight long years.

The Home Depot, Inc.

Now it’s starting to look like it did back then. The recent resurgence in new home construction, combined with a significant pop in home remodeling and repair projects, has sent demand and price for many of these commodities skyrocketing once again. Among the biggest beneficiaries so far are components that comprise most of a home’s structural panels, namely plywood and an alternative known as oriented strand board, or OSB.

According to Random Lengths, which has tracked the prices of these materials for nearly 70 years, the cost of structural panels is up 45% since last year this time. The spike is a result of growing demand, compounded by tight supplies. And the environment — which hasn’t been this healthy since ‘04 — is proving a boon to companies that produce these boards as well as those who sell them.

For those in the industry, it’s about time. The APA—Engineered Wood Association–says consumption of softwood plywood fell from 16.3 billion square feet in in the middle of the last decade to 8.6 billion in 2011, before edging up last year to 8.8 billion. The group projects consumption will continue to rise, hitting 11.1 billion by 2016.

Because producers closed mills and idled production during the downturn, supply of these structural panels — which are about one-third plywood and two-thirds OSB — has grown increasingly tight. And as demand continues pressuring inventory, prices are doing what prices do: according to Random Lengths, the composite price for structural panels soared to $511 per thousand square feet in mid-March from $351 one year earlier.

Major producers are selling everything they can ship out the door while ramping up production and even adding capacity to meet the burgeoning demand. Retailers report that the product is flying off the shelves. Here are five companies that stand to significantly benefit.

The Manufacturers

One-hundred-year-old Boise Cascade Co (NYSE:BCC), the second-largest producer of softwood plywood in the U.S., went public in February and has been on an uptrend because of the building boom. In early March it reported that fourth-quarter 2012 revenue in its Wood Products division was up 28% year over year, thanks to 28% higher plywood prices and 19% higher plywood volumes. The company projected that increased demand would continue throughout the year and is adding workers and shifts to meet it. Officials have, however, cautioned that prices could be volatile, with changes in production capacity and fluctuations in distribution channel inventory.

Competing building products supplier Louisiana-Pacific Corporation (NYSE:LPX) is one of the world’s largest producers of OSB, with significant penetration throughout North and South America. In early February it reported that 2012 OSB sales were up 50% over 2011, and its OSB division recorded a $124 million profit for the year after a $63.5 million loss. The company also projected OSB — which serves many of the same uses as plywood, such as roof decking, sidewall sheathing and floor underlayment — will capture more market share from plywood going forward.

Georgia-Pacific, the largest U.S. plywood producer, is a private company owned by Koch Industries since 2005. It recently announced it was investing $400 million over the next three years to boost lumber and plywood output and efficiency as demand continues to grow. In its plywood operations alone it is adding equipment that, beginning in the second-half of 2014, will increase capacity by 20%.

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