One of the leading trio of UK producers is following up an average price increase of around 6% at the start of April, with a further 5% hike from the start of June. The move is based on rising costs, tightening supply and the fact that the industry as a whole is continuing to “trade at prices that are far too low”, said a senior spokesperson.

He went on to note that energy and petrochemical-related prices were “having a serious impact on our ability to make money”. This had been a key factor, he added, in the company’s decision to review its FR MDF price “for the first time in a number of years”. The result is an increase of between 5-8% which will come into force on June 1.

Another of the leading home producers is waiting until mid-June before implementing its second price increase of the current quarter. Having raised its prices by an average of 7% at the beginning of April, the forthcoming upturn on standard board products is to be limited to around 3%. The company’s MR MDF prices were not moved during the April price review but will be lifted by between 8-10% during June.

At the time of writing, the remaining domestic producer had yet to confirm its exact near-term pricing intentions but nevertheless made clear that further increases were likely. “We are on a mission because we are still losing money as an industry,” TTJ was told.

Many distributors appear to be struggling to pass the increases on to end users. “Just when we have managed to push one through, another one is announced,” said one contact. “We are almost one increase behind all the time.” There was evidence that many players were prepared to operate on very low margins simply to maintain a turnover of material.

Meanwhile, feedback from all three producers indicates reasonable demand for MDF in the UK. “It’s steady – it’s neither stagnating nor flying,” said one producer. The consensus is that, after the first five months of 2006, domestic consumption is running slightly ahead of last year. Latest estimates suggest that, having dipped to around 1.15 million m3 in 2005 as a whole, UK consumption is on course to return to the 2004 level of around 1.2 million m3, with some optimists contending that the total may go as high as 1.25 million m3 for 2006.

That said, not all of the demand indicators are positive. Domestic consumption has continued to suffer the adverse impact of business casualties among its regular customer base, most notably of late within the UK furniture sector.

While domestic MDF producers are claiming to have lead times no longer than two weeks, strong demand on the Continent has helped to push out delivery times to an extraordinary extent. The spread quoted to TTJ this week was extremely wide, with 16 weeks mentioned in one quarter. Latest figures from the European Panel Federation underline the fact that supply is exceedingly tight from virtually all Continental suppliers, with demand mopping up an estimated 94% of available production capacity – the highest level attained for a decade, according to one expert.

One of the obvious impacts of a busy Continental market has been to restrict the flow of MDF available to the UK where prices are generally less appealing. But if UK prices continue to rise, some industry experts believe this market may ultimately attract offers and supplies from further afield, including Asia. At least one UK importer is understood to be evaluating bringing in MDF from China.

&#8220It’s absolutely critical that manufacturers hold the line [on price]. If they don’t, they will undermine what they and the distributors have been trying to achieve out there for the last few months”

Meanwhile, Continental producers with an established presence in the UK are continuing to maintain a foothold in this market, with one confirming this week that its standard board prices would rise by “at least” 5% at the beginning of June. A spokesperson said that the prices of added-value MDF products such as veneered and melamine-faced were also likely to come under increased scrutiny. “The trade doesn’t like tinkering too much with added-value product prices for fear of losing market share,” he said, “but the petrochemical effect means they are needing closer review.”

Having noted that the summer often produced a demand dip, the same source added: “Prices need to go up now or we may as well forget about it until September.”

So what does the near-term future hold? Once again, the approach of the summer has created a tangible sense of unease. After many months of concerted industry effort to rebuild prices, there is a real fear that the traditional seasonal downturn in demand will lead to “back-door deals”. One contact sent the following unequivocal message to domestic MDF manufacturers: “It’s absolutely critical they hold the line [on price]. If they don’t, they will undermine what they and the distributors have been trying to achieve out there for the last few months.” History has proved, he said, that dropping prices does not lead to additional sales “because buyers just wait for the deal of the week”.

While next month’s round of price increases may well be the last before the autumn, domestic producers are determined to protect the rebuilding work carried out over recent months. “I don’t anticipate there will be any price weakness through the summer,” said one producer, before adding that a build-up of stocks would put the company in a good position to take advantage of stronger demand in the autumn.

A spokesperson for another UK producer agreed that, following the increase in June, a further price rise before September was unlikely. However, he also saw “no reason” for any deals to emerge during the summer. Looking further ahead, he said the pressure to maintain upward price momentum would be intensified by a long-term reduction in timber supply brought about by competition from the biomass sector. “This will become the main driver in the coming years in terms of costs and supply,” he argued.

Given that UK demand was stronger than at this stage of 2005, “we are trying to maximise production,” he said. As a result, attempts were being made to reduce this month’s planned maintenance shutdown of one line from seven to five days. The company’s other MDF line was due to shut for maintenance purposes for one week in July, he added.

Of course, domestic supply will also be affected by Norbord’s decision to decommission its MDF2 press line at Cowie – a move which, the company says, will reduce MDF output at the site by around 20% in the short term before rising again to around 90% of present capacity by late next year. Closure of the line is imminent, said a spokesperson.

Meanwhile, Coillte is still in line to acquire Weyerhaeuser Products’ plant at Clonmel in Ireland, which produces around 400,000m3 of MDF per year. The due diligence process is still taking place, TTJ was told this week.