After a sluggish start to 2003, most contacts in the wood machinery market report that business is picking up – although with the inevitable proviso that competition is as cut-throat as ever. Margins also remain under severe pressure in many sectors.

“The good news is that I can honestly say that we have never been busier,” said one contact. “We are at capacity both on installation and servicing and we really couldn’t do a lot more than we are doing.” The down side, he added, is that the market continues to be squeezed because of excessive machinery production: “Over production is still a problem in our wonderful industry – manufacturer’s subsidiary companies are all struggling to move metal because of the worldwide economic situation.”

Another said that most of his customers and suppliers did not get back to work until mid-January and that “it has taken them a while to sort themselves out”. He added that the market is now noticeably busier: “We had a very good Woodmex and generated a lot of interest into 2003, which was very promising. It is now a case of converting those promises into real, live orders. Enquiry levels are good and we are starting to see people putting their hands in their pockets. All our salesmen are busy talking to a lot of people.”

The market obstacles most commonly cited by contacts were imports, price levels, exchange rates and uncertainty over the possibility of war in Iraq and its potential effect on the economy. “Some people seem to be doing OK in some areas of machinery sales but it is very competitive,” said one source. “The complaint I hear most often from people across the industry is that there are an awful lot of furniture imports.”

While a proportion of these imports may be from Europe, Continental wood machine manufacturers face serious difficulties of their own, with many already forced to cut their workforces. There are rumours of more layoffs to come, primarily because of falling demand globally. German companies also face the continuing indirect impact of unification costs.

Golden egg

Some of these firms are said to have relied heavily on the ‘golden egg’ of US demand over the past three or four years, which is now in steep decline. But in this regard, the UK industry is thought to be better insulated and “leaner and meaner” than the European competition, having already downsized progressively over the past few years.

The threat of conflict in the Middle East does not yet seem to have prevented prospective buyers from showing interest in new machinery. However, as some commentators point out, the eventual effect on markets will depend very much upon the outcome of the campaign and its duration. “It hasn’t had an impact yet, the market is still fairly buoyant,” remarked one. “We have six salesmen out there who are all busy with enquiries. If the Americans and our boys are walking around Baghdad inside three days, then it won’t make any difference. If it goes the wrong way, it will be different.”

Another said that machinery buyers in some firms may yet use the war as an excuse for inertia, as some will use “any excuse for not ordering”. “We saw the market go through a similar period immediately after September 11, when suddenly the brakes went on completely. But people will still move house and fit new kitchens etc.”

&#8220Over production is still a problem in our wonderful industry – manufacturer’s subsidiary companies are all struggling to move metal because of the worldwide economic situation”

Another contributor noted that the industry is still in limbo on the question of new key guidance notes that will affect the way that timber and wood product finishing processes are undertaken in future. There are three main guidance notes which affect the sector: PG62, PG112 and PG633. PG62, concerning the manufacture of timber and wood processes, has been “under revision” for about two-and-a-half years and the last time the working party convened to discuss the matter was 18 months ago.

Guidance notes on hold

“It is very overdue,” said one company. “It doesn’t seem to be a priority. The guidance notes on combustion are in a similar situation – they just seem to be on hold at the moment.” He added that most companies are still working to the old process guidance notes and to criteria laid down by local authorities and the Environment Agency.

Legislators are said to favour bringing environmental guidance into line across all industry sectors, which could spell trouble for timber finishing processors because wood finishing comprises a comparatively small group of companies compared with, say, the automotive sector. Some wood finishing firms are therefore concerned that they will face more far-reaching and costly adjustments than other, perhaps more polluting sectors.

Positive prospects

Most contacts are positive about the wood machinery industry’s prospects for the first quarter of 2003, with one pointing out that tens of thousands of new houses will have to be built over the next decade, every one of which will need kitchen and bedroom furniture. “This sort of thing drives our market and what is comforting is talking to trade customers in these areas who say they are extremely busy.”

But one contact believes that there is still “no way” the industry will be able to strengthen meagre margins in the short-term. “In niche markets, such as wrapping machines, margins remain reasonable. But if you look at the more general CNC and point-to-point machinery side, that is where the main pressure comes on pricing. People do large production runs, machines go out of the factory and they have got to get rid of them. There lies the problem for the industry – it is a great time to buy.”