It’s a sign of the chipboard market times that manufacturers are starting once more to step up product promotion and communication. Marketing tends to be one of the first areas where business wields the cost cutting knife in any downturn. The Covid-19 lockdown was no exception. But now companies clearly feel the time is right to raise their profiles once more.
“It’s a reflection of some optimism coming back into the sector and a show of our commitment to taking the market forward through product development and communication with end users and specifiers,” said one producer.
Another said they were now “rebooting” marketing of their latest new product collection, which was interrupted by the pandemic.
“It had only been launched a matter of weeks when we went into lockdown and, while we got good initial buy in, obviously the momentum was lost to an extent,” commented a company spokesperson. “Now we feel it’s time to pick up our campaign. In particular we’re tapping into the increased prevalence of online working we’ve seen, with new digital marketing and sales tools.”
The consensus among manufacturers, distributors and merchants is that the chipboard market has recovered more rapidly than anticipated and there is now some talk of supply gaps appearing and possible price inflation, although that is not universally agreed. But even though some are taking a more cautious outlook for the rest of the year, the most frequent comment from companies was that they didn’t expect the sector to be where it is today four months ago.
Perspectives on the severity of the situation at the height of lockdown varied across the supply chain. But it was generally agreed to be a “shock to the market system”, demanding rapid adaptation.
A major distributor acknowledged that it “took a lot of pain in March and April”.
“Demand from multiple merchants dried up and most of our suppliers turned off production. In turn we furloughed some of our team,” they said. “But where we did see demand hold up was from the independent merchants servicing the DIY and RMI sectors and also from construction, with many sites continuing to operate, albeit at a slower pace under personnel distancing rules. We’d also taken the precaution of stocking up before suppliers shutdown so we could carry on supplying the demand there was.”
One manufacturer reported closing production for three weeks, but continuing to sell at “much reduced levels”.
“It was the nature of the times that where we did have demand was from funeral and health sectors, notably for material for Nightingale hospitals,” said a spokesperson.
Another producer also furloughed personnel, but continued production.
“There was demand from the health service and funeral trade, of course, but not exclusively, and, while we had a reduced workforce, we ensured we remained flexible to respond,” they said. “Whether we’ll make up the shortfall in turnover through the rest of the year remains to be seen, but maintaining production stood us in good stead for when things picked up.”
An independent merchant, meanwhile, said they had benefited from larger competitors closing operations, combined with consumers in lockdown turning to DIY to keep busy and improve home offices.
“As a merchant, virtually all our chipboard sales are TG4, but we saw strong demand through April, May and June from private buyers,” they said. “That’s now slowed down, presumably as people return to work, but it’s balanced by regular trade buyers coming back in good numbers.”
Recent monthly statistics from the Timber Trade Federation show particleboard/ chipboard imports from January to May 2020 at 217,000m3, 43.2% down on last year. The reduction also got steeper through the period.
May saw the lowest monthly total for 10 years at just 24,000m3, compared to 2019’s 70,000m3 monthly average.
It’s generally agreed this principally reflected contraction in UK demand, but some felt there was more to it.
“What we’ve also seen is continental suppliers reducing output, then seeing demand in their home and neighbouring continental markets not slowing as anticipated – for instance construction in Germany and the Netherlands continued more or less normally. So there was less availability and less incentive to export to the UK,” said one producer.
That said, an independent merchant said they’re now seeing an increase in speculative approaches from continental suppliers. “So maybe we’re seeing the import slowdown bottoming out,” they said.
A manufacturer reported the first product to see demand improve was P5 into construction.
“That started early to mid-May, next we saw raw board recovery, then worktop sales,” they said. “For us, recovery in faced product, selling into furniture manufacturers, started in June, then really picked up in July.”
Another producer reported recovery accelerating through May and June. “In fact in July and August we’ve been at record levels,” they said. “We think it’s a combination of the big builders recovering momentum – and we reckon the ones we serve are at 80% capacity and rising – and the home improvement sector. Consumers are using money they would have spent on holidays and eating out to invest in new kitchens, bedrooms and bathrooms.”
They added that sales continued into the health sector and also the hospitality industry as pubs and restaurants invested in social distancing partitions and screens.
“Our stress on products’ anti-bacterial properties obviously helped us in this area,” they said. “Overall the market is now exceeding our expectations. At one point we were wondering if we’d get to 70-80% of normal by the year end. Now we’re ahead of where we were this time in 2019.”
On P2, a manufacturer said early August demand was at about 85% of pre-pandemic levels. “Upholstery manufacturers have been steadily opening and sales rising, while door core business is at 80-90% of normal,” they said. “But there’s been a 10-15% price drop recently due to increased availability, with some [panel] mills trying to secure extra volume while quiet by turning to chipboard.” A distributor agreed.
“Raw board is a product that companies pick up quickly and just as quickly put down again,” they said. “I think as faced product sales are now increasing, and for us MFC is now incredibly strong, we’ll see producers withdrawing from raw board again.”
Another big chipboard user, the film and theatre sector was clearly hit hard by the pandemic, but is also reported to be improving, with confidence boosted by the government’s £1.57bn arts funding rescue package.
“Besides spending on panel products for sets, we’re also seeing demand for partition material to implement distancing rules,” said a distributor.
Where demand remains subdued is in shopfitting, exhibitions and the commercial office furniture and fit out sectors.
“Shopfitting was weak going into the pandemic and, with all the retail job losses being announced, doesn’t look as though it’s going to improve any time soon. And we can’t see the exhibition sector getting back on track before 2021,” said another distributor.
“We think we’ll see some uptick in the commercial office sector, but there’s a feeling that some changes in work practice forced on us by the pandemic could be a permanent shift. However, that could see a concomitant increase in investment in home working facilities. We must be prepared to evolve with that change.”
One area that has clearly not slowed down in these challenging times is product development. Obviously new products that have come to market recently were already in the pipeline, but manufacturers say R&D activity has continued through lockdown. A distributor said they’d introduced 100 new items to their range in the last three months.
The stand out trend in kitchen and furniture products, said a manufacturer, has been a prevalence of different shades of grey.
“The focus on surface effect and texture also continues to be the key,” they said.
Looking forward, some in the chipboard sector are more upbeat than others, but most predictions are tempered with caution and provisos.
“Our manufacturing customers report good order books into the last quarter,” said one producer. “As for construction, the question is whether new work will come into the pipeline as current projects, many of which were started pre-lockdown, are completed. We’ll also be watching to see if government makes good on its promises to support building.”
Some do predict upward pressure on prices as demand continues to recover.
“Producers absorbed quite a lot of costs at the end of last year, and they’ll be looking to pass those on,” said a distributor.
A manufacturer, however, anticipated demand dropping in the autumn as the real impacts of the lockdown, delayed by the furlough scheme, become apparent, with rising unemployment and business closures.
“I think we’ll see prices come under pressure as manufacturers try to secure volume,” they said.
Another producer summed up the general consensus on the longer term. “There are major unknowns out there. Will there be a second Covid-19 wave? Will the government secure a Brexit deal? So it’s impossible to predict too far ahead,” they said. “We’re focused on making the most of business as it is now, which is better than anticipated, while remaining flexible and responsive to the market.”
