While the UK’s construction output is suffering some shrinkage, housebuilding is still providing a boost for the timber industry, not least the wood-based panels sector. Markets for the three board types manufactured in the UK and Ireland were strong in 2017, particularly in the second half of the year and 2018 started in the same vein.
“Across chipboard, OSB and MDF we saw UK production increase by 2.8% in 2017 from the previous year,” said Alastair Kerr, director-general of the Wood Panel Industries Federation (WPIF).
“Chipboard and OSB saw the strongest domestic sales increases, really on the back of their two principal markets, furniture and construction. MDF output fell a little in 2017 but that should increase this year.” UK production of chipboard satisfied around 73% of domestic consumption in 2017, OSB around 60%, while MDF dipped to around 55%.
“The average across the three board types this year is probably about 65-67% but I would expect that to increase to 70% next year, which is the long term average [as a result of an increase in MDF production],” said Mr Kerr.
He added that, as MDF and chipboard are mature markets there isn’t likely to be much change in production volumes but that OSB is where the growth is, both in the UK and Europe. Norbord’s new line at Inverness will see a doubling of its capacity to 640,000m3 and Kronospan has indicated that it would like to have a new OSB manufacturing facility within the UK. All of the manufacturers have shown a long-term commitment to the UK and whether with new presses or value adding capabilities, significant capital expenditure has been made over the past decade and this trend continues today.
The European Panels Federation’s statistics show that European OSB capacity grew by 6.5% last year – to 6.9 million m3.
“The OSB market certainly still has room to develop,” he said. “It is still growing and much of its future growth will come through the increasing move towards modern methods of construction but also through the substitution of some plywood.”
The trend in product development is still very much toward value adding, particularly for furniture markets.
“Finished boards have always been a feature of the furniture sector. It’s a market sector where consumer preferences are constantly changing. Board manufacturers have adapted to this by continuing to invest in processing technology and into developing new types of overlays.
“These value adding developments can also be seen in respect of boards intended for the construction/building market where there is an ever increasing array of overlaid and coated boards. This trend towards value adding has increased particularly over the last two or three years and I think we can expect to see a continuation of that.” As with other sectors of the timber industry, the shortage of wood fibre is causing concern.
Supply was very tight in Q4 2017 and into Q1 of 2018, the causes of which have been widely reported. These included a lack of access to the forests during the bad weather (at the time of writing it was still snowing in parts of Scotland) a lack of material being brought to market by private growers and the resultant soaring price of roundwood. Some sawmills have had to cut production due to the lack of roundwood and supplies of chips and sawdust to panel mills have reduced as a result.
Demand from the biomass sector is another contributing factor.
“In respect of virgin roundwood, the panels sector generally takes the top third of the tree, ie the small roundwood, but competition for this material with the energy sector has been increasing over the past decade.
Demand by the energy sector is such that, today, we see larger roundwood traditionally used for pallets and fencing stock is now also going into energy. This has also pushed prices up recently.
“Demand for wood for energy is increasing and if the roundwood supply situation doesn’t change then it’s bound to have a knock-on effect on the panels sector.”
It’s not looking that much better for manufacturers relying on recycled wood, either.
“A few months ago supply of recycled wood didn’t seem to be a problem but even that is a bit tight now,” said Mr Kerr. “And there are some big waste-to-energy plants coming on stream this year, which could see some recycled wood being diverted.
“Panel manufacturers used to be the largest consumer of waste wood but now we’re second after energy. According to the Wood Recyclers Association about 1.5 million tonnes went to energy in 2017 and it estimates that we could see a doubling of that to 3 million tonnes in the next year or 18 months. That is out of a supply of about 5 million tonnes per year.”
One challenge facing the UK that its wood-based panels sector seems more phlegmatic about is the forthcoming Brexit. The 18% fall in the value of the pound following the referendum had an impact but “no one is squealing about it because they have no control over it”.
“Obviously it is a particular issue for our members in Ireland [MEDITE SMARTPLY] exporting into the UK but for domestic manufacturers the main impact has been on imports of their chemical inputs. There has been some offset from exports, which UK trade statistics show rose by 12% between 2016-2017.”
There isn’t much discussion about Brexit among the domestic manufacturers because most of their production is sold within the UK, said Mr Kerr, adding that the international ownership of Kronospan, Norbord and Egger was another calming influence.
“At a group level these companies are exporting all around the world, so they are not really fazed by Brexit,” he said.
“Where it has been an issue, however, is in creating uncertainty as that tends to have an impact on medium to long-term planning and investment. Although, having said that, it didn’t stop Norbord investing at Inverness, so I think that says it all really.”
The WPIF and its UK manufacturing members will continue to be fully engaged with EU matters come the end of March next year.
“It is particularly in our industry’s interests to follow European standards because we don’t want to have dual systems. A huge amount of investment went into the transition from national standards into European standards and we definitely don’t want to undo that.
“I believe the BSI will maintain its membership of CEN (European Committee for Standardisation) and CENELEC, so we would continue to have a seat at the table on the standards side.
“In terms of regulations, the government has set out its intention through the Repeal Bill to bring existing EU legislation into UK law and, in fact, there is already quite a lot that is already embedded into UK law, such as the Industrial Emissions Directive.
“While the UK government won’t have a direct voice within the EU institutions when EU legislation is amended in the future, I think it will continue to follow them very closely.”
One such EU regulation is REACH – Registration, Evaluation, Authorisation and Restriction of Chemicals – a process that began in December 2006 and is still ongoing. REACH addresses the production and use of chemical substances and their potential impact on both human health and the environment and there has been a heightened focus on formaldehyde levels within wood based panels.
“In terms of occupational exposure the recommendation made by the Scientific Committee for Occupation Exposure Levels is 0.3 part per million. The UK currently has an occupational exposure limit of 2 parts per million, which everyone knows is way out of step with the rest of Europe. However, when the REACH process is finished, the UK will no doubt adopt the common position. It will involve looking at management procedures and zoning where people can operate but the industry is confident it can cope with that.”
Another potential change under the REACH framework will relate to indoor air quality and the European Chemicals Agency launched a call for evidence in January.
“The European industry has been pressing for some time to make the E1 formaldehyde class compulsory across the EU,” said Mr Kerr. “Whilst E1 has been mandatory in some EU countries it has not been a requirement for all uses across the EU. A number of years ago all of the members of the European Panel Federation voluntarily adopted the E1 class. Although European producers are manufacturing to E1, the higher E2 emission class still exists in standards and some imported products from outside the EU can have significantly higher formaldehyde levels.
“The vehicle to change hasn’t been that obvious to date, but there are signs that the process through the REACH framework could ultimately lead to harmonisation around the E1 Class.”
