Whereas some of the other panel products, notably chipboard, witnessed dramatic price developments in the first and second quarters this year, by comparison MDF has been a picture of calm against a backdrop of steady but unspectacular demand, full production and normal lead times. “The market is flat – not flat good, and not flat bad either,” was the summary from a producer.
Price movements have been kept to a bare minimum thus far in 2014, with the only one reported to TTJ being the 5% hike implemented by one manufacturer at the start of the year on its MR MDF for manufacturing.
Furthermore, the majority of TTJ’s contacts this week envisaged no major price changes in the near term as the battle for supremacy between supply and demand continues to be a generally even fight. Indeed, there is widespread concern over whether demand is sufficiently strong to support an increase and over the potential for higher prices to lead to loss of market share.
The lack of MDF price movement in early 2014 compares to a 4% increase in European prices across the whole of 2013, according to latest results from Norbord. But even in 2013, MDF’s price progress was less marked than for OSB (+8% year on year) and chipboard (+7%) because the product was “less directly impacted by the recovering housing sector”.
Raw board sales
One UK producer said that, as yet, his company had pencilled no firm date for an MDF price increase into the diary. Overall, the market was “not falling” but it was “not really rising fast either”, he said. The shopfitting market was “busy” and laminate flooring was “strengthening” while the housebuilding upturn was being reflected in the healthy growth in demand for MR MDF. But unfortunately, he added, sales in the biggest volume segment of the MDF market – namely raw board – were merely “OK, but not spectacular”.
The same producer went as far as to say that the next MDF price hike might have to wait until the autumn; he added, however, that “it could be earlier if the summer is busier”. He also stressed that, from his own operation’s perspective, the increase would have to come in the autumn “at the latest” given the ongoing pressure applied by, in particular, the rising costs of both timber and residues. The hike was likely to be “at least 5%”, he told TTJ.
Another UK producer had a more positive interpretation of the market. While not streets ahead, sales volumes were higher than in last year’s corresponding period and sentiment was improving “month by month”, he said. And he questioned the more downbeat analyses of the raw board market, describing order levels in the UK as “okay”. And while overall demand for MDF was not yet strong enough to enable producers to put up their prices “with confidence”, the same contact said that even a relatively slight pickup in orders would be sufficient to push out lead times and spark a price increase – especially as “there is not a lot of stock in the pipeline”. If the media “buzz” surrounding construction in the UK were to trickle down into the MDF market, he added, then it could have “a very quick effect” on prices. Indeed, he did not rule out the possibility of an MDF price increase during this quarter.
A leading distributor came down on the side of domestic MDF prices remaining unchanged until the autumn, given the combination of the summer period and “steady but not brilliant” demand. Following a “dip” in sales momentum earlier in the year that could be ascribed in large part to the impact of wet weather on industrial activity, MDF producers were now busy but not flat out and lead times were “generally acceptable”.
Although there had been talk of price increases, another distributor acknowledged, “I don’t think the market could accommodate this because supply and demand are well balanced and the manufacturers wouldn’t want to lose market share”. At the same time, he reckoned the MDF market was sufficiently robust to eliminate the possibility of any price downturn in the summer. Furthermore, he said, “raw material and resin cost pressure will mean manufacturers will hold the price steady”.
The same contact continued: “There seems to be slightly more supply than demand, but it seems to be busier. Customers seem confident, with improved order books, and volumes are up from last year – especially with shopfitting.” And an MDF product supplier added: “All my customers are very confident and so much happier to book an order now.” He doubted, however, that there would ever be a return to distributors carrying the larger stock holdings seen in the past. There was also talk this week of a “highly intense” environment in the distribution sector as players jostled for market share. A leading distributor agreed that “the market for MDF is busy but extremely competitive”, to the extent that “getting sensible margins is difficult”.
Decline in veneered MDF
While MDF prices have gone unaltered of late, one area subject to change – albeit gradual – involves veneered MDF. According to a specialist in this field, UK sales of this product have slumped perhaps 50% over the last seven years, not least because of the ongoing emergence of high-quality melamine alternatives. In a view shared by other contacts, he said: “Veneered is dying. There are only a few people these days who want real wood. And the melamines are so good, it’s got to be the way forward.” While veneered MDF values had been “holding up” of late, there were “still some ridiculously cheap prices out there”, he added.
Meanwhile, the strength of demand from the shopfitting sector and the trend for high-gloss finishes in kitchens had helped support sales growth for acrylic MDF, TTJ was told.
Latest figures from the Timber Trade Federation (TTF) bear eloquent testament to the stronger domestic demand for MDF last year as exports are revealed to have tumbled 34.5% from 193,000m³ in 2012 to 126,000m³. And the gathering of demand momentum in the second half of last year is reflected in the fact that overseas shipments were flat calm from August onwards at a mere 8,000-9,000m³ per month.
As for MDF imports, the 2013 total of 576,000m³ was 3.2% ahead of the 558,000m³ recorded for 2012. Incoming volumes scaled a peak for the year of 62,000m³ in November – only for imports to slide to a 2013 low point in December of 30,000m³. While the UK’s near neighbours continue to supply volumes into this market, direct imports from dollarbased economies dried up some time ago owing to currency exchange and freight rate considerations. “The dollar would need to be a lot higher and freight a lot cheaper,” a leading importer said.
Modifications continue to be made to the panel production map of mainland Europe, with Kronospan’s recent acquisition of Sonae Indústria’s plant at Le Creusot in France providing the group with additional capacity for the production of MDF thin board.
With several MDF experts already predicting price stability into the autumn, several forecast that stable market conditions were likely to persist for 2014 in its entirety. “I can’t see anything driving the market up through the ceiling,” said a leading distributor. Another panel product veteran argued that “the whole industry is more disciplined these days” and that producers were unlikely to “overcook” price increases.
