UK demand for MDF has made steady progress in the second half of this year and the sector is hoping for – and indeed anticipating – the trend to continue in 2014.
Several suppliers this week reported an increase in phone calls from customers with a pressing need for MDF prior to the Christmas break. "Many don’t keep as much stock as they once did so a decent order can wipe them out," one supplier said. Following a "pretty good" November, he added, a decent amount of business was still being conducted into early December.
Confidence has continued to grow, although "people are still wary of saying they are doing alright despite the more positive data".
The most recent round of MDF price increases started in September and spread across a couple of months. Those hikes on standard board and MR of between 3-5% have now been assimilated by the market. One UK producer said his company would introduce a 5% increase in January on MR MDF for the manufacturing side; its recent MR increase had been applied solely to distribution.
MDF producers anticipated the next full round of price increases is unlikely to be before February or even March. Boosting MDF values remains a relatively slow process compared with other panel products.
One producer highlighted the importance of the excess capacity in this equation, saying: "People still worry about putting up prices because they don’t want to lose the sale of a single sheet." For the same reason, he added, MDF price increases tended to be quite conservative in scale, rarely exceeding 4-5%.
Of course, as he and other producer contacts were keen to emphasise, such hikes several months apart mean that MDF prices struggle to keep pace with rising production costs. Costs are still climbing "faster than we have been able to put up product prices", said a producer, pointing to recent growth in wood and transport costs as well as to energy bills "going through the roof".
Another producer said his company’s electricity and gas costs had leapt 39% and 25% respectively over the last two years; even more concerning, he said, was the fact that the traditionally most difficult months for energy costs – January and February – were just around the corner.
He also said that methanol was now 25% more expensive than at this stage last year. At the same time, sawmills were busier and competition for logs had increased. "Timber prices are definitely an issue, as is the availability," he said.
2013 better than expected
Asked to sum up 2013, one producer said that "it has been a better-than-expected year – but then again, we weren’t expecting that much". Business in the first half had been slow but the latter five or six months had delivered "a relatively good pick-up", he said. A fellow producer calculated that the company’s MDF sales had climbed 5-6% year on year, mainly thanks to this same second-half improvement.
A spokesperson for a UK distributor reported that his company’s MDF volumes have been marginally higher than in 2012. Such a result was "quite encouraging", he said, given that the first half of this year had been "a bit hit and miss". Overall order files reflected "a more sustained improvement" rather than a steep upturn. "There has been no huge bubble in demand," he said. "Most MDF product lines are selling and the situation compares very well to that on the Continent."
That said, certain consuming segments appear to be performing better than others in the UK. Whereas orders from the building and construction industry were labelled "reasonable" by a leading distributor, the same contact said MDF sales into the shopfitting sector were "romping away" as many retailers – including some of the biggest high street names – were now implementing store improvement programmes which previously had been shelved.
One producer acknowledged that the shopfitting sector "has got much busier" in the second half and that faced MDF had been a notable beneficiary. MR MDF for skirtings had gained from renewed growth in newbuild housing, while laminate flooring sales had been rejuvenated as a result of the introduction of new ranges by some of the larger sheds, he said. One of the few sources of negative feedback is veneered MDF. Although prices have been stable to slightly higher of late, sales continue to suffer at the hands of competition from melamine alternatives.
According to one distributor, this competition has been particularly visible in shopfitting where melamine is regarded by many as a match for the aesthetic appeal of veneered MDF but is easier to handle and can reduce on-site time and costs.
While demand for most forms of MDF has been climbing steadily, statistics from the Timber Trade Federation (TTF) indicate only a marginal increase in imports over the first eight months. As has been the case for some time, incoming volumes have been limited largely to specials supplied by Continental producers with an established presence in the UK. "Nothing long haul is coming in" and circumstances "would have to move considerably to make it viable", one contact told TTJ.
Meanwhile, the TTF’s latest statistics show MDF exports declined 35.8% in the first eight months (93,000m³) compared with January- August 2012 (145,000m³). One UK producer attributed this in part to stronger competition in export markets, adding that sustained growth in UK business was required to compensate for reduced overseas orders. In this context, he predicted MDF sales in the UK would grow 5-6% next year. "There is probably quite a sustainable strength," he said. "We won’t see any big jumps but there will be more substance to the market."
