It’s not often when doing a market report that people end up talking about a different product to the one in question.
But with the advent of coronavirus and its impact on China, many chipboard market industry contacts were talking about the plywood sector.
That’s because Chinese plywood manufacturing has been impacted by the coronavirus-linked shutdown in China and shipping services are being disrupted or cancelled due to the situation, with talk of plywood shortages in the coming weeks. One European panel product manufacturer told us it had been asked by buyers if they had any plywood – unusual considering the company doesn’t make plywood, but perhaps an indication that buyers are on the phone and anticipating a tightening of supply in the coming weeks.
Interestingly, the company in question thinks there may be opportunities for product substitution with value-added chipboards and OSB.
Of course, a lot depends on how long any disruption goes on for.
Coronavirus aside, the result of the UK General Election and clarity on the UK’s direction over the EU has led to more positive market sentiment in the chipboard sector this year, according to market contacts.
“There does seem to be more activity with some of the big projects,” said one domestic chipboard manufacturer. “The builders say they’re looking to get back to where they were at in 2018.”
Another said it was seeing a “green light” for projects that had been held up by the political and Brexit uncertainty characterising last year.
“Talking both to large builders and big furniture manufacturers that we supply there seems to be a bit less pessimism about,” added another.
On the distributor side, a contact told us there was more confidence in general, with the company registering a strong January and February.
Chipboard Imports
The trend of UK chipboard imports, as shown in the Timber Trade Federation (TTF) statistics, shows a 13.5% decrease in volumes in January to November, 2019 – that’s 125,000m3 lower compared to the previous year.
Volumes were down to 806,000m3 for the period (2018: 932,000m3), while the month of November alone saw a 25% decrease.
Conversely, chipboard exports for the first 11 months of 2019 were up 23.7% to 82,000m3 (2018: 66,000m3).
Currency hit a low in August last year with the pound / euro exchange rate at around the €1.06 mark. At the end of February it had gone up to around €1.16, making the UK a more attractive destination for European panel producers, although as TTJ went to press the pound started to weaken again, perhaps linked to coronavirus market fears.
Speaking to UK domestic chipboard producers, several said demand for locallyproduced material had probably increased given concerns around the impact of Brexit. “We saw a reasonable sales growth year-on-year,” said a contact. “Q4 was more of a challenge than the previous three quarters though.”
Although 2018 isn’t an ideal comparison year for 2019 due to the ‘Beast from the East’ storm, he reported a slowdown in T&G P5 flooring product sales for the new build sector. He estimated new build house volumes could be down by about 7% in 2019.
A European producer contact told TTJ it was not doing a massive amount of commodity raw chipboard sales in the UK because of prices and due to UK-produced competition.
He estimated chipboard prices reduced 10-12% in 2019, with smaller peaks and troughs for value-added products.
Basic chipboard prices, he added, were stable at the start of 2020, though he reported that some MFC prices in the market had dropped, as a result of several suppliers wanting to secure key account business.
An importer told us he had brought in an extra 20% volume before the second Brexit deadline last autumn to guard against any negative Brexit impacts. This was 10-20% less than the larger extra volume he had imported before the original Brexit deadline.
On the distributor side of things, contacts described the chipboard market as “fairly static”, with MFC demand staying relatively strong throughout 2019.
“There is a bit more confidence in general now,” said one distributor.
“The construction and merchant sectors are a bit flat and affected by the weather but we would expect to see growth there in the next four to six weeks. That sector has not really got going so far this year.”
Despite weakness in the merchant sector, better chipboard product sales are reported in the furniture and joinery manufacturers segment, with value-added products like veneered and melamine boards holding up better than raw commodity products.
While final NHBC statistics for UK housing completions and registrations in 2019 have not been published yet, new home registrations for Q3, 2019 show the number of new homes registered to be built in the UK was 9% down on Q3, 2018, despite a significant increase in the affordable and rental sector. Brexit and election uncertainty at the time were contributing factors.
The figures show 39,364 new homes were registered compared to 43,403 in Q3, 2018. In the private sector 27,916 homes were registered, 16% down on a year before, while registrations in the affordable and rental sector increased by 11% compared to 2018 figures (11,448 versus 10,293).
The final couple of months of 2019 saw producers record a slowdown in business from distributors as the latter took a more concentrated look at stock levels.
Regulations & the Environment
On the regulations front, Germany has taken the bull by the horns and announced DIN EN 16516 as the new reference method for formaldehyde emission for wood-based materials produced in Germany.
This ‘E05’ standard, implemented on January 1, effectively reduces the current European E1 formaldehyde emissions level content of 0.10 ppm to 0.05 ppm for German wood-based panel production.
In doing so, Germany has gone beyond the limit recommended by the World Health Organisation.
All panels produced by December 31, 2019 can still be used and sold in Germany without limitation until they are exhausted, but all new raw uncoated and coated panels must comply with the E05 standard.
One UK market contact believed the move may lead to a reduction in availability of raw board in mainland Europe as E05 production is targeted for local markets in Germany. A potential decrease in production speeds with the new product may also have an impact on output levels.
Of course, lower formaldehyde levels are part of the increased emphasis on health and well-being, the environment and sustainability.
“There is more and more interest in wood panel products with regard to the environment and sustainability,” added the contact. “People are talking more about plastic replacements and waking up to the knowledge that wood-based panel products have a good story to tell.
“Over the last three to four months the environment/sustainability issue has become more of a topic.
“I’ve heard a lot of the big companies talking about sustainability and deleting plastic.”
Another contact noticed one or two customers pushing away from MDF due to it being harder to recycle.
Future Prospects
Markets contacts see chipboard market prospects as broadly similar to 2019, depending on fluctuations in prices and currency.
Key furniture producers are saying they expect a slight improvement in 2020 and certainly better than Q4, 2019.
“The talk of Brexit has gone quiet at the moment but it will start to bubble up again in the second half of the year,” said one contact.
“But from a UK point of view, in comparison to those central European areas, we are in a relatively healthy position.”
“If we can finish where we were in 2019 volume wise we will be happy,” said another. “We will switch into more value-added products and not get dragged into a price war on commodity items.”
Lower current stock levels are being reported by several contacts compared to last year.
Meanwhile, producers are increasingly targeting their marketing efforts at specifiers, promoting the benefits of their ranges to drive demand at distributor level.
“There is room to grow on value-added products, such as FR, structural grade and veneered products,” said one producer contact.
