The most recent mdf price increase of 5-6% introduced by the leading three domestic manufacturers has still not pushed the value of the material back up to the levels witnessed earlier this year. However, those same producers are facing up to the Christmas period with a fair degree of optimism, not least because demand is appearing to hold up and because lead times are claimed to have moved out significantly. All three manufacturers plan to run their production plants over the holiday period.

It was suggested this week that January delivery was now being quoted in some instances for home-produced MDF, although lead times were put at anything between two and four weeks. Availability is said to have become noticeably tighter in some areas, with 12, 15 and 18mm standard grade material mentioned in particular.

Strong demand

Even though one or two companies have been disappointed by recent order levels, general demand for MDF appears to have remained reasonably strong in the early days of December, with many firms claiming to have sufficient orders to take them up to the Christmas break and even into the new year. Even the shopfitting sector, which would normally have disappeared from the market this close to the Christmas shopping rush, has continued to place orders in reasonable volumes.

It must be remembered that this is effectively a three-week trading month since many companies will be starting a fortnight’s break from December 19. However, when taking all these factors together, many companies with MDF interests appear to be heading into 2004 with significantly more confidence than was apparent a few months ago.

According to a senior figure within one of the leading domestic producer operations, his company had to contend with low stocks in a number of its popular lines and would produce throughout the Christmas period in order partly to achieve greater balance in its inventories. Another of the domestic producers echoed his sentiments: MDF prices had been increased across the board and yet demand had remained strong. The result had been a reduction in stock levels and lead times of up to four weeks, thereby creating an environment in which the company could continue to produce MDF throughout the festive period.

The other UK manufacturer confirmed that the most recent 5-6% price increase had been accepted by customers and that there was now a “nice balance” between stocks and orders, despite a slightly more constrained availability of the bulk 8×4 and 10×4 grades. While expecting something of a wait-and-see buying pattern to emerge at the start of the new year, a senior spokesperson ventured: “‘If everyone holds firm, I would expect prices to be going up again in February.” The predicted increase was likely to be similar in scale to the previous price rise, he added.

Elsewhere in the market, order intake in the MDF mouldings sector was reasonable in the early days of December although little scope was reported this week for raising prices. Relative stability was also reported among the speciality varieties of MDF such as MR and FR.

According to one of the domestic MDF producers, the value of MDF was still 15-20% below that of this time last year and, therefore, the product remained “grossly undervalued”. As a result, anyone whose job involved trading in MDF had welcomed attempts to boost the price. “Most people realise that the direction of the market has to be towards recovery and higher prices have not stopped the momentum of demand,” he stated. If demand remained reasonably strong, prices would probably be re-evaluated “some time in January”, leading possibly to his company introducing a further price increase for February deliveries. However, he stressed that any such upward adjustment would be made “only if it is sustainable”.

General improvement

&#8220There is still more and more MDF being used and, if demand remains strong, then a small volume of imports won’t stop domestic producers from being busy”

Another senior producer figure pointed to strengthening OSB and chipboard flooring prices as indicative of a more general improvement in the panel sector. His own company had introduced a couple of price increases since the summer, the most recent of which had effectively put up the price of all grades of MDF by 5 or 6%.

The low MDF prices that have prevailed in the UK for most of this year have generally served to keep imported board way down the agenda. However, the issue appears to have re-emerged, partly as a result of the weakness of the US dollar. The UK market consumed around 1.2 million m3 of MDF last year and is expected to top that total during 2003. So, while domestic producers were mindful of import developments, relatively small amounts of incoming board would not prevent UK manufacturers from remaining busy in a still-growing market, according a senior domestic producer spokesperson. “The market has always functioned on a spectrum of supplies at a spectrum of prices,” he added. “There is always going to be someone, somewhere with a competitive price – especially when the exchange rate is in its favour. But there is still more and more MDF being used and, if demand remains strong, then a small volume of imports won’t stop domestic producers from being busy.”

Small import volumes

Another UK producer suggested that such imports represented only a small percentage of total UK consumption but added that the strength of his firm’s order books would dictate “whether we feel the need to respond”.

A number of contacts referred specifically to board coming into the UK from Argentina and Brazil, with several suggesting that these volumes were having a significant impact on the market. The importer in question was at pains to stress that this material was being brought into the country in only relatively small volumes and was selling at prices that were broadly in line with others in the market place. Further consignments would be arriving in the UK for the first quarter of next year, it was added.

“We are selling only modest volumes and only to people who we would normally sell to,” a company spokesperson told TTJ this week. “We are only getting back market share we lost in the summer when domestic manufacturers dropped their prices rather than cut production – when the UK producers learn to cut production in the summer, we will see a more stable market.”

He added that, overall, his company’s daily order intake had virtually doubled during November and that “we are still seeing a good bit of business in the lead-up to Christmas”.

Another leading MDF player confirmed that he had recently sourced small volumes of MDF from the Continent at “substantially lower prices” than were available in the UK, adding that imported board had become of increasing interest to the UK market. He doubted whether domestic manufacturers would be in a position to raise prices early in the new year because the market remained “extremely finely balanced – more finely balanced than it was a month ago”.

Indeed, several other contacts expressed concern that a combination of increased imports and a continuation of domestic production throughout the Christmas period could undo much of the progress made in recent months. One contact commented: “It’s disappointing because all of us were looking to introduce modest price increases in January, but now we could find ourselves staring down the barrel of a gun again.” The key, he said, was “how the domestic big guns react” to these latest imports.

Surveying the market from the wider European perspective, lacklustre economic circumstances across many parts of the Continent have resulted in unexciting MDF sales. That said, MDF consumption is expected to exceed 10 million m3 this year despite the particularly weak market conditions during the spring.