Theresa May’s “strong and stable” pre-election mantra could be applied to the current chipboard market in the UK.
The phrase proved to be wishful thinking for the prime minister but for the UK chipboard market it’s likely to be applicable at least until the end of the year.
Demand is strong across all sectors, from furniture to housebuilding, and producers are also happy with MFC sales.
One merchant reported that their sales volumes of P5 were well ahead of last year.
“The market is still very solid. We’re not seeing any deterioration,” he said.
The company was also trying to encourage housebuilders to use weather-protected flooring boards and, while there was no dramatic increase in volumes this year, sales were steady and he expected customers’ interest to rise over the next few years as they appreciated the benefit of value added boards.
“We’re trying to get customers to look at weather-protected boards instead of the standard white-sliced bread of 18mm P5 and there is a definite migration. Twenty years ago we had 8x4ft sheets of flooring grade, then T&G became the norm and then 18mm MR came along for specific areas like bathrooms and kitchens. Today there is only MR or better grade P5 and 22mm is definitely beginning to outgun 18mm,” he said.
As demand for chipboard has increased, supply has tightened and as a result the merchant’s lead times had stretched from the usual seven working days to three weeks.
The strong demand for all chipboard grades has exposed cracks in the supply of raw board, largely created by lack of investment by some producers.
“There’s no doubt there’s more demand than supply. Europe is a lot busier than it was two or three years ago and that’s taking an increasing amount of raw material,” the merchant said. “I don’t think there’s a shortage of raw material, it’s more a factory capacity issue.
“Chipboard is such a commodity that if panel producers are going to invest they probably choose to invest in OSB and MDF where they can get better returns,” he added.
A European producer agreed and pointed out that raw board supply was tight not just in the UK, but all across Europe.
“Production lines have been closed and everybody seems to have invested in OSB. Also some producers are not willing to sell raw chipboard because they use it for their own lamination,” he said.
According to the European Panel Federation chipboard production rose by 0.8% last year. This took total annual output to 30.2 million m3, well below the peak of 37.8 million m3 seen in 2007. At the same time capacity shrank by 2.2%, largely because of the closure of the former Darbo mill in Linxe, France.
One producer said manufacturers had been buying from one another and he had been selling “everything we have available” and at higher prices.
Prices have risen not by the usual 5% but by as much as 15%, partly in response to the supply situation but also to accommodate exchange rates and the steep rise in glue prices earlier in the year. The cost of papers for MFC has also increased.
The market dynamics have also opened the door for European producers to sell P1 and P2 in the UK, even with the exchange rate burden. One European manufacturer told TTJ that, even taking the exchange rate into consideration, at present it was more profitable to ship P1 and P2 to the UK than sell it on his domestic market.
“We’re sending a lot of standard grade chipboard to the UK at acceptable prices for us, which is not normally our focus product,” the producer said.
This supply/demand imbalance is creating a pressure for chipboard customers who are anxious to keep their own factories operating.
“We have big industrial customers and if they can’t get boards they have to stop factories so they have to pay whatever the market price is to keep themselves busy.
We’re always interested in selling but now there’s a degree of customers wanting to secure some volume because there aren’t many options, especially for raw boards,” said a producer.
“Customers want to keep stock to give themselves back-up but there’s not the stock available. Now, purchasing boards is becoming as important as selling for our customers.”
The UK supply situation may have been exacerbated by fires at both Kronospan and Norbord, although Kronospan has not made a statement to TTJ and Norbord has given assurances that production was interrupted only briefly.
Just over a year since an explosion occurred on the MDF line at Kronospan’s Chirk plant, a fire broke out in one of the driers on the facility’s chipboard line on September 8.
The alarm went up just before 5am. Six fire crews attended the blaze and remained on site until around midday. No-one was injured.
The cause of the fire is not yet known and an investigation is under way.
Following the incident Kronospan issued the following statement to local media: “Kronospan would like to thank the North Wales Fire and Rescue service for their rapid response to the fire we had on site this morning. The fire was in one of the driers but is now under control and no one was hurt. We are now in the process of investigating how it started and our engineers will continue to work closely with the North Wales Fire and Rescue service to determine this.”
Nearly two weeks later, on September 21, a fire occurred at Norbord’s Cowie plant. The incident happened just before 1.30am and six fire appliances attended.
A company spokesperson told TTJ production was interrupted temporarily. “Our systems detected smouldering in a silo on one of our production lines, which was initially attended by our on-site team.
The fire service was alerted automatically as is the standard procedure,” the spokesperson said.
“We are investigating the cause, the silo has been cleaned, and the production line was running again shortly afterwards.”
These issues aside, the chipboard sector, both in the UK and Europe, expects UK business to continue on a positive course next year.
“We think the UK market is going to grow next year and things we’ve been doing this year should bear fruit in 2018,” said one European producer.
Another expected little change in the UK market, at least for the first quarter, and he was optimistic that housebuilding activity would maintain good sales levels for P5.
The supply issue, however, is more difficult to predict. One producer believed the situation would stabilise next year as he couldn’t envisage it lasting much longer, but another was less optimistic.
“The shortages will only end if someone increases production or makes more raw board available and I don’t think that’s likely to happen, at least not in the short term,” said one producer.
Even the quieter Christmas period wouldn’t do anything to redress the balance.
“It’s not going to change much because everyone will stop for Christmas and it doesn’t seem there will be any increase in capacity,” he said.
Manufacturers are increasing capacity, or have plans to do so, but the benefits won’t be felt for at least 12 months.
Construction is under way on Egger’s new chipboard factory in Biskupiec, Poland. Production is not expected to start until late next year or early 2019.
The facility, Egger’s 19th in Europe and first in Poland, will have capacity of 650,000m3, producing mainly furniture grade boards.
Kronospan plans to install a chipboard line at its factory in Sanem, Luxembourg, which currently focuses on OSB production.
The first phase of the €150-170m investment will include construction of a biomass plant and modernisation of the existing OSB facilities. The chipboard line will be built in the second phase and production is due to start in 2021.
Egger achieves dual site accreditation
Egger underlines its commitment to protecting the environment by implementing the ISO 41001 standard at both its UK sites
Egger has achieved the new ISO 41001:2015 environmental management standard at both its UK sites.
When the company gained accreditation for its Hexham site earlier this year, it was the first UK wood-based panel manufacturer to do so, and it has now achieved certification at its Barony site.
The new standard seeks to encourage companies to undertake proactive initiatives to protect the environment, including sustainable resource use and environmental impacts associated with product use and end-of-life treatment or disposal.
Heiko Lichtblau, Barony director technical/production, said the new standard was designed to help companies to consider environmental issues in a more holistic manner.
“This approach ties in extremely well with our closed-loop cycle for chipboard production which includes forestry, recycling, manufacturing and renewable energy processes. Production of Egger chipboard creates very little waste, in addition to locking in CO2,” he said.
