Though it would be a stretch to describe the majority of key players in the MDF sector as enthused by the current market, they appear comfortable with conditions: price rises early in the second quarter seem largely to have stuck; volumes are continuing to move despite the general business lull that traditionally accompanies the peak summer holiday season; and even the pressure from some cost areas appears to have eased – for the moment, at least.

A combination of holidays and the Olympic Games has created a "demob happy" market, TTJ was told this week. "Volume-wise, we are getting reasonable support from the market – but it’s not too exciting," said one of the domestic producers. Another commented that, with a sizeable chunk of the holiday season already completed, "we have not seen any deals and we have not had to stop production (except for the scheduled summer maintenance shuts)". He added: "The worst period didn’t arrive. The market has held up."

Demand for faced MDF remains generally healthy, whereas orders for standard board have been "pretty normal". Shopfitting continues to be mentioned as one of the strongest end markets and kitchen/bedroom door producers are also said to be busy, whereas furniture manufacturers are quiet.
Meanwhile, static prices have been reported for veneered MDF although demand has been generally low of late.

Sales volumes
Most of the producers and leading distributors contacted this week said that their sales volumes across the first seven or so months of this year either equalled or exceeded those recorded in the same period in 2011. But in line with tradition in the summer months, sales have slowed of late as buyers look to minimize their stock commitments.

One of those companies citing an improved sales performance also pointed to the positive impact of substantially higher exports, with volumes shipped overseas currently accounting for a "double-digit percentage" of its total MDF business. "The pound has appreciated against the euro but it is still OK for exporting," said a senior company official.

Statistics from the Timber Trade Federation (TTF) underline this point: UK January-May MDF exports increased more than 50% over the same period last year, from 67,000m3 to 101,000m3. Overseas shipments in January, March, April and May of this year were higher than for any month in 2009, 2010 or 2011.

According to a domestic producer, MDF remains a growth market despite the economic downturn of recent years, with volumes rising year on year after the low point reached in 2008. But despite these and other encouraging noises made about the market, there is an acceptance among UK experts that a true measure of its robustness cannot be taken until the summer holidays are over. "September will be the litmus test," TTJ was told this week by a leading distributor.

One senior producer figure was "reasonably hopeful" of a decent upturn in business by next month, especially if the euphoria surrounding a successful Olympics for Team GB were to boost consumer and business confidence. It should be said, however, that other contacts were somewhat sceptical of this "Golden Games" effect.

As indicated above, price increases of typically 4-5% were introduced for standard board and MR MDF in April and May this year. Since then, manufacturers have reportedly made great efforts to remain firm on their pricing, with suggestions from elsewhere in the trade that any "deals" have been restricted to "those made on a one-on-one basis"; particularly competitive pricing has been reported for some of the main commodity items such as 18mm standard board but examples of deals appear to be isolated.

While there has been no scope for raising prices further during the summer, domestic producers say they are not ruling out the possibility of an upward move at some point in September.

"It will depend on how the autumn is panning out," said one. "While the panels market in general has proved to be relatively robust, there is still a lot of bad news out there."

While also expressing relative optimism for the autumn, a fellow producer said: "It is too soon to call it." If there were to be a further downturn in demand, his company would respond by reducing supply rather than prices, he added. But having noted the enduring burden of rising energy, fuel, resin and wood costs, the same producer said: "The pressure is on to see an MDF price increase in September – it’s a distinct possibility."

Conflicting views came from two prominent distributors: one saw "no reason why producers can’t push for a couple of points of increase in September" whereas another failed to see any scope for higher prices given that "there is still plenty of supply for the available demand". The latter also acknowledged, however, that producers "do not appear to be overstuffed with stock".

Production maintained
Although some MDF production downtime was taken earlier in the year, it would appear that stoppages over the summer months have been limited largely to scheduled maintenance periods. A senior spokesperson for one of the domestic producers said that, despite implementing only the normal summer maintenance breaks of a few days and running at full capacity the rest of the time, his operation has been able to sell what has been made and has not built its inventories. "We are happy with our stocks at the moment," he added. "They are well manageable."

Another producer figure said that he expected his business to make only scheduled maintenance breaks over the entire summer period and that these stoppages "will take some of the pressure off what is a low-activity market at the moment". At the same time, he insisted, "we are not over-stocked".

In Norbord’s results second-quarter results, published in late July, the group’s president and CEO Barrie Shineton contended that MDF prices in Europe "are firmer than this time last year", remaining "flat" quarter over quarter but improving 3% year on year. However, higher MDF prices "were more than offset by the impact of higher resin prices, higher supplies and maintenance costs".

Panel markets on this side of the Atlantic "continued to hold up well despite the backdrop of negative economic news", according to Norbord. And Mr Shineton added: "UK domestic demand and prices remain stable, our panel mills are running at full capacity and I expect the recent solid results from our European operations to continue." On the downside, he also noted: "We are now beginning to see our UK panel exports to the Continent impacted by the weakening euro and softening Continental demand."

Imports unchanged
Staying with currency factors, the recent weakness of the euro appears to have had little impact to date on the volumes of MDF arriving in the UK from the Continent. "There is no sign of imports causing any particular aggravation," said a leading distributor. Overseas suppliers with an established foothold in the UK market were maintaining their presence "but we are not seeing any new brands", he said. Even though sales prospects are distinctly gloomy across most of the Continent, MDF prices in the UK "are still not high enough for too much additional volume to come in from the Continent", another distributor said.

Opportunities for MDF to be shipped to the UK from beyond Europe are even more limited, according to a leading importer. "The freight kills it," he said.

Latest figures from the TTF tend to bear out expert opinion. In the first four months of 2012, UK imports of MDF tumbled 24.3% year on year from 275,000m3 to 208,000m3. Incoming volumes traced a relatively flat line across the first quarter but dipped significantly in April itself.