Summary
• Manufacturers have increased prices by 5%.
• Demand is generally flat.
• The consensus is the market has reached the bottom.
• Distributors are keeping stocks low.
With the arrival of summer the MDF market in the UK has slowed and everyone is waiting, keeping an eye on September.
Since TTJ’s last MDF report manufacturers have pushed through – and sustained – a 5% increase in price. However, some importers said they had no reason to increase prices at present. “There is nothing there to push for a price increase at the moment,” said one.
There has been little change in demand since the sudden drop at the start of the year, and the market is said to be “bumping along the bottom”.
“It’s no different from a lot of commodities at the moment. There is an excess of supply over demand due to the global recession and all of the consequences that that brings,” one manufacturer said.
Furniture demand
Some chipboard suppliers are reporting a pick-up in demand from UK furniture producers who are being helped by the weak pound, but the MDF sector still says its not finding much joy in the sector. And the market for construction mouldings, traditionally a strong outlet for moisture resistant MDF, is also flat. But one contact reported steadier demand from shopfitters.
In terms of products, standard MDF in 12mm, 15mm and 18mm is selling well, albeit at extremely low prices, and one contact told TTJ his company had been successful with a range of thick panels up to 45mm.
However, generally there is little movement in the market, and little prospect of change. “There’s a flat demand and not an awful lot of signs of things changing at the moment,” said one supplier.
Exchange rates
The sterling/euro exchange rate means there is little imported product coming into the UK. One importer said if the euro moved into the mid e1.20s against the pound he could “see some opportunities”. Likewise, if the dollar goes towards 70-80c, which he is expecting it may in the next six months, there could be more movement on imports.
One manufacturer said he was receiving more enquires from abroad, especially the Mediterranean and Middle East, a trend he attributed to not just the weaker pound. “I think it’s generally that markets are tightening a bit so there is a little more [activity].”
One contact said there were indications that a lot of markets were at bottom, but no-one was expecting sudden growth. “It would be nice to see some modest growth in 2010,” he said, but he was not expecting a sudden jump in activity. “It’s going to be a slow process,” he said.
With producers’ traditional summer shutdowns nearing and inventories at a minimum industry-wide, another manufacturer said there was a seasonal increase in demand for the distributor-merchant markets.
However, stock levels everywhere are generally low, with no-one holding more than needed to meet immediate demand. And stocks will stay low as manufacturers take summer downtime. One said it will close for three weeks in August, while another is taking down a line at regular intervals.
Forward ordering
There is little forward ordering at the moment, and most distributors are buying on a hand-to-mouth basis. One importer said his company was not covering much further than a month ahead. “We wouldn’t have to hold more than three weeks’ worth of stock in our yard at a time,” he said. A second importer confirmed his company was under no pressure to buy.
One manufacturer said standard sizes and thicknesses are expected to be delivered within two to three days because distributors are keeping their stocks to a bare minimum. Another manufacturer commented that customers had “no real confidence.”
Many expressed hope that demand will increase after the summer holidays, and people in all parts of the industry expect to see manufacturers increasing prices in September or October. “We’re all trading at levels that are financially unsustainable and therefore the pressure is on to increase prices,” one manufacturer said. He was fairly certain that the next movement in prices would be up.
