Within the past few weeks, domestic prices for standard MDF have begun to climb from the depths plumbed during the summer when new lows were established. The phrase “historically low prices” is often abused but, on this occasion, everyone involved in the home MDF sector appears to be agreed that prices reached levels never before witnessed in the history of the product.

Since the end of the summer holiday period, average price increases of between 5-7% have been implemented by the three major domestic manufacturers. And according to senior spokesmen within each of these companies, further attempts to push up the price of standard MDF can be expected during the fourth quarter. Indeed, it was suggested that, in general, MDF customers had reacted “reasonably favourably” to the increases and that they were generally expecting further rises before too long. Not for the first time, everyone was said to be looking forward to the day when greater value was returned to this country’s MDF market. “We couldn’t continue to see prices where they were because no-one benefits,” said one experienced industry figure.

Stronger demand

Support for higher prices has been provided by stronger post-summer demand, particularly in October with several contacts noting “a big increase in uptake over the last week or so”. The shopfitting and exhibition sectors were said to have made a reasonably strong return to the market, although demand from the construction and furniture industries had remained somewhat more muted, it was suggested. TTJ was told: “Given the current level of demand, I would expect manufacturers to be looking for more money.”

The increasing strength of the market is also illustrated by the recent re-emergence of those all-important lead times for at least some in the domestic MDF manufacturing sector. The longest mentioned was of over three weeks, although one domestic producer confirmed that his own company was not operating on a lead time despite the fact that demand was now “pretty good”.

The upward price momentum has also been driven by the need to escape from the “financially unsustainable levels” reached during a summer in which, according to several contacts, demand was hit harder than normal for the time of year as “UK plc seemed to go to sleep for six or seven weeks”.

Against this backdrop, there was some welcome restriction of the domestic MDF supply pipeline. One of the major three manufacturers confirmed this week that press downtime totalling two-and-a-half weeks had been taken for preventative maintenance. “We were committed to moving prices up from August and would have accepted a loss of business if that had happened,” he said. “We are looking to move prices again in November – we are just reviewing where we are, but I would expect the same sort of increase as before.”

The recent “grim” market conditions have prompted several non-manufacturer contacts to renew their calls for all three domestic manufacturing operations to take a defined period of downtime during the summer months. “Hopefully they will learn the economic lesson for next time,” said one source. Another added: “The main domestic producers need to take downtime like they do on the Continent – they work out their sums overseas based on working for 48 weeks of the year.”

&#8220Everyone involved in the home MDF sector appears to be agreed that prices reached levels never before witnessed in the history of the product”

Haulage costs

The MDF industry as a whole is keen to draw a line under a summer described by one of the domestic producers as “a total and utter disaster” from the financial standpoint. Values had been so low, said a senior manufacturer, that distributors were having difficulties in covering their haulage costs. The problems for the MDF sector had started in the second quarter when “far too much supply was chasing not enough demand”, and the summer troubles had therefore represented the culmination of these negative influences. “It was not just the summer factor,” he insisted. “The downward momentum had already started.”

Outside of the domestic manufacturer sector, one operator claimed: “MDF was under-valued even before the summer – and then tremendous discounts came in.” His concern, however, was that too many buyers would be given leeway on prices and that further increases would not be made to stick.

Although one contact captured the sentiments of many when he said it was “time to turn the page on the third quarter and look ahead”, more pessimistic observers believed the MDF community would not have to look too far to see the next potential banana skin. The Christmas period is little more than two months away and, with business likely to begin to slow well before the middle of December, the MDF trade was said to have only a few weeks to inject yet more much-needed momentum into market. “December is always a tricky month – so let’s hope that people hold firm on price,” said one contact. Another was equally concerned about the back end of an already disappointing year and commented: “The industry has got to ride out December because distributors will not be around for 10 days and yet production will continue to be churned out. It will be a case of holding your breath and waiting for January.”

While stressing that overall consumption was still growing, domestic producers did not deny the precarious nature of the market. One senior spokesperson confirmed that October would be “an incredibly key month that could set the course for the next six months in terms of higher prices, higher consumption and longer order files”. He believed that the market was currently closer to supply/demand parity than at any time over the past few years; indeed, he argued that the gap between supply and demand was smaller than the pivotal 15% “which, historically, leads to pressure on lead times and on pricing”.

He suggested that the low prices of late had already encouraged new uses for MDF, although other sources believed this to have been only a minor trend. “When the prices go back up, this will lead to some adjustment but past experience suggests that some of the new consumption will stick,” he said.

Less open to doubt is that the recent low prices were successful in limiting the flow of imported board into the UK and therefore in boosting import replacement. One supplier of imported MDF confirmed that buyers had appeared too nervous to commit to his longer delivery times because of a fear of further price falls. That said, another supplier confirmed the recent increase had resulted in “customers coming back to us who had deserted us when the UK prices went so low”.

It is worth stressing that the so-called “summer bloodbath” on pricing was reserved almost exclusively for standard grades, and most particularly for the 18mm 8×4 which constitutes the trade’s ‘bread and butter’. Although several contacts did suggest that ultra-light MDF and larger boards had experienced some instability over recent months, speciality grades in general – such as FR, MR and exterior – had been relatively unaffected by price fluctuations because, as one contact put it, “there is less competition in these areas and added-value products like these are more interesting to sell for the distributors”.

As one MDF operator observed: “The market is completely dominated by standard grades, and by 18mm 8×4 in particular. It’s the industry’s loaf of bread, its tin of baked beans – while the wider range of MDF products gives the profit, 8×4 gives the volume.” Another added: “Some distributors are no longer taking orders for just standard MDF – there is no point in putting it on the lorry. They want something else to support the order.”