The confidence apparent in other segments of the UK wood panel sector is undoubtedly present for MDF too – but it is all a matter of degree.
In the chipboard market, for example, UK demand is running so far ahead of domestic supply that sizeable price increases have been introduced recently and more are anticipated. However, the balance between supply and demand in the MDF sector is far finer.
"It is almost oscillating either side from one week to the next," said one UK producer. As a result, the timing of price increases is proving more difficult to call as MDF producers want to see sufficient evidence of market robustness before making the announcement to the customer base.
MDF benefited from a pick-up in sales activity during the second half of last year – a period in which prices in the UK are believed to have climbed by around 8% on average. The most recent round of increases took place over a couple of months spanning the end of last year’s third quarter and the early fourth quarter. Since then, price movements have been limited largely to one producer’s 5% increase on MR MDF for manufacturing, which became effective from the start of this year.
Asked whether price increases were likely for other MDF products – including raw board – at some point in the first quarter of 2014, one domestic producer said: "I would like to, and I need to, but I don’t see it." Given that any increase "has to be sustainable", he believed MDF demand was currently too patchy to support a price hike before the end of March.
While another domestic producer agreed that MDF demand was no better than reasonable in some sectors, he was nevertheless "expecting prices to go up by the end of the first quarter". But given current market conditions, he doubted whether "anybody’s going to be brave enough" to push for price increases beyond what has become an established norm for MDF of 3-5%.
Noting a drop in his MDF sales last year, a leading distributor added: "I don’t think there is enough demand to have a demand-led price increase at the moment." Another major distributor emphasised the strong end to 2013 in pointing to a 25% jump in his company’s MDF sales volumes in December when compared with the same month in 2012. A "quite buoyant" end to a year was often followed by a slow January but the first month of 2014 had also proved to be "busier than expected", he said. As a sign of the firm’s mounting confidence in the market, he added, "we are committing to more stock than we were a year ago".
Feedback suggests that, in general demand terms, MR MDF is performing "very well"; laminate flooring is still understood to be enjoying reasonable sales after market growth began to gather pace in the second half of last year; and the melamine-faced MDF market is developing satisfactorily.
End user markets
As regards end uses, shopfitting, joinery and kitchens have been highlighted as particularly healthy markets while opinions were divided this week as to whether newbuild housing growth was already beginning to show through in increased demand for MDF mouldings. But although some evidence of higher prices for veneered MDF was reported late last year, values were described this week as "fairly flat" amid continuing signs of customers switching increasingly to melamine alternatives.
The "need" for price increases expressed by MDF producers is based on pressure from ever-rising costs. One pointed in particular to double-digit percentage timber cost increases in some areas, as well as to the 9% hike in the company’s methanol bill at the start of the year and to urea "trending upwards" too. Another producer added: "Glue costs continue to rise and fibre prices aren’t going down. The road haulage bill isn’t going down either."
The current balance between supply and demand in the UK contrasts markedly with the overcapacity characterising the Continental market. The latest mainland European company to confirm the closure of MDF capacity is the Binderholz Group.
Its operations at MDF Hallein in Austria are now scheduled to close at the end of March because "the financial pressure in the timber materials industry was far too great and the competition from low-cost manufacturers was too strong".
The group pointed in particular to the "very high prices for industrial wood and chip wood" faced by MDF Hallein, said to be at an all-time high and continuing to rise. It had not been possible to pass on these increases adequately because of "massive overcapacity" in the market. The group also blamed "an increasing migration of the furniture and flooring industry from western Europe to eastern Europe and the Far East which has caused major clients of MDF Hallein to disappear".
Speaking of the closure to TTJ this week, an MDF contact said: "There will be further restructuring and consolidation within the industry." Another agreed that more Continental closures were likely this year and that a question mark must be hanging in particular over "old and inefficient mills" that are located "in a high wood cost catchment area".
Exports and imports
Latest figures from the Timber Trade Federation (TTF) reveal that, compared to January-October 2012, UK exports of MDF tumbled almost 35% to 110,000m³ in the first 10 months of last year. Producers in other parts of the world were continuing to apply strong competitive pressure in some key export markets and a stronger pound had rendered overseas shipments even more difficult, a domestic producer said.
Making the same comparison, the TTF statistics reveal a 2.5% increase in UK imports of MDF over last year’s January-October period to 485,000m³. As has been the case for some time, imports appear to be restricted almost entirely to those coming from Ireland and from the near Continent, with the latter supplying mainly non-standard items for which demand in the UK was "doing well", an importer told TTJ.
Looking further into 2014, MDF producers appear reasonably confident about prospects for market growth and for implementing further price increases on a regular, perhaps quarterly basis. Company sales volumes increased in 2013 and were expected to grow again in the current year, one producer said. Another agreed that volumes had improved in 2013 and that the outlook for 2014 was promising given that "the market has still to gain full confidence" but was "moving in the right direction". And he went on to say: "A bit of a surge in demand would be difficult to cope with. Responsible key players are already looking at their supply chain."
Five year prediction
Peering even further into the future, Norbord’s website highlights research from industry analyst BIS Shrapnel which suggests global MDF output will boom over the coming five years as demand for the product "skyrockets". Rising demand is attributed to a recovery in US housing construction and to robust furniture and flooring industries, as well as to strong housing growth in eastern Europe and Russia, Asia, South America and Australasia. The report predicts that global production of MDF will leap more than 16% to 99.1 million m³ in 2017 if current expansion plans are proved to be correct.
