Summary
• UK panel consumption comprises about 8% of European consumption.
• Supply now roughly matches demand across Europe for the first time since the mid-late 90s.
• The UK government has had a relatively more enlightened view on biomass subsidies than those on the Continent.

Fundamental changes over the past couple of years have affected the wood-based panels industry around the world.

Many believe these changes are positive, despite a number of quite serious problems. Why? Simply because the use of wood-based products is ultimately the most environmentally-friendly and economic solution for many building and living projects. And, there are signs of growing public and political understanding of this.

It is important to put our industry into perspective. First, UK panel consumption is only a small part of a much larger jigsaw puzzle; it comprises about 8% of the 60 million m³ of wood-based panels consumed across Europe. About one-third of the 5 million m³ of chipboard, OSB and MDF consumed in the UK is imported from Euroland. But this imported proportion is in decline due to faster cost escalation for Continental panel producers than UK producers over the past couple of years.

The European panel industry is only a fraction of the European wood industry, which is only part of the global timber industry and is subject to global trends in consumption, production, transport and trade. Significant global changes will continue to set the agenda for the development of wood products industries worldwide.

New consumer

The first of these is the rapid worldwide growth of new consumers – particularly from China, India, Russia, eastern Europe and the Middle East. The second is rapidly increasing global energy demand – a consequence of the first. The third is the increasing price of major commodities – a natural consequence of the first two factors – including wood.

This commodity strength will continue to generate wealth in producing countries such as Russia – adding to increased consumer spending, and compounding the growing need for consumer goods and services demanded by these hundreds of millions of “new” consumers.

Looking ahead, consumption of our products in western Europe, including the UK, will continue with modest growth, while eastern Europe, including Russia, will experience continued rapid growth.

The rapidly increasing consumer spending power translates very quickly into increasing demand for products which require wood products in two major categories: housebuilding, and DIY and furnishing.

&#8220Our wood-based panel industry is well positioned to satisfy the increasingly precise demands for modern methods of construction”

Prices for wood-based panel products have risen substantially over the past couple of years, driven by three main factors: market demand, available supply, and cost of production.

Demand is likely to remain strong for the aforementioned reasons, while supply now roughly matches demand across Europe for the first time since the mid-late 90s. Over the past three to four years, industry consolidation and rationalisation, coupled with demand growth, has corrected the imbalance that depressed prices to unrealistic levels in the first part of this decade.

Costs have escalated: energy, resin and transport costs are related to the cost of petroleum and gas and have all suffered a step change increase.

Wood costs have also risen substantially and will continue to grow due to increasing demand from the energy and wood products sectors. These increases will be relatively higher on the Continent than in the UK, since the UK government has had a relatively more enlightened view on biomass subsidies than those on the Continent.

Labour costs will continue to rise with inflation. However, Norbord and others continue to invest in technology to contain these increases by way of efficiency gains.

Environmental message

To sum up the cost picture, there has been a fundamental upward cost shift due to factors much larger than the wood panel industry. But this doesn’t negatively affect our competitive position against other materials such as steel, concrete, brick and plastics. They are all subject to the same cost pressures – some more so – and they lose the environmental argument. But we must continue to spread the good news about wood products and the environment.

Earlier this year, the European panel supply chain was subjected to several one-off events which created extraordinary product shortages and added to the rapid price appreciation already under way. We think that the worst is over, and that product availability is coming back into balance. This should afford price stability over the short to medium term – unlike the past 12–18 months when the rate of price increases was almost unprecedented.

The future looks exciting. Our wood-based panel industry is well positioned to satisfy the increasingly precise demands for modern methods of construction and fulfil the aspirations of all to produce building and living products with a much lower carbon footprint.