The MDF market has maintained its improved supply/demand equilibrium into the autumn and there is even evidence of tightness in some areas. Indeed, lead times are said to vary between four and six weeks depending on the customer’s specific requirements, although one of the major players is bidding to reduce this to three.

Even buyers of substantial volumes of MDF were reporting difficulties in sourcing all of their requirements, with one contact blaming the impact of “old, cheap contracts that are not reflecting replacement value”. As a general rule, customers with highly specific requirements are finding more difficulty on the supply front compared with those who can be more flexible. “People are having to do a bit of shopping around,” it was said in one quarter.

Rush of orders

There is a belief that, despite repeated warnings from the manufacturing sector, many buyers were caught out by the relentless upward march of prices, resulting in a sudden rush of orders. “Those people who have got stocks have got a lot of orders,” TTJ was told.

True to their word, domestic manufacturers have maintained the upward price momentum. One of these ‘big three’ producers introduced an increase of around 5% from the start of October – effectively its sixth increase since early December 2001. A senior spokesperson pointed for justification to a “firming” European market where prices have risen even in the generally hard-pressed German market.

He expressed some sympathy for stockists faced with resistance to price increases from end users. “They often have to lose a bit in the short term while the price increases become established,” he said. “Overall, I am quite pleased with how the market has accepted the higher prices.”

Overall, distributors are said to be competing strongly for business and often find themselves operating on thin margins.

Another of the major domestic manufacturers is gearing up for another price hike equating to an average of just under 4% from the start of November. A spokesperson confirmed that, after a series of several price increases during this year, distributors were finally beginning to accept that the market had acquired an upward momentum that was unlikely to wane in the immediate future. As a result, they had been more concerted in their efforts to push through the higher prices to end users “who have been reluctant to accept them until now”, he said.

While celebrating the improved health of the market, the same contact insisted that “MDF certainly isn’t a licence to print money” and that costs had been rising at the same time as prices. Another manufacturer observed: “We are still selling at prices lower than those in December 2000. We are carefully monitoring the situation and I would hope that, in two or three months from now, we will be announcing our next price increase.” The increase was unlikely to be dramatic, he added.

The third of the major producers instigated a price increase averaging 6% in September and is already anticipating a similar increase for around the turn of the year. A spokesperson confirmed that lead times were between four and six weeks, and that the order book was “pretty strong”.

Production hiccoughs

Domestic producers are claiming to have overcome production hiccoughs from earlier in the year. Kronospan, for instance, suffered a fire in June but went on to register a combined chipboard and MDF production record in September. Weyerhaeuser Europe, meanwhile, experienced a three-and-a-half week break in production on one of its lines at Clonmel in the Republic of Ireland in order to accommodate the installation of a new press. “It will take some months to reach full capacity, but we are slightly ahead of our initial schedule and feel very comfortable with that,” a senior spokesperson confirmed this week.

&#8220Many produers have had their fingers burnt in the past, so I don’t think there will be a rush for new capacity. Even so, lead times for such projects can be two years or more”

On the Continent, meanwhile, it was confirmed that one MDF mill lost 10 days’ production in the late summer as a result of the flood waters affecting large parts of central Europe. Production returned to normal but the impact on stocks has meant that lead times have extended.

The MDF market generally appears to have reached what one producer described this week as “an equilibrium phase” following an “unsustainable” period characterised by “desperate” price levels. Supply has begun to tighten at a time of scarce new capacity announcements. Asked whether new capacity was likely to become a growing issue for manufacturers, he responded: “Many producers have had their fingers burnt in the past, so I don’t think there will a rush for new capacity. Even so, lead times for such projects can be two years or more.”

A spokesperson for a Continental European company which was one of the more recent to introduce new MDF capacity confirmed that “our enquiry rate has been increasing, which would tend to suggest that people are feeling the pinch and are therefore looking elsewhere for supplies”.

The increased tightness in supply prompted one major domestic manufacturer to predict that, given the continuing volume growth in MDF sales, “there may be some shortages by 2003”. Strong European demand for laminate flooring is continuing to boost the MDF market, while indications from the UK furniture trade are of broadly reasonable levels of business as manufacturers begin the run-up to the crucial Christmas period.

Overseas producers

Despite the higher prices now available, the fact that MDF demand appears healthy in most countries has dampened the interest of overseas producers in selling into the UK market. Over recent weeks, there appears to have been no appreciable change in the volumes of MDF imports and, indeed, there seems to be little spare capacity in the wider European market.

However, several agents for imported boards confirmed that the sums were becoming more interesting and that they had renewed discussions with their mills about possible business in the UK. One said: “We introduced increases across all our grades in September and these have stuck. We have heard the talk about possible further price increases by UK producers and we will follow them if they stick.” However, in common with several other contacts, he believed the UK market would find it difficult to assimilate further price increases before the end of this year.

Under-valued material

Not for the first time in recent months, there were complaints this week that MR material remains under-valued. “We have lost business on MR because others haven’t put up their prices – and I reckon the UK can stand higher prices,” argued one contact. “The price differential between MR and standard board has been eroded to a nonsensical extent, which makes it harder to achieve the perception of MR as an added-value product.”

A domestic manufacturer agreed that his own company would hope to see higher prices for both MR and FR “in the near future”.

In the mouldings sector, meanwhile, there have been signs of a general improvement in market conditions following a slower than expected September. Some concern was voiced, however, over the effects of regular price increases, with one operator suggesting “I can’t make them stick because my competitors are so weak”. The end result, he suggested, was that buyers were able to play off one supplier against another.