The UK chipboard sector struggled in the first quarter of 2005 to maintain the strong momentum developed last year. Lead times of up to 10 weeks were reported towards the end of 2004 but, in the opening months of this year, sales have become much more difficult to secure. Costs have also continued to go up and, according to one or two reports, the odd offer has begun to emerge. In effect, supply and demand are converging and as a result the near-term market has become more difficult to predict.
One industry figure said: “If you want to come into the market and move some volume, you have got to do a bit of trimming [on price].” Another said: “Producers may have slightly overcooked the market. We could have had perhaps one price increase too many for current market conditions.” A respected industry figure noted a distinct nervousness in the market place. He said that as far as chipboard was concerned in the year so far, “not one sector, not one product has been buoyant”.
An early Easter was pinpointed as one of the reasons for generally lacklustre sales figures. Although most contacts were confidently predicting an upturn in the second quarter, it was also noted that industrial buying patterns tended to become more cautious in the run-up to a general election.
TTJ was told: “Customers tend to sit on their hands to see what happens, so I don’t expect to see any significant change in the market until after the election, or even until the end of the summer.”
One leading domestic producer said the UK market made a strong finish to 2004 to the point where his company had been oversold in some areas. The company continued to produce chipboard during the Christmas period, but then saw strong sales in January replaced by a significant slow-down during February. Demand improved to some extent in March, but the first quarter was quieter than the last three months of 2004, with the result that lead times had returned to more familiar levels.
The same producer said that 3-6% price increases introduced around the start of the year had generally held firm. He said there have been some discussions about more increases, but added: “I expect a period of consolidation.”
Rising costs
A similar view was expressed by another domestic manufacturer that had increased prices by 6-7% at the beginning of the year. “We will be looking only to pass on any further increases in our costs. The wood market is quite tight. It looks as though resin costs could be quite stable for the second quarter, but we prefer to be cautious.”
He said that 2004 had been the best for his company in terms of its UK production levels and 2005 had begun slowly by comparison. He said: “Sales have improved since Easter and we believe the building trade will pick up in the second quarter.”
He was less enthusiastic about sales into the UK furniture sector, which has suffered in recent months from poor demand and at least one high-profile casualty, and a large chunk of furniture production has gone offshore. The UK was increasingly importing components or fully-finished furniture from other countries in Europe and beyond rather than manufacturing from scratch in the UK.
Another leading domestic chipboard concern echoed the general trend in confirming that sales in the early months of the year had been slower than anticipated. He was pleased that his order file had shown considerable improvement immediately after the Easter break. Past experience suggested cheaper deals were by no means unusual in any pre-holiday period, he said, but market fundamentals were still pointing firmly upwards.
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“Producers may have slightly overcooked the market. We could have had perhaps one price increase too many for current market conditions” |
Import impact
Among other features of the chipboard market, it was said imports were having a significant impact on the melamine-faced chipboard market and that P1 stocks were adequate for current demand. Mixed reports were received on T&G as some companies reported healthy sales and others the exact opposite. Meanwhile, recent investments by leading producers were said to have improved the availability of P2, although no impact had been felt on prices.
At the European Panel Federation‘s general assembly in Brussels last month, manufacturers delivered a glowing review of the Continent-wide chipboard market in 2004. Demand was described as “exceptionally dynamic” with a 5% increase in particleboard consumption and a 13% rise in imports. Particleboard production among EPF‘s members outstripped that of 2003 by 4.6% to achieve a high of 34 million m3, about 1 million m3 more than the previous record in 2000.
Europe’s top five chipboard-producing countries – Germany, France, Italy, Spain and the UK – accounted for nearly 83% of the additional output and returned growth rates of 3-10%. These nations accounted for almost two-thirds of the total output of chipboard in Europe.
The EPF said the early months of 2005 had generally brought a continuation of the favourable market conditions, but acknow-ledged rising costs – notably for timber, glue, energy and transportation – represented major concerns for the wider wood-based panels industry. Domestic chipboard producers contacted this week expressed continuing concern over rising costs and in particular the recent upward pressure on timber prices.
One leading manufacturer said UK producers have also had to contend with import pressure from the Continent although he said he hoped that ever-increasing demand from central Europe would help divert the attention of mainland western European producers away from the UK market.
In company news, Sonae is still on course to complete by June its multi-million pound “de-bottlenecking” programme at Knowsley, which it expects to improve site use by an estimated 10%. Civil work has been completed on a new £5m-plus chip cleaning plant capable of handling 35 tonnes per hour. A senior spokesperson said this would cement the company’s position as the leading UK recycler in the field. A new £1m stack designed to improve dispersion is also scheduled to come into operation in June.
Sonae invited suppliers and customers to visit Knowsley for a “Partnership Day” to hear more about the investment programme. A spokesperson said it reflected the company’s strategy of “going forward with certain customers with longer-term agreements”.
Russian venture
Egger (UK) Ltd’s first chipboard production venture in Russia is now scheduled to become fully operational towards the end of the year, a company spokesperson said. The project began in early 2003 when Masistar Ltd of Shildon, formerly Vertex Panel Products, went into receivership and a large proportion of the assets were acquired by Egger. It then announced its intention to establish a production operation at Shuya, 100 miles north-east of Moscow, incorporating two chipboard lines and a laminating operation.
The aim had been to produce raw boards at 250,000m3 a year by early 2005. Delays – some of them weather-related – pushed back the start-up date, but it was confirmed this week that the laminating process was likely to come on stream later this spring and the chipboard lines towards the end of the year.
A company spokesperson was adamant about Egger’s earlier announcement that it would look to market all of the factory’s output within Russia. “The market in Russia is fairly buoyant and there is good growth in GDP. The company had already taken steps to prime the market by revamping its design studio in Moscow,” he said.
