In normal times 2017 would probably be regarded as a steady year for the chipboard industry.

Demand is strong for all market sectors but the continued slump in the value of the pound since the EU referendum means higher costs for UK manufacturers. In response, late last year/early this year they raised prices by 5-7%, depending on the product, and may have to consider another increase sooner rather than later.

“Last year through the weakening of the pound we saw a significant increase in the cost or our raw materials – resins, paper, chemicals and machinery parts. Typically in most cases we absorbed that but it did have a significant impact on the business,” said one UK manufacturer.

The company eventually succumbed and raised prices, and may have to again soon.

“We’re now faced with some big increases in material costs, particularly in resins, some of which have doubled in price. We will have to look at how we can pass on these costs in the spring,” he said.

While no-one likes to pay more, customers understood the reasons for the price increases and negotiations were “reasonable”, he added.

Another producer, however, thought a further price increase could be avoided as long as the pound/euro rate remained stable. “We’ve put our prices up on the basis of a €1.15 exchange rate so if it stays like that we won’t put prices up again,” he said.

While the weaker pound has certainly created higher costs for UK producers the silver lining for them is that it’s made life more difficult for imported standard chipboard products.

“One benefit of the exchange rate is people looking to switch more supply from secure currencies,” said one manufacturer. “Some foreign producers held on for some time but imports have declined as people switch to home-produced product.”

This is likely the case for raw board, although there is still a market for imported value-added product.

“Raw board is a spot business and we have plenty of other products where we have a market and a strong presence,” said one European producer.

Rather surprisingly, these supply dynamics are not yet evident in trade statistics but perhaps the coming months will reveal a different picture.

According to the Timber Trade Federation’s statistics published in January, chipboard imports continued to rise following the Brexit vote last year, suggesting that volumes were on course to return to the levels last seen in 2007.

The bulletin covered the 11 months from January to November 2016 and over those months imports were up 25.8% on the same period in 2015 to 766,000m3.

Import volumes from France and Germany increased by 7% and 12% respectively but they failed to increase market share thanks to substantial increases in volume from Belgium and Latvia. An increase of around 25,000m3 from Belgium and nearly double that volume from Latvia accounted for around half of the overall increase in chipboard imports in 2016 to date. Much of the increase in volume from Lativa is recorded as being cheaper unworked varieties, the TTF says.

On the demand side, sales are firm across all industry sectors from shopfitting to construction, generating sales for a range of product sectors from MFC, veneered board and FR to T&G. Customer confidence is strong and this in turn gives confidence to producers.

“I’m feeling quite positive; 2017 will be a strong year,” said one.

Manufacturers are generally pushing towards producing more value-added products which is giving the resilience and a broader spread of markets.

Another manufacturer said the year opened with strong demand “from the very first day”. While he expects that level of demand to be maintained throughout the year, other considerations will make 2017 challenging.

“It’s going to be a normal year in terms of volume but other market considerations are going to make it a tough year,” he said. “We expect further rationalisation among distributors and on top of that there’s the currency. It’s going to be a year with many changes and it’s going to take more effort to defend our volume and to try to gain some extra.”

New production

Worldwide, production of chipboard has been on a growing curve.

China, of course, has been investing in many new plants, with the latest 270,000m3 mill being developed by MDF manufacturer Lian Jiang Huasen Wood Industry Co in Zhanjian City in southwest China.

According to Wood Markets, China completed 20 new chipboard production lines in 2015, expanding production capacity by 3 million m3, giving a total of around 338 chipboard production lines with a total capacity of 19.7 million m3.

Kronospan has also continued to invest in eastern Europe. The first board was expected to roll off the new continuous line at Veliko Tarnovo in Bulgaria late last year. The line replaced a daylight press.

Late last year Chilean company Arauco received permission to build what will be North America’s largest chipboard mill, in Grayling, Michigan, costing an estimated US$400m. The new 52m-long continuous line will have an annual capacity of around 800,000m3.

The mill, which is said to be the first chipboard line to be built in North America since 2002, is expected to be commissioned at the end of 2018.

Meanwhile, closer to home, Egger’s Hexham chipboard plant in Northumberland has just hosted a special press event to unveil a multi-million investment in its new T&G panel processing line. The line produces over 6.5 million Egger Advanced Structural Flooring panels every year.

Collections on trend

Panel manufacturers chose the Bau exhibition in Munich in January to launch their new collections.

Under the theme “inspirations close to you”, Pfleiderer presented its design Collection 2017-2020 the com.pany has put together an integrated collection of 360 décors, including 118 new décors, and 21 textures covering raw board, MFC and HPl for different uses and customer groups. one Collection, as the range is known, includes everything from classic boards for furniture and interior fit out to lightweight construction and fire prevention.

Pfleiderer also introduced three new surface textures: natural Wood, Stucotex and Brightstone.

This year the company plans to invest €50-60m to increase productivity.

eGGer has also launched its new decorative Collection 2017- 2019, which replaces the ZooM collection.

The decorative Collection for the specification and shopfitting sector features 297 décors, while the collection compiled specifically for the UK and ireland furniture manufacturing industry features 170 décors, 114 of them with matching laminates available from stock. there are 44 new designs and two new textures.

UK Bucks Positive Trend

In terms of financial results for chipboard producers, Egger Group’s most recent update shows a 10.1% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) for the first half of its financial year 2016/2017 but noted that Brexit has impacted on its UK performance. EBITDA rose to €189.6m and the margin increased to 15.9%, compared with 14.4% a year earlier.

“The general economic situation was very unstable in the last half-year,” it said.

“Nevertheless, compared to the previous year, we were able to grow in almost all geographic markets in our main product segment – furniture and interior design – which represents 75% of our total turnover,” said Thomas Leissing, Egger’s head of finance, administration and logistics.

The big exception, he added, was the UK, where uncertainty following the Brexit vote led to sterling falling in value. UK turnover increased by 4.8% in sterling but the negative currency effects created a turnover regress in Euros of 9.2%. In comparison, turnover grew in Russia, Romania, Spain, Portugal, France, Italy, Germany and Austria as well as in Asia and Japan.

Norbord released its annual results in February, reporting that UK chipboard prices in 2016 were 4% lower than 2015 because of the sales mix and all its European panel mills (chipboard, OSB and MDF) ran on full operating schedules in 2016.

In Europe, Norbord’s core panel markets remained “strong”. In the UK, where three of Norbord’s four European mills are located, GDP grew at 2%, unemployment dropped below 5% and housing starts activity remained firm.

Its European sales totalled £323.7m for the year (2015: £362.9m) and EBITDA was £32.7m (2015: £30.3m). Shipments increased 2% over the prior year.

Norbord’s two UK chipboard mills Cowie and South Molton had a capacity at 2016 year-end of 405 million sq ft (msf) and 160 msf respectively.

Reported European panel prices in US dollar terms were impacted by the significant devaluation of the pound following the Brexit referendum in June last year.

Norbord said a weaker pound relative to the euro was advantageous to Norbord’s primarily UK-based operations as it improved sales opportunities within the UK and supported its export programme into the Continent.