Demand driven

A period of welcome stability has settled over the UK particleboard sector and it is expected to continue throughout the first half of 2015, at least.

The strong demand which emerged over last year's summer, and extended into early autumn, has eased off, reducing the pressure on supply and leaving the three UK manufacturers contented and optimistic about the months ahead.

"The year started well and the trend is continuing, which is the important thing," one manufacturer said.

Demand is said to be good for all grades, from raw board to [melamine faced] MFC, and across all sectors, from kitchen and bathroom products to office furniture.

"New housebuilding is still growing; it's been growing for more than a year," said one manufacturer. "In the second half of 2013 the demand was mainly for raw board but now a lot of houses are being fitted with furniture and you can see that reflected throughout the particleboard product range."

While another manufacturer was positive about the market, reporting record production and sales, it hadn't quite met expectations.

"Compared with 12 months ago we're slightly ahead of the game but not quite up to where we expected it to be," he said.

After "particularly high demand" during spring and summer last year, the company had rationalised its products and moved away from some lower-value business.

"Everyone expected [demand] to continue to grow but it's stabilised - and stabilised at a reasonable level," he said.

An importer believed that housebuilding activity had not reached the levels anticipated and that the market was difficult to predict.

"Board is being sold but you don't want to buy too much because you're not sure what's around the corner," he said. "Unless you have a repeat order it's difficult to buy ahead; we're just topping up, really."

Merchants were also being cautious about what they needed, unless there was a "real bargain". They were also tending to buy more mixed loads.

Product rationalisation by some of the UK manufacturers last year meant that gaps in the supply of the lower grades were being met by imports from Belgium, but they could be on a six-week lead time.

And, he added, as the price of other panel products was becoming more comparable to particleboard, some substitution was taking place and the volumes of particleboard traded by his company were lower as a result. Particleboard would still be the only choice for some applications but, in others, OSB would do.

"True particleboard users are going to struggle to get what they want unless they adapt to certain sizes," the importer said. "OSB in 8 x 4ft in 11 and 18mm thicknesses is becoming cheaper than particleboard and that's opened another avenue in the furniture industry. For a structural element of furniture, they'll probably use OSB."

A manufacturer agreed that OSB could affect particleboard prices and take some market share.

"When there's oversupply [of OSB] it takes some market share that traditionally belongs to particleboard - not that it's profitable but it keeps their factories running. Soft furniture manufacturers can use particleboard or OSB for frames and they will use whatever is cheaper," he said.

"The price of some OSB at the moment puts it on a level with particleboard, which is remarkable."

UK particleboard manufacturers raised prices in the final quarter of last year and no further increases are planned yet - even though timber costs continue to rise, largely because of the competition from biomass, which has been felt more keenly since the introduction of the Renewable Heat Incentive (ie using wood biomass).

One manufacturer described UK particleboard prices as "acceptable", while another predicted that prices would remain unchanged for the next six months. "We'll see what happens in the autumn," he said.

The recent strengthening of the pound against the euro will help to keep a ceiling on prices for a while as the currency shift makes the UK attractive to European manufacturers, who are still dealing with sluggish demand in Continental markets.

While raw board imports were adding to the stability of the UK market, cheaper imports of MFC were "dragging prices down". However, he added, it would not change the dynamic of the market, where there's "plenty of supply and plenty of competition", but it has an effect because "it's a reference price-wise".

One manufacturer said that although some Continental manufacturers were taking advantage of the more favourable exchange rate to divert product from the quiet European market to the UK, these were "short-term movements" which could change just as quickly if the pound weakened or European purchases strengthened.

Another manufacturer played down the impact of imports.

"There are a few imports coming in, but nothing really," he said. "The UK market has become more sophisticated and its ability to spot-buy has become more difficult. People typically require a just-intime approach and, while the pound may have strengthened against the euro, people are always cautious it may go the other way. Also, when people jump ship it might not be that easy to jump back again."

While one importer believed outside factors, such as the exchange rate, made it difficult to predict the UK market, manufacturers are satisfied with current trading and are optimistic about prospects. All agree that general business confidence has increased and particleboard's end use markets are busier.

"I'm optimistic about the year ahead," said one. "I can't see why things won't continue at a good steady pace."

This story was first published in sister magazine Timber Trades Journal (TTJ) in March 2015.