Unprecedented times

It is our fervent wish that this year’s survey and report of particleboard capacity changes in Europe and North America will not be repeated for its illustration of the dire conditions of the current state of the industry. Since the 2006 survey, the declining fortunes of the industry have been reported with sadness and trepidation. The author and WBPI editor have felt like gloom-laden messengers from ancient Greek mythology.

While there is no natural law of continuing industrial growth, it had been hoped that the western European and North American particleboard industries could at least enjoy modest growth linked to the socio-economic fundamentals. These hopes have been dashed in the past two years and 2009/10 show little sign of recovery. That is not to deny the rest of Europe, and indeed other parts of the world, their own development.
The author’s personal observation of much of the commentary and reporting of the panel industry seems to be rather impersonal and somewhat unemotional. The riposte may be to use ‘objectiveness’ as a justification and that may be a worthy approach. However, the author has been analysing the particleboard industry around the world since the early 1970s and these are unprecedented times. Perhaps it is time for Europe and North America to hand on the mantel of market leaders to other regions. Perhaps it is an economic inevitability. Nevertheless, it is a structural change that deserves a little emotion.
At a time when ‘wood is good’ is the message being received, the particleboard industry – and the panel industry in general – has seldom faced such a range of hoops and hurdles to be negotiated just to stay in business.
The 2009 survey of particleboard capacity in 2008 shows that aggregate European and North American capacity declined by 0.2% during the year.
Europe declined by 0.7% and North America, principally the US, declined by 3.5%. This is despite the known expansions in certain sub-regions. These changes are measured among the mills still operating at the end of 2008. Some mills are closed, it is believed, indefinitely. Other mills are taking extensive closures and short-time working. For the sake of comparison their capacities are included at their full annual rating.
The data collected is by no means perfect and we remain aware of the possibility of under-recording a number of current mill’s capacities. This would have been true for 2007, but by leaving the data unchanged for 2008, a like-for-like comparison is possible.

North America
The 2008 results for North America show the lowest levels of capacity and production for very many years. Within the region, Canada and Mexico exhibit stability over the previous year. There is no recorded change to nameplate capacity. In the US, following the closures in 2006 and a static situation in 2007, there were effectively three further closures in 2008: Stuart Forest Products (which, with apologies, was not shown in the 2007 listings), ATC Panels, Franklin, Virginia and Waverly Particleboard, also in Virginia.
Roseburg Forest Products and Flakeboard remain the two largest groups operating but their individual sizes are not outstanding in global terms these days.
Not only were market conditions poor in 2008 but there has been a worsening in 2009. There are several rumours of further line closures, together with one specific announcement.
ACT seems to have been a casualty of this squeeze. First, the closure of the Franklin mill and second the sale of the Moncure, North Carolina plant to Uniboard.

EU15 Countries
The EU15 countries saw capacity fall by 1.9% over 2007; the total recorded is 31,160,000m3 per annum. However, a couple of mills in France and Germany which should have been omitted from the 2007 listing remained. Their removal from the 2008 listing does not alter significantly the downward trend. This is because one or two upward revisions were made, including Kronospan, Bischweier from 594,000m3 to 800,000m3 per annum. There were also some downward revisions, including the changes at the Saviola Group in Viadana, Italy.
The Norbord, Genk line closure in Belgium, announced at the end of 2007, was effected in 2008 and the Utisa line at Utiel closed as well, for a combined loss of 320,000m3 per annum. The small Valentin mill in Germany also closed.
Western Europe remained in the grip of the economic recession, especially the housing sector. According to Euroconstruc, tdwelling units completed in the EU15 fell by 12.5% in 2008, with single-family units – the important market for particleboard – falling by 18%. They also reported no change in the value of housing renovations. Equally, house sales, including existing dwellings, also stagnated with the resultant impact on demand for furniture and fittings.
Table 4 shows the number of mills and lines in the EU15 countries, with a reduction in both compared with 2007.
Accordingly, operating rates fell – especially as so many mills reported shorttime working in one form or another. Production as a proportion of capacity fell from 82.3% in 2007 to 73.2% in 2008. The forecast for 2009 suggests 69.1%. As shown later, the rates in ‘Other Europe’ remain above 80%, despite increasing capacity. One suggestion is that EU15 exports to Other Europe have suffered.

Other Europe
Capacity in this region grew by 5.2%, or one million m3, during the year. There were expansions in Turkey (Kastamonu, Gebze) and most notably the new Gagarin Plywood mill in Smolensky came on stream with 528,000m3. (Also, the Kronospan Swiss mill was upgraded in the lists but this should have been shown in the 2007 lists). Table 5 summarises the country changes in mills and number of lines. There was a small increase in average line size, from 182,000m3 per annum to 189,000m3 per annum.

Russia reinforced its position as having the fourth largest capacity in the world. By the end of 2009 Russia will be pushing the US for third place.

Future Capacity Changes
The aggregate North American and European capacity will increase by 5.1%, or 3.2 million m3, during 2009. Only 250,000m3 of this growth will come from North America or EU15 countries. Even then, joint capacity will remain below 2007 levels.
Table 6 summarises the changes in North America. Admittedly, the Merillat closure comes later in the year and ostensibly this does not represent a loss of the full 160,000m3 during 2009.
There is a truism about this type of market situation, which is that those companies that can remain in business will benefit more than proportionately as and when the market picks up. Product may be in short supply and prices could firm up quite quickly. How long that situation might last before imports and new competition increases is debatable.
This results in a small net increase during the year. However, at the time of writing there is no information about new projects in the region for 2010 and beyond. Closures seem more likely than new projects but it is likely, if there is any sign of economic recovery, that some operators of multiple lines might consider new equipment and rationalise their older lines.
2009 will be a significant year in eastern Europe, Russia and Turkey. New capacity will almost equal that in 2008 at 3.1 million m3 in 10 major projects – a growth of 15.6%.
Turkey will make the most gains, with large plants for Yildiz Sunta and Yildiz Entegre. Kastamonu will build in Adana, commence a renovation of its Yontas acquisition, and complete its Gebze expansion (closing a small line at the end of the exercise).
In Russia, Ugra Plit is expected. This was one of the last orders for Metso before that company’s final sale.
Kronospan will be busy in Latvia and the Czech Republic. Indeed Kronospan will be active in both 2010 and 2011 with 1.58 million m3 in three projects in Russia, Bulgaria and Belarus.
Kastamonu will complete its Turkish expansion (its planned Russian mill has not been reported again and for the time being is omitted from the list until further clarification is received).
The two Krono Groups have been very expansionary across eastern Europe and Russia in all panel products. They have opened new mills as well as making numerous acquisitions and subsequent redevelopments. They have been very adept at sourcing World Bank and EBRD funds (European Bank for Reconstruction and Development). There is a long leadtime to obtain these funds but the Krono Groups understand the process very well.
It has been commented that they are an almost ideal fit to the profile for applicant companies.
By the end of 2011, ‘Other Europe’ capacity will have reached at least 24,703,000m3 per annum.
About five million cubic metres per annum will be added to capacity but it takes only a cursory glance to see the impact of eastern Europe, Russia and Turkey. One interesting thought is the effect this might have on inter-regional trade in the coming years.
This, however, is a study for another time!