Following on from Part 1 of our survey of the industry, covering Europe and North America, as usual, we turn our attention for this survey of 2010 to those countries in the ‘rest of the world’.

As we saw in part 1, once again North America and Europe exhibited very little dynamism, with little change from the activity recorded in our survey of 2010.

However, when we come to look at developments in the ‘rest of the world’, we see that 9.9% increase in capacity in three main regions.

At the end of 2010 there was a further 4.8 million m3 waiting to be installed by end-2013 in the ‘rest of the world’, principally in China, South East Asia and Europe, as shown within the table of Aggregate World Capacity in this article.

Last year’s survey predicted 80,047,000m3 global aggregate capacity and the final outcome is only around 14,000m3 down on that prediction; global MDF capacity is well on track to reach 87,420,000m3 in 2013.

Because of the Japanese earthquake, demand for panels may come from a different source in 2011. The Japanese earthquake, and the horrific tsunami that followed, not only destroyed MDF and particleboard capacity, but also huge quantities of Japanese plywood capacity which was located in that region of Japan and this has led to major shortages in the market place which few other countries can fulfil.

If the Chinese market should continue to boom as it has done, then suppliers may well be in a position to achieve more reasonable, sensible, prices for the first time in years.

However, both markets are quite discerning because the board is used in China in export products which themselves have to conform to quality and emission standards in North America and Europe. Furthermore, assuming that Japan is unwilling to reduce its formaldehyde emissions requirements (and we think it unlikely that it will) then only those Chinese mills set up to produce to the stringent F**** standard required by Japan will be able to benefit from any increased demand from that beleaguered country.

At the end of 2010, the rest of the world possessed 68.3% of global MDF capacity (2009 – 67.7%). Although not a significant increase, it does still show that the ‘old MDF world’ is still shrinking in its share of global capacity.

As in 2009, the bright spots for MDF remain Asia, South America, Turkey and Russia – with less significant growth in the rest of Europe and North America.

The signs are very limited for improvements in the North American and western European economies but China, with its vast domestic economy, is the engine for growth in Asia.

China’s construction industry appears to be supporting the rest of the world’s economy. We could say that if a metaphorical Mr Lee doesn’t put his deposit down on a new apartment, then the rest of the world should tremble – this might be the beginning of the next downturn. Not only does construction consume panels, but new homes need new furniture of course.

More than any other region, Europe remains on a knife-edge. The well publicized problems of the Greek economy, coupled with Ireland, Portugal, possibly Spain – and, most recently, Italy – threaten the stability of global economies and the possibility of a double dip recession.

Also, in recent days, the thought of the mighty US economy reneging on its debt repayments is not one that is likely to enhance stability in global markets for any commodity.

Developments in China
In addition to what we have already said about China, we should look at capacity development in that country.

This year (2011), Chinese capacity will grow by slightly more than 10% to regain its status as the largest MDF region in the world. The growth in Chinese capacity during 2010 was 4.84 million m3 and this mirrors the 10% increase in the number of installed lines.

There continues to be growth in the number of European-made continuous lines from Siempelkamp and Dieffenbacher, but competition in that market is increasing from continuous press manufacturers producing presses in China. The most obvious and longest-established of these is of course Shanghai Wood Based Panel Machinery Ltd, now 70% owned by Dieffenbacher of Germany. The four-feet-wide continuous presses made at SWPM’s Anting, Shanghai, factory are gaining increasing popularity in the Chinese market (as well as in some regional export markets).

However, as regular readers of our reports from China will know, several other Chinese companies have brought, or are bringing, continuous presses (including eight-foot widths) to market. Yalian Machinery Co Ltd, Sufoma Machinery Co Ltd and Shanghai Jiecheng Baihe Woodworking Machinery Co Ltd’s ‘Bino’ press are all either extant or imminent.

Meanwhile, Italian machinery supplier group Imal-Pal says it is also offering a continuous press made in China as part of a complete-line-supply package.

We detect that the rate of addition of new continuous lines in China is slowing at a time when the supply base of continuous presses is expanding….

The rumours which have been around for some years that MDF capacity is approaching market saturation in China – and that particleboard manufacture will thus increase – seem once again to be gaining ground.

Meanwhile the contest to be the biggest volume MDF manufacturer in China continues, with Yingang (aka China Salt) making a lot of noise about its intention to be top with its five-year plan for growth, including a target of 1.4 million m3 in year two of that plan.

Sichuan Guodong now has a capacity of over one million m3 in total and plans more.

Several other manufacturers also have firm plans for expansion.

However, all these plans seem to pay scant regard to the limiting factor of available wood supply in China and, sooner or later, that problem has to be faced.

The increasing number of four-feet-wide lines in the country is a tacit acknowledgment that there is not an unlimited supply of wood raw material.

The perhaps more realistic view among many MDF makers (including the aforementioned Yingang) is that the way forward is to remove uneconomic capacity and replace it with new, more efficient, continuous lines, which will also meet the increasing quality requirements of the panel market.

Please note that the listings for China still contain asterisks (*). These show lines planned or under construction. The total capacity shown for each company includes these lines but the grand total at the end of the list does not. The most active provinces for the new MDF capacity are those whose economies are the most dynamic, such as Sichuan and Hebei.

Developments in other regions
After several years of no change in North America, 2010 grew by 503,000m3 entirely as a result of the re-opening of the Uniboard mill in Moncure, South Carolina.

South America continues its activity and we show a total for the region at end-2010 of 6.527 million m3.

The delayed Eucatex mill, which was commissioned in 2010 with a full-year capacity announced as 250,000m3, will not be fully on-stream until 2011, but the company said the line made a significant contribution to its revenues in the first quarter of this year.

As reported in WBPI news, Duratex SA, the southern hemisphere’s biggest wood panel producer, is to add 1.2 million m3/year capacity to its already significant portfolio with a plan to build two new world-scale MDF mills in Brazil by 2015.

The Sâo Paulo based group is investing almost US$766m in both mills; a 520,000m3/year fibreboard plant in Itapetininga, Sâo Paulo state, with completion late next year; and a 680,000m3/year MDF plant, due to be built at a still-undisclosed location with a start-up date scheduled for the second half of 2014.

Once these projects are completed, Duratex predicts it will have an annual MDF capacity of 2.7 million m3. Considering current prices and projected sales mix, this will generate revenue of more than US$638m, it stated.

Also in Brazil, Arauco has announced plans for a further mill in Jaguaraíva, with an installed capacity of 500,000m3, in late 2012. This will bring Arauco’s capacity in Brazil to 1.147 million m3 by end-2012.

Arauco has further announced a 90,000m3/year increase to its Puerto Piray mill in Argentina with a start-up in early 2012.

For 2011, the expected Berneck plant in Brazil (414,000m3), the Tablemac plant in Columbia (130,000m3) and, for 2012, the Fibraplac plant (250,000m3) in Brazil remain unchanged as no new notifications have been advised.

Markets in Brazil have been growing strongly since about September 2009, according to industry association ABIPA, with panel makers focusing on making more value-added production, while demand has also been strong for thin MDF.

The strength in Brazil’s markets comes from a growing number of middle class consumers of furniture and household goods in recent years, particularly in the southern states. According to ABIPA, this growth is set to continue over the next four or five years and has offset poorer export sales in recent times.

There appears to be no shortage of suitable wood supply in Brazil.

Largely as a result of exports of many products and commodities to China, several South American economies have seen strong growth since 2010, with Argentina approaching 7% growth and Chile, despite its devastating earthquake in 2009, has also shown growth of around 4.8% in 2010.

Peru, Colombia and Mexico have also benefited from strong expansion.

On the downside, excessive dependence on China for exports may rebound if the Chinese economy has to readjust to changing economic realities.

Brazil has experienced strong growth in its medium density particleboard at the expense of MDF but, according to economic expert Bernard Fuller, writing in WBPI Issue 5, 2010, p52, MDF’s share of panel production in 2011 will reach 36%, up from just 19% in 2005, while MDP will have a 33% share.

In India, Greenply Industries launched its new MDF line in March 2010. The particular significance of this line, located in Pantagar, Uttrakhind, is that it is the first MDF line in India for which the machinery was all sourced from European suppliers, including a 28m-long Dieffenbacher CPS continuous press, giving an annual capacity of 180,000-210,000m3. Greenply markets its MDF panels under the Panelmax trade name.

In South East Asia, Panel Plus of Thailand is installing a new line at Hat Yai with a Siempelkamp ContiRoll continuous press of 8ft x 38.7m. Capacity, due on stream at the end of 2011, is expected to be 330,000m3/year.

Meanwhile, in Klaeng, Malaysia, Rayong is building a similar MDF line with the same size ContiRoll press and an anticipated annual capacity of 300,000m3.

Future trends
There are approximately 22 new lines under construction in the rest of the world, with about half of these being located in China.

PT Sumatera Prima Fibreboard’s 260,000m3/year new mill in Indonesia has been postponed until end 2011 and the 40,000m3/year expansion at the Segamat mill in Malaysia, shown in last year’s survey of 2009, is no longer reported.

The joint venture company in Vietnam, MDF VRG Dongwha JSC, has increased the capacity of its new mill planned for 2012 to 360,000m3/year, up from the previously reported 300,000m3/year.

The impact on global capacity of these changes is shown in the ‘Summary of new capacity’.

By the end of 2012, world capacity will exceed 85 million m3, with 46% located in China and 26.5% in all Europe.

South America will pass seven million m3 per annum in 2011, to reach just over 7.9 million m3 in 2012.

It seems remarkable that MDF demand appears to have held up so well in spite of the global economic difficulties and, whilst the rate of capacity growth is decelerating, it ensures more than adequate supplies from a very wide range of geographical sources to service users of this versatile material.

How the Listing was Compiled
The WBPI listings from 2010 were reviewed and modifications made, using other published sources and data received from the mills.

Published information was reviewed for news of capacity changes.

These sources included relevant trade magazines, association reports and equipment suppliers’ reference lists.

Self-completion enquiry forms were distributed to the mills in both Europe and North America, requesting current and future capacity data. Other questions were asked about non-standard production, future production rates, price movements and cost changes. The form was also posted on a special website

The mills’ own reported capacities are used wherever possible because this is the basis on which they make their estimates of future capacity and production changes. Where this information is not available, published sources are used, usually on the basis of 330 operating days per year.

Conversion of ft3 to m3/year is made with 1,000ft3 equal to 1.77m3.