The industry added 6.37 million m3 to MDF capacity in 2007, a growth of 13.5% over 2006. This was predicted in last year’s survey and is further underscored in the results summarised in this year’s. Of particular interest are the beginnings of significant changes in the relative importance of the regions; the ‘rest of the world’ increased capacity by 15% in 2007 and accounted for 62% of world growth, compared with 44% in 2006.
This would have been considerably greater were it not for the expansions in Russia and Turkey which are included in the ‘Europe’ region and described in Part I of this survey (WBPI Issue 3, 2008).
Information for the regions outside North America and Europe incorporates over 100 modifications and additions compared with the 2007 listings.
As always, the editor of WBPI, and the author, are highly appreciative of the contributions made by mill operators, equipment suppliers, journalists, commentators and other individuals who continue to offer their support. Often our contributors offer clarification on the various media announcements of new projects which are frequently reported in different publications with some variations as to mill location, capacity or timing which has the effect of creating ‘ghost mills’ and the prospect of greater capacity than might otherwise be the case.
Our description of regional events begins with China.

Chinese mill listings continue to be shown by corporate affiliation for the larger mills and by province for the smaller ones. To create the corporate listing, all current lines and announced projects are included. Where lines were not operational at the end of 2007, they have been asterisked (*) as coming on stream in 2008 or later.
There are 387 lines, compared with 352 at the same time last year, but those asterisked lines are not counted in the end-2007 capacity total of 16,806,000m3.
Thus installed capacity increased by 2.5 million m3 during 2007, suggesting that equipment suppliers caught up with much of the slippage evident in 2005 and 2006. The WBPI listing continues to show fewer lines and less capacity than some other sources. It is hard to account for some 200 additional mills shown in other data, but they are probably not dry-process MDF producers. The WBPI-surveyed capacities are compatible with estimated production levels.
Of the 387 lines in the listings, 227 are in multiple ownership – a 20% increase over 2006. Although there is an obvious trend towards consolidation among owners, it is nowhere near as advanced as in other regions of the world.
Only two groups exceed one million m3 of MDF capacity, namely Dare and Weihua, and Dare has again become the leader over Weihua in terms of current and future capacity. Between them, they have seven new projects with capacities in excess of 150,000m3 per annum.
Suichang, however, continues to possess the greatest number of lines, at 13.
Sunway, an early leader, has not added to its capacity recently. However, other companies have continued to grow, such as Shandong Heyou, Lishui, Sichuan Guodong Construction and PTP.
After several changes in ownership, PTP is now owned by CVC Asia-Pacific and is adding another line. CVC has also acquired Asia Dekor and adding that company’s 200,000m3 per annum capacity to a revised PTP propels CVC to fourth place.
Many of these larger groups are consolidating their position in both the MDF sector and the wider panel industry as a whole. They have several market options selling raw board to both export and domestically-oriented companies. They can also export raw board. They are sometimes integrated into further processing such as flooring or furniture production, which in turn can be exported or sold to the domestic market.
However, export-oriented end-users have been badly affected by the US downturn and softer markets in Europe and elsewhere. Direct exports of MDF – strong in 2007 – are down 6% in Q1 2008. Imports of raw board, on the other hand, are 18% down.
The mills which came on stream in 2007, and the others expected in 2008, may well find themselves in a crisis fuelled by rising costs and weaker demand; plus, of course, their numerous new competitors.

Developments in Other Regions
Outside China, most new activity in 2007 was confined to Thailand and Iran. Vanachai, Advance Fiber and Siam Fibreboard (Evergreen) added 610,000m3 of new capacity during the year. Five new mills have reportedly come on stream in Iran – with more to follow. There was a new small mill in India and Evergreen, again, acquiring an Indonesian mill, in Palembang (WBPI Feb/March 2008, p27).
Very little by way of capacity creep on existing lines has been reported. There were two closures of significance, namely CHH in Tasmania – always seemingly a troubled plant even under previous owners – and Laminex is not reopening its Taupo, New Zealand mill after a recent fire.
These events rather set the scene for the new regional dynamics: Australia and New Zealand go into decline under the new Asian and Chinese capacity. This is more than offset by the gains in the rest of the world (comprising Indian sub-continent, Middle East and Africa).
2007 saw the ongoing expansions in South East Asia and South America as well. North East Asia is relatively static, with no change in Japan and modest growth in Korea. (The growth attributed as Korean can be interpreted as Dongwha’s aggressive acquisition policy elsewhere in the region. The company is believed to be seeking another deal in Malaysia – having achieved an injection of funds from Laminex for a share in their Mataura, New Zealand, mill).
2007 was a relatively quiet year in South America with Masisa Brazil bringing on the most notable new capacity and a precursor to dramatic events in the next two to three years.

Future Trends
The ‘Summary of new capacity’ table shown above details the changes anticipated from 2008 onwards.
Globally, at least 80 mills are under construction or on order from the end of 2007 to 2010, accounting for 13.1 million m3 of capacity. This is even after 6.3 million m3 was added in 2007. Europe and North America will account for 3.6 million m3 and the balance will be found in the ‘rest of the world’.
China will account for over 4.5 million m3 of the 13.1 million m3, with 22 lines in 2008, 18 in 2009 and two booked for 2010. From 2007, China will install 25 large lines in four years. Intriguingly, the average size of new mills rises from 80,000m3 per annum in 2008 to 138,000m3 in 2009 and 175,000m3 in 2010.
During 2008, China will overtake Europe with the largest capacity in a
single region in the world.
The capacity situation in Australia/New Zealand will most likely remain quietly static during this period.
In North East Asia, a new line for Kwangwon Lumber in inchon of 100,000m3 per annum is expected. ©p 30 ß p16 This is part of Korea’s gradual build-up of demand and capacity. Or perhaps not so gradual; Dongwha is a partner in the new Vietnamese mill of 300,000m3, probably due in 2010.
South America continues to offer surprises. Over three million m3 will be added up to 2010. The duratex mill is now reported as being 760,000m3 per annum and not the 680,000m3 recorded in last year’s survey. Berneck will open a 680,000m3 per annum line during 2008 and Satipel one of 350,000m3.
Paneles Arauco has plans for a 500,000m3 mill in Paillaco, Chile, but not due before 2010.
Shanghai Wood Based Panel Machinery Company Ltd (SWPM) will supply four lines to Brazil during the period, bringing a total to that country of eight new lines in two years and a total capacity of 4.5 million m3.
After a busy 2007, South East Asia is a little calmer until Vanachai © p32 ß p30 installs a 300,000m3 line at Surathani in 2009 and Vietnam completes another 300,000m3 line in 2010.
The table (left) summarises the regional position after these changes are taken into account.
Normally, buoyant capacity building would suggest optimism regarding industry conditions – if not at present, at least when the new lines go into commercial production.
There are several common features running through this year’s survey, many of which hark back to the word ‘crisis’ in the title.
Wood costs continue to increase and are exacerbated by the spectre of reduced availability in many countries as a result of (subsidised?) demand from bio-mass and bio-fuel developers.
As a counter to this, numerous new projects are located close by plantations, particularly in South America and China.
The increases in crude oil prices have measurably influenced resin and energy costs (and inevitably distribution transport costs for finished board).
In the medium term – say the typical pay-back period for a new mill – alternative fuels and energy sources will have little impact. Therefore, it is all the more intriguing to view so many new announcements.
Several mills were brave (or honest?) enough to report their view that production costs would rise during 2008/2009 by 20-40%. Their prospects for price increases are pessimistic, at around only 5% each year.
Over a two-year period that represents a crisis.
Whether the cost pressures will stabilise, and general world demand stage a recovery, is a matter of speculation rather than certainty.
Of course, many of these new projects are in developing markets which possess plantation timber and where demand is relatively strong.
The regulatory environment has been described before as having an impact on panel producers’ costs. The implications of all these factors for panel production and panel demand are difficult to divine.
The author’s fears are several. Taking the combination of forces, will wood panels be relatively harder hit than other materials? At what price do panels lose their cost-in-use advantages? Which end-use sectors and regions will suffer the most? Are there any regions/end-use sectors which can better militate against these effects?
Is the author too pessimistic and should he consider the principle of ‘a rising tide floats all boats?’ Recently on a trip to America, the comment from one moulding and component manufacturer was that ‘under these conditions why use a panel when solid wood can be used?’
It would be prudent for panel companies and/or industry bodies to consider sensitivity analyses to address these issues and better illuminate the way ahead. n

John Wadsworth is the managing director of Intermark. Based in the UK, he has been researching and consulting in panel products globally for more than 26 years.
He can be contacted by
phone (44) 1376 501565;
fax (44) 1376 501557;