2008 will long be remembered as the year when the global economic downturn, occasioned by the collapse of the US and European housing markets, encountered the global financial crisis. In many ways the two events were linked through the sale of toxic assets comprising dubious housing loans among the world’s banking community.

More than one year on and much of the world has experienced recession. It is fair to say that crisis and near-crisis conditions remain with us.
Inevitably, in the market conditions prevailing, the particleboard industry has suffered greatly. However, a little like the geographical impact of the economic crises, the performance of the particleboard industry has also varied by region and by country.
Part II of the 2009 survey of 2008 capacities, which covers the ‘Rest of the World’ outside North America and Europe, shows that aggregate world capacity grew by just 1.3% or 1.20 million m3 in 2008. North American/EU15 particleboard capacity declined by 2.3%. Their share of world capacity fell to just 46.9%, against 52.7% as recently as 2005. This is because capacity in ‘other Europe’, which includes Turkey and Russia, expanded by about one million m3 (+5.2%) and the ‘Rest of the World’ grew by 1.2 million m3 (+4.4%) to the end of 2008.
Capacity in the ‘Rest of the World’ at the end of 2008 stood at 28,507,000m3, compared with 27,290,000m3 at the end of 2007. However, even in these slightly more buoyant economies, we cannot even pretend that capacity represents production. There is evidence to show that capacity utilisation in Africa and South America in particular is running at uneconomic levels for many operators.
The listings of mills show fewer changes than has been typical in past surveys, with the major changes being the incorporation of the new mills opening during the year (reported one year ago in WBPI Issue 6, 2008/9) and one previously existing, but unrecorded, mill in a new country for the survey, namely Zambia. An Ethiopian mill is also shown for the first time but again this mill was reported in the 2008 survey as a new project.
The editor of WBPI and the author continue to extend their thanks and appreciation to all the respondents who took time to complete the enquiry form or to send their comments separately about new projects, closures and changes of ownership during the past year.
We recognise that even after several years our lists are not complete and nor do they always contain the most accurate information for some mills.
The timing of new lines, or plant modifications, which add to capacity can be difficult to confirm against originally announced schedules. This has become an increasing problem during the recent period. The problem of existing but previously unrecorded mills has a relatively small impact globally but can be significant on a regional basis. Adding them to the lists in any given year will show an apparent growth in capacity unless modifications are made historically. The ones shown in the 2009 survey have not been incorporated into historical data because their sizes are not very large.
There remains the ongoing problem in China with the large number of at least 200 small ‘village’ mills with local equipment. It may be possible to make an estimate of their true number and aggregate capacity for any given year but subsequent tracking of change is not practicable. The listings continue to show those existing and new lines incorporating foreign equipment.
The net effect of the changes is to show a position very similar to that reported 12 months ago, with 710 mills operating 795 lines globally. The forecast for 2010 suggests there will be 724 mills with 809 lines. This is a little down on the previous survey but there are some lines previously forecast which have been postponed or abandoned.

There have been no significant additions reported for China since the two larger continuous presses installed during 2007. Indeed there is little new activity reported thus far for 2009/2010. The Chinese particleboard sector is not as dynamic as the MDF sector – or even the plywood sector. Some of the newer mills have reported their intention to substitute the lower quality output of the many small units by offering superior quality and a wider product range.

North East Asia
2008 saw the biggest capacity changes for many years in this region when Japan Novopan and Okura brought on-stream their new lines for a combined total capacity of 545,000m3 per annum. Their motivation is to achieve cost efficiencies with what are the two largest lines in Japan. Both companies operate existing lines and it remains to be seen if they will close one or two of their ageing lines.

South East Asia
There are two main changes to last year’s survey forecasts. Firstly, Green River Panels opened its first particleboard line in Thailand at Hat Yai. Secondly, our report of the SPF mill in Palembang was premature and its capacity has been deducted from the South East Asian total (but it will appear again in the future!).

Other Asia
Despite the diversity within the region, there was no activity reported. There were a number of small changes made to the listings for existing mills, based on new information received.

South America
As reported in the 2008 survey, new announcements and significant changes planning. For more information readers can refer to Richard Higgs’ Focus on Latin America in the October/November 2009 issue of WBPI (No 5).
The two recent developments were the Duratex/Satipel merger and the acquisition of Tafisa Brazil by Cellulosa Arauco through its subsidiary Placas do Parana. Some 1,895,000m3 of existing particleboard capacity is involved in these transactions, as well as up to two million cubic metres in future plans.

Capacity changes in this region remained very quiet during 2008. The region has been affected directly by global conditions and its export markets remain very sluggish.

Through the two new lines in South Africa recorded in the 2008 mill listings, Africa is seen to record one of the largest percentage gains in particleboard capacity of any region. The net effect is, however, affected by the closure of older lines by P G Bison in 2008 and will also be affected by Sonae’s reported intention to close a small line in 2009.

There is apparent growth in Africa because of the addition of the new mill in Ethiopia and the pre-existing mill in Zambia.
Average line capacity Tables 2 and 3 show the average line capacities in the ‘Rest of the World’ and North America/Europe. Some of the new lines have had the effect of raising average capacity in North East Asia and South East Asia. There is very little change noted for the other regions. Even so, average capacities in the rest of the world are considerably below those in North America and Europe. Indeed, EU15 average capacity increased a little during the year.
The total of lines between 100-199,000m3 per annum has fallen during 2008 because there was one closure and one correction to the listings.
Similarly for the 200,000m3 per annum lines, there was one correction to the listing which was in fact moved to the largest category. It is here where growth is most apparent. This total includes lines under construction but not yet operational. There is a 50% growth in numbers, which under-represents the actual capacity change because several of these lines are 500,000m3 per annum or larger.
Operators are concluding that if the finance and raw material are available, then build as large as is feasible. This is particularly true in those countries where there are old, small, mills operating over which the new mills can gain an economic advantage. The industry in most regions – including Europe, Other Europe and North America – are suggesting that extra-large mills will be the future model and closures of the older mills will follow.
Globally, there are eight lines coming on stream in 2009 or 2010 with capacities of 450,000m3 up to 750,000m3. Three of these are in the ‘Rest of the World’ and the remainder are in eastern Europe, Turkey and Russia. Their combined capacities amount to over 4.4 million m3.
There are 36 mills worldwide with capacities greater than 500,000m3 per annum. Five are in ‘Rest of the World’, two in North America and 29 in Europe/eastern Europe. Building big mills has, it appears, become the norm.

Future Capacity Changes
The ‘Rest of the World’ enjoyed capacity growth of 4.6% in 2008 and this will be at least maintained in 2009. Two large mills in Brazil, for Masisa and Fibraplac, aided by the SPF mill in Indonesia, will see 1.37 million m3 added to capacity during 2009 (+ 4.8%). It has been assumed that Sonae will close a line in South Africa. Although the volume gain in 2009 is similar to 2008, the number of projects is much reduced.
We still have no further details of the PT Novopan (Indonesia) mill bought by Segamat.

Beyond 2009 there are only two projects reported. They are both by Masisa: the ongoing expansion of its Montenegro mill; and a new mill in Chile. Therefore, capacity growth in 2010 and 2011 is virtually negligible, but aggregate capacity for the ‘Rest of the World’ may slip over 30 million m3 a year by 2011.
This event was expected sooner but the Duratex one million cubic metre per annum project has been shelved.
Berneck has also postponed or shelved its plans for a very large line in Santa Caterina, Brazil.
Following the Cellulosa Arauco purchase of Tafisa in Brazil, some of the small lines in Curitiba may be closed.
There has been no news of further developments in China. It is possible that, as China’s furniture industry places more emphasis on the domestic market, it may lead to a bigger demand for particleboard.
It is hard to believe that all the regions except South America will remain static during this time. Nevertheless, it is equally difficult to discern just at what point in the future companies will consider new mills and lines. The growth attained in 2008 and 2009 was the result of decisions made prior to the initial economic downturn in 2007 and the subsequent crisis in 2008. It will be a brave decision to commission new lines now which might come on stream at the end of 2010 or early in 2011.
As seen in South America, companies may use their capital and credit lines to embark upon mergers and acquisitions rather than create new greenfield capacity. This was a process European firms went through 20 years ago and Australasian and US firms within the past 5 to 10 years. Apart from South America there are signs of corporate activity in South East Asia, eastern Europe, Turkey and even in China.
One result of the economic conditions may be to give rise to an accelerated strategy of corporate consolidation. If the industry growth follows the trend in capacity growth then companies may find this unacceptable as a return on direct investment in new production. Mergers and takeovers, followed by rationalisation and modernisation, could well prove more attractive in the medium term.