Summer is a traditionally difficult period for all of the panel products and yet the UK chipboard sector has been able to point to some positive developments over recent weeks and months. Overall, however, competition within the sector continues to be tight and margins remain as elusive as ever for manufacturers, merchants and distributors alike.
The general view is that the market has held up “as well as could have been expected” in the past few months. “It has been a more gentle summer than in some recent years,” suggested one source. “It’s not been great but there hasn’t been the same level of summer madness.”
Furthermore, he was happy to confirm that “we have a reasonable order book for the post-holiday period”.
Masistar plant
The most notable recent boost to the UK trade was perhaps confirmation from Egger that, having bought a large part of the former Masistar Ltd plant at Shildon, it would not be looking to re-start production on that site or, indeed, anywhere in the UK. There had been fears within the chipboard sector that, at a time of massive overcapacity and poor profitability, resumption of production at Shildon after a hiatus of several months would have a damaging impact on the balance of business.
A feasibility study by Egger has confirmed the widespread contention that it was not viable for the company to start up production at Shildon. Instead, the major panel producer is looking at options for siting the plant – comprising two chipboard lines plus chipping, drying and sanding machinery – in eastern Europe. Although, as one source observed, relocation to a country with a lower cost base still meant that “the same capacity could still come back and bite us some day”, there has been general relief at the news that the plant appears set to disappear from UK shores.
Stance on prices
“It has been a more gentle summer that in some recent years. It’s not been great but there hasn’t been the same level of summer madness” |
The first half of the summer has produced slightly better conditions in the UK chipboard sector than many had feared. One manufacturer claimed to have achieved record production levels in May and June, ahead of a dip in July attributed to technical problems in the plant. Noting that the company had picked up on “one or two unexpected export opportunities”, he added that his business was refusing to sell at below self-imposed minimum price levels despite the appearance of “a couple of prices out there that we have been amazed at”.
He attributed the firm’s strong stance on prices partly to the pressure imposed by rising costs. The small reduction in chemical costs expected for the third quarter would fall well short of offsetting the increases introduced in both the first and second quarters of this year.
Another supplier confirmed that it had succeeded in pushing through price increases of between 3-5% on its flooring products at the start of the summer, despite the fact that sales volumes had been broadly similar to those of 12 months earlier. Growth had been visible, however, in the sale of kits for the housebuilding sector, he added.
T&G flooring
A manufacturer confirmed that demand for T&G flooring had been strong over recent months but that his own company still had spare capacity. Another contact, meanwhile, said that his own company was opting to remain on the sidelines of the T&G flooring market because excessive competition had turned what was originally an added-value product into a loss leader in many instances.
The UK market for P2 and P3 chipboard was described this week as generally stable despite a recent influx of imported material from Scandinavia. Prices appear to have held reasonably firm in the face of what was described as “fairly lightweight” demand. Having contended that “prices are hardening”, a manufacturer later said that avoidance of substantial price weakness over the summer months could lead to “a good autumn”.
The toughest conditions this summer appear to have been reserved for melamine-faced chipboard, with one source describing the market as “a dog’s dinner” characterised by prices that, in many instances, “don’t make sense”. A lack of orders had precipitated “a fight for whatever’s available”, to the extent that “long-established customer relationships” were coming under pressure.
As for the overall chipboard customer base, the construction industry appears to be reasonably busy but the furniture and shopfitting sectors have continued to be affected by the low level of consumer confidence. Some furniture producers are understood to have introduced short-time working, most notably in the upholstered and office furniture areas.