There is a general feeling among chipboard panel manufacturers that stead-ily rising raw materials costs over the past 18 months must be balanced with price rises on finished board as a matter of urgency. People have been hoping to pass on a proportion of these costs for some time but only now has it become a feasible proposition. ‘I think it is time for the market to get a reality check on the price of chipboard,’ believes one contact.
‘I think the market has accepted that things have to change – the question is by how much?’ said another.
Several manufacturers, including the major UK-based firms, have raised prices by between 3-7% since Christmas. Those that haven’t say they will be doing so in the near future. ‘We won’t be talking about massive price increases but if we can get something on the table out of our customers, that’s what we’ll be looking for,’ said one.
‘There has been no increase in demand at all but I think the market is bobbing along reasonably well,’ said a spokesperson for a domestic producer, who sees cost inflation as the biggest risk facing the industry at present. It is a sellers’ market in roundwood, which has pushed up the price that manufacturers have to pay for their wood, while prices on resins, transport and handling have also risen dramatically. But the contact said the situation had been compounded by staggering increases in energy costs. ‘Our energy costs more than doubled in the final quarter of last year,’ he said. ‘It really was a big hammer-blow.’ The huge rise in energy costs is put down to increased demand at a time when capacity is being restricted.
‘We have raised our chipboard prices by an average of 7%,’ said the contact, who admitted that the move was bold but necessary. ‘I don’t know whether our competitors are fully grasping the severity of the situation with raw material costs,’ he said. ‘We made a decision that we really do need to move it along. Normally we wait for supply and demand to be the driver for forcing price increases through, but with the extra capacity in the market place, it will take some time for things to rectify themselves. We need to respond now to these cost pressures.’
A chipboard agent who raised his prices by 3% in the new year said there were the usual grumbles from buyers in response to the increase but that they had generally been accepted with good grace. However, while the modest increase has helped keep customers happy, the agent said it was not enough: ‘Three per cent is not as much as we would have liked but it is better than nothing.’
Wood flooring
Demand for chipboard from worktop and furniture manufacturers is described as buoyant, while healthy consumer demand for wood flooring is the main driver behind increasing sales into wholesalers, builders merchants and specialist retailers.
‘This is one of the busiest times of the year for the flooring side,’ said one UK board manufacturer. ‘We are doing very well and taking on lots of new customers in flooring. We’ve also had enquiries from several large organisations we haven’t dealt with before.’
‘It is a good market in the UK, but very competitive and hard going,’ confirmed an overseas manufacturer. ‘It has become harder for everybody concerned, not just for us.’
However, he is convinced that growth in demand for laminate flooring in the UK will continue: ‘It is one of the products that we see a very big future for.’
Core board sales are holding up well, while prices on melamine-faced chipboard have improved.
It remains anybody’s guess just what impact the additional capacity provided by Sonae‘s Challenger plant will have on the wider market. Managers at the plant are said to be still ‘getting to grips’ with production and it is not yet known when it will be running at full capacity.
The Domotex Exhibition, the major European carpet and wood flooring event, took place in Hanover, Germany, from January 13-16. The show attracted 1,116 exhibitors, compared with 1,070 last year, and 45,000 trade visitors attended. There were around 30 com-panies exhibiting laminate flooring at this year’s show – a similar number to last year but three times more than in 1999 – including major UK and Continental chipboard interests.
The reason for the presence of so many more laminate flooring exhibitors is phenomenal growth in the market, according to one exhibitor. ‘The market has mushroomed,’ he said. ‘It has been growing at something like 3-4 million m² a year and I think it still has quite a long way to go before it bottoms out.’
Although it is always hard to gauge what a show has yielded in the immediate aftermath, attending Domotex had been well worth the effort, he believes. ‘It was a good show. We had good responses from the people who came on the stand.’
However, the UK laminate flooring market is not producing great returns for all concerned. ‘On the laminate flooring side we are not doing too well,’ admitted one agent for an overseas producer. ‘Everybody has seen flooring as the place to be recently and, while the UK market is buoyant, it is more competitive than ever.’ The agent plans to maintain a position in the market in the expectation of a ‘shake-out’ in future but: ‘I don’t think it is going to happen any time soon’.
Another contact said the ‘bandwagon effect’ is a common phenomenon in almost every new market. ‘When a product is relatively new, everybody rushes into the expanding market,’ he said. ‘You get all sorts of qualities and prices flying around for a while.’
The bulk of UK laminate flooring sales are conducted through the large DIY outlets. While many sell good quality product, there is also some ‘rubbish’ among the product mix. According to one contact,this is not doing the wider market any good.
Quality question
‘The sort of laminate flooring you see in some DIY outlets is a very bad advert for wooden floors,’ commented one merchant. ‘Not only is it a poor quality product, you see opened packs of it lying on the floor, with bits of tongue kicked off and damaged edges. It gives consumers the wrong impression.’ The merchant added that he thinks British consumers have yet to be convinced of the merits of a wooden floor over carpet: ‘It is very different on the Continent but the British still seem to prefer carpet, despite our efforts.’
‘You can actually find good stuff in the big DIY stores,’ believes one chipboard agent, ‘you start from the bottom and work your way up. Don’t forget, most of them work on the basis of a loss-leader at some ridiculous price in the hope that Mrs Smith will buy something that cost double what she went in to look at.’
The European Producers of Laminate Flooring have been heavily promoting the recently-recognised DIN standard, which takes into account the amount of traffic a floor can expect to encounter in its lifetime; classification EN 13329 replaces the traditionally-used Taber test, which provided a simple measure of resistance to abrasion of the surface of a floor.
‘It now takes in the product as a whole, not just how scratch-resistant the surface is,’ said a contact. ‘In theory, in the past, you could have used the worst possible substrate in the world, put a very high scratch-resistant surface on it and produced what looked like a very good product. Now all components will be looked at to make sure they reach the required standard.’
But he added that only educating consumers to enable them to be more discriminating about their purchases would prevent them from ‘getting their fingers burnt’ with laminate flooring.
In the wider chipboard market, things are expected to remain stagnant over the next few months, with little change in terms of volume. However, the development of panel prices needs to continue and, in the words of one manufacturing contact, retailers of chipboard must take their fair share of the squeeze on prices. ‘Retailers have to understand the overall supply chain and play some part in allowing us all to make a bit of a living,’ he said.
A spokesperson for one chipboard producer said the com-pany will be able to avoid this year’s seasonal dip in the market after developing ‘other avenues’ for its board products that will help maintain sales over the period’ ‘Our quiet period, if there is one, is usually May/ June, when demand dips a little,’ he said. ‘But we are not stopping at all this year. We plan to expand our distributor base in the second quarter of this year and work right through from January to January.’