This time last year the panels sector was reaping the benefits of rapid economic growth in the UK in 2014. Domestic manufacturers increased production accordingly and strong demand, along with weak sterling, also drew in a surge of certain imported sheet materials during 2015.
Demand has largely been driven by the resurgent UK housebuilding sector, said Alastair Kerr, director-general of the Wood Panel Industries Federation (WPIF).
“The two principle markets for panel products are construction – mainly housebuilding – and furniture,” he said. “Simply put, build a new house and you use wood-based panels. Sell it and the new owner will buy furniture.”
The dramatic gains of 2014, when UK housing starts were up by 9% on 2013 to 163,700 were not quite matched in 2015 (forecast at +5% to 172,425) but housebuilding growth is still anticipated – by 4% in 2016 and 3% in 2017. And, with the Structural Timber Association predicting timber frame’s market share of housing starts to rise to 27% by 2017 (up from 24.6% in 2014), demand for associated sheet materials, such as sheathing products, will increase accordingly.
As a result, panel manufacturers remain confident and investments in both capacity and value adding are continuing.
The WPIF estimates that UK producers satisfy just under two-thirds of domestic demand for MDF, OSB and chipboard and said it believes that, in terms of the normal operation of the individual plants, mills will be at, or close to, capacity.
Chipboard has put in the strongest performance, according to Mr Kerr. “There has certainly been an increase in output there, particularly with overlaid board and although there was a slowdown in the last quarter of 2015, the first three-quarters were really quite positive and there has been a lot of optimism.”
Rafael Willisch, managing director at Finsa UK, said that its chipboard business has been performing very well. The company’s new Superpan (MFC) plant is now running and, at the time of writing, was expected to be in full production around March/April time.
“The Superpan coming from this new line will feature some improvements on our products,” said Mr Willisch. “The existing line in Porto, which at present is running alongside the new line, will have to be transferred to a new location in the near future. The new line’s production capacity is around 250,000m3 per year at stage one, but this could be increased in a second stage.
“We experienced an increase in demand for chipboard due to shortages in Europe in the first half of 2015,” he said, adding that the chipboard market in the UK had been stronger than in the rest of Europe – as it had been for MDF. Egger UK has had a similar experience.
“The UK market has continued to show growth while the generally larger markets of Germany, France and eastern Europe have remained stagnant or, in some areas, such as Russia, have seen a decline,” said Bob Livesey, Egger UK managing director.
He added that Egger UK’s performance is increasingly important to the Group.
In terms of the different market sectors Egger taps into, Mr Livesey said that investments by major retail, hospitality and education organisations continue to support growth in the specification and fabrication markets, while sales of higher value retail furniture products have also been supported by fiscal changes. Housebuilding has fuelled demand for both building materials and furniture products, he said.
“Generally the chipboard market has been quite strong on the back of a growing economy, particularly in the construction industry and last year saw demand at a slightly higher level than supply,” he said.
He added that OSB and MDF, both of which the company brings in from the Group’s other operations, have faced more challenges, particularly in the commodity market, where imports have increased.
As previously reported, Egger has invested significant sums at its Hexham facility. Recent improvements include a new impregnation lamination line, updates to its Campact resin facility and a new dispatch warehouse. All these investments were completed on time and, said Mr Livesey, “have continued to support the security of supply and a commitment to service which we hope our customers will benefit from”.
He added that construction on two large projects is scheduled for later this year, the details of which will be confirmed at a later date.
Norbord has also witnessed “some impact” from imports on the MDF market but said it was seeing some “reasonably strong” figures on chipboard and expected that to continue.
“We tend to see less of an impact from imports on our chipboard because we’re geared more to the flooring market which is much more of a service proposition,” said Karl Morris, managing director of Norbord Europe.
“A significant proportion of the chipboard flooring in the UK is coming out of our site at Cowie and we’re enjoying the benefit of that as housing starts increase. What has been a little disappointing is the RMI market has not been as busy as people anticipated.”
The MDF market has been the flattest of the board types, with a “modest uplift” in production, according to industry observers, although manufacturers such as Finsa and Medite maintain that the improving economy has supported good growth and that demand has been “steady”.
The latter manufacturer also reports that the market for its Medite Tricoya Extreme MDF is continuing to grow “in line with expectation”.
“We have been manufacturing steadily increasing volumes of product in order to satisfy various end use markets,” said Andrew Macdonald, director of sales and marketing at Medite SmartPly. “There has been very good acceptance of the product’s unique characteristics in applications such as high-end exterior doors, windows and joinery, roofline products (fascias and soffits), cladding (both flat façade and profiled), shop fronts, signage and garden products.” Meanwhile, Finsa’s agreement with Proteak jointly to operate a new MDF/HDF plant in Mexico has come to fruition.
Construction of the plant has finished and production trials are ongoing, with plans to be fully operational in the first part of this year.
Of the three board types manufactured in the UK, the OSB market has been the most affected by the influx of imports from Europe. “It has been tempered by both currency issues and overcapacity in mainland Europe, which has led to imports of very competitively priced OSB,” said Mr Kerr.
“This has dented profitability – but the positive aspect is that the overall market has been really reflective of the construction market and demand has been pretty good.
“OSB has definitely continued to take market share from plywood,” he added. “For example, where plywood was the dominant sheathing board in frame construction, OSB is now the dominant board in that application.”
Growth in the OSB market has encouraged significant investment in its production. The much-prophesied reinvestment at Norbord’s OSB mill at Inverness has recently been announced, for example and will see £95m spent on upgrading the production to continuous press technology and a near doubling of capacity to 640,000m3 per year.
Ahead of that, in Ireland the €59m upgrade of the SmartPly mill is on schedule. The Waterford mill took delivery of a Siempelkamp line last summer and initial production is anticipated to commence in the third quarter of this year. Capacity is set to “significantly increase”, according to the company.
“The SmartPly mill upgrade will underpin the realisation of our market-led, speciality focused approach through the provision of more flexible and versatile production capabilities,” said Mr Macdonald.
“The investment into the SmartPly facility will give us the scope to expand our product offering to wider market demands,” he said. “We continue our investment to develop new innovations – for both OSB and MDF – which provide additional properties to overcome technical challenges or legislative requirements.”
The trend towards more fully finished products and systems continues. The development of more specialist products with intrinsic added value is customer driven and is designed to overcome specific market challenges, said Mr Macdonald. He cited the development of SmartPly FR/FR Build Flame Retardant OSB, SmartPly VapAirTight and Medite FR as prime examples of this.
As for surface finishes, there are two ends of the spectrum. Finsa, for example, introduced both high gloss and supermatt versions of its Fibraplast Lucent MDF last year, as well as its Studio Range register embossed melamines. Meanwhile, Egger has recently launched a Perfect Matt product, which succeeds in providing a very matt finish with the advantage of not showing fingermarks.
“Printed designs have continued to improve and evolve but what is important now is how you combine these with textures and how you complement different designs and material,” said Mr Livesey. “With the use of more solid colours, greys and whites especially, the focus, in a kitchen, is increasingly on how all the elements of the kitchen work together, such as the worktops coordinating with other elements such as doors and end panels.”