In line with their own predictions from the opening weeks of 2013, local MDF producers will be seeking price increases from early in the second quarter. There has been a price movement hiatus since November last year but, according to producers, the pressure from spiralling costs is now forcing them to take action despite sales volumes being relatively flat when compared to the same period last year.

One producer highlighted a 45% year-on-year increase in his gas costs. ‘And they are still going up’, he said. On the same basis, the operation’s electricity bill has surged 33% higher while its methanol costs have jumped 24%. And in the case of the latter, he added, there has been a "double problem" because methanol is bought in euros – a currency which has been gaining value in relation to sterling. Once the 5% increase in the company’s timber costs over the last year is factored in, the combined impact on the business has been "quite dramatic", he said.

As a measure of how MDF prices have developed over much the same period, Norbord suggested in its most recent financial report that product values increased by around 3% in the 2012 calendar year.

Another domestic MDF producer said that, largely as a result of hikes in wood and glue costs, the sector needs a price rise. "People can’t carry on selling MDF at the numbers that are kicking around at the moment."

In response to these market conditions, one domestic producer is planning to introduce price increases of "at least 5%" across its whole MDF range from the second half of April. Another confirmed it would also be implementing a similar increase in April that would apply to most of the company’s range of MDF products. One of these producers expressed the hope that the increase would be assimilated as successfully as the previous hike in November last year while the other contended that distributors in particular are "keen to get prices up because their own overheads are rising too".

Indeed, a distributor told TTJ: "We run large fleets and our costs are rising, so an increase in product values is important. I’m not too nervous about getting this latest MDF price increase through. Everything else is rising in price in our sector, so perhaps that has built up a mentality of acceptance." However, a fellow distributor said that, in today’s "fiercely competitive" sales environment where volumes are "steady at best", "distributors will have to take some of it [the MDF price increase] on the chin".

MDF sales volumes suggest consumers’ activity levels are generally far from buoyant. "The market is flat across all products," a producer told TTJ. "I didn’t expect too much of volumes in the first quarter, but what has surprised me is the hit on costs – I didn’t expect it to be that inflationary." His business has continued to run at full production throughout the first quarter and his intention is to maintain this level of output. However, he also said that he would not be prepared to build stocks given the current cost situation.

His counterpart at another domestic production operation agreed: "We wouldn’t build stocks – it doesn’t make sense." For his business, MDF sales volumes in the first quarter were no lower than in the same period last year and remained "on plan". That said, buyers have been generally looking to keep their stocks low – especially with the financial year-end coming up. The former anticipated no major change in market conditions during the second quarter but welcomed the fact that the disruptive Easter break would be "got out of the way early". Also on the upside, he alluded to a greater degree of optimism within the market – a phenomenon he ascribed to a widespread sense that "it can’t get any worse and so it has to go up at some point". Another contact agreed that the market had appeared to plateau "and so people see that it can’t carry on falling".

Shopfitting a bright spot Shopfitting continues to be one of the more robust areas of demand for MDF, although at least one producer suggested that order levels were livelier towards the end of last year and that the first quarter had been a difficult period for the retail sector in general. "There are still a lot of [shopfitting] projects waiting for the button to be pushed," he added. Shopfitters are "reasonably positive" about their market prospects, said another contact, while a fellow distributor commented: "Those shops that are still left on the High Street are spending money. Demand from furniture manufacturers is also better than it was."

One producer pointed to an upturn in interest from the social housing sector but believed this was largely a seasonal effect as attempts were made to spend budgetary allocations ahead of financial year-ends. According to another contact, there have also been parts of the UK where construction-related demand for MDF has been holding up relatively well.

Veneered MDF is said to remain under pressure, with evidence of "some silly prices in the marketplace" and of some businesses being prepared to cut corners on quality, according to one contact. He warned that more veneered specialists could find themselves struggling to survive given the "big threat" that continued to be offered by well-made melamine alternatives. A distributor noted the additional pressure imposed by due diligence requirements on some of the more exotic veneers.

The recent weakening of the pound against the euro could help UK-based producers by making exports of their MDF more competitive. Stronger sterling is believed to have played its part in cooling the UK’s exports in the second half of last year: according to the Timber Trade Federation (TTF), overseas shipments leapt 16.6% across the whole of last year to 193,000m3, with a peak of 59,000m3 attained in the first quarter while the final three months of the year saw the low point for exports of 34,000m3. Indeed, shipments abroad in the closing quarter of last year failed to reach the 40,000m3 achieved in October-December 2011. Despite this drop-off in exports towards the end of 2012, last year provided yet more proof that UK producers have established regular overseas outlets for their MDF. One of the results of this, said a non-producer expert, is that they have been able to achieve greater stability within the domestic market.

In contrast to exports, latest figures from the TTF reveal that UK imports of MDF fell 8.7% last year – from 611,000m3 in 2011 to 558,000m3. According to one contact, MDF has continued to arrive from relatively close-at-hand overseas suppliers with an established presence in the UK whereas longer-haul shipments to this country have not made commercial sense for some considerable time.

Once again, the consensus is that the UK MDF market, while not in rude good health, is continuing to outperform that on the Continent. "Margins are a bit under the cosh but demand in the UK seems to be holding up quite well," said a contact, The same cannot be said, he added, for many parts of mainland Europe.