China has dominated discussions in the panel industry, at least for MDF, for the past few years as massive new capacity has come on stream.
An industry which had previously been composed of small-capacity, Chinese-made single- or multi-opening press lines, each producing from 10-50,000m3 annually, suddenly embraced continuous pressing technology from the European machinery manufacturers Siempelkamp, Dieffenbacher and Metso Panelboard.
The result was that Chinese MDF capacity went from around one million m3 per year in 1995 to around 16 million m3 this year. That includes a number of new Chinese-made, multi-opening lines, each with an annual capacity of around 80,000m3.
However, the scarcity of wood raw material in China, coupled with some over-optimistic investments and a feeling the market can’t sustain that kind of dynamic growth, has meant a marked reduction in new MDF projects in the past couple of years.
Chinese production
Attention is now turning to chipboard production in China, with the first two large-scale continuous lines having recently begun production. But, of course, the raw material problem remains, although a lot of tree plantations are being established.
The driving forces behind China’s capacity expansion are the growing domestic market for furniture and building, and burgeoning furniture exports.
Meanwhile, the major western European panel makers are building large new mills for both MDF and chipboard in eastern Europe: in chipboard alone, Kronospan is established in Poland, Romania, Russia, Croatia, Latvia, Slovakia and the Czech Republic; Pfleiderer is in Poland and has plans for Russia; and Kastamonu of Turkey is in Bulgaria too.
By contrast, there is little new capacity within the EU15 countries, with no new MDF mills in western Europe for four years and a similar story for chipboard.
However, Turkey will have 726,000m3 of new chipboard capacity in the next two years and about 660,000m3 of MDF. In fact, Turkey is set to become the second largest producer of MDF in Europe after Germany.
After the ‘economic blip’ in South-east Asia in the late 1990s, Thailand and Malaysia have rejoined the fray in earnest, with 748,000m3 of new MDF capacity in three lines, and 166,000m3 of chipboard due next year in Thailand alone.
In Malaysia, there is 390,000m3 of new chipboard due this year in addition to the nearly 600,000m3 Mieco added in 2005.
Wood raw material supply is becoming an issue in South-east Asia and is likely to limit further major capacity expansion to some degree. It is also unclear where the market for all the existing/planned capacity is going to be, but much will be exported.
North America, like Europe, is showing very little movement in either chipboard or MDF capacity. South America is a different story, with Berneck of Brazil building a 250,000m3 a year MDF line for 2008, and other new developments in the pipeline.
Major investments in completely new plywood capacity are increasingly rare as MDF eats away at the thin plywood market, while OSB attacks the structural side. Having said that, Europe still produced around four million m3 in 2005 and the European plywood federation, FEIC, claims 4% average annual production growth over the past 10 years.
North and South America and Scandinavia, of course, still have strong softwood plywood industries too. China’s plywood industry (around 25 million m3 annually according to the FEIC) has caused some controversy in Europe, which has been well documented in TTJ.
Boom in OSB demand
North America saw an unprecedented boom in OSB demand in 2004/5, with consequently strong prices, leading to considerable investment in new capacity. Unfortunately, by the time that new capacity hits the market, demand may not be so strong and some predict painful economic times ahead for producers.
Meanwhile European OSB production sits at around 3.7 million m3, with just over one million m3 of new capacity planned in eastern Europe. Demand has only slowly risen towards existing capacity levels.
A major feature of the European panel industry in the last two years or so has been consolidation, with fewer, bigger companies controlling the vast majority of the capacity.
So, it would appear that supply of panels for the foreseeable future is not likely to be a problem. Demand is, of course, another matter.
With rough world capacities of 3.9 million m3 of OSB, 27.5 million m3 of chipboard, 48 million m3 of MDF, and 63 million m3 of plywood (FEIC figure), where are the markets?
European consumption of panel products is slowly improving and, with it, capacity utilisation for the mills, but the market still lacks energy. China is a growing domestic consumer as well as attracting furniture manufacturing capacity from Europe and the US. The South-east Asian economies are growing steadily again, with the exception of Indonesia, and should feature increasingly in world markets.
It seems the world is now looking at south Asia, particularly India, as both a growing market and a low-cost production base for the future, for panels, furniture, or both, but probably not another China for the panel making industry.
The outlook would seem to be for increasing competition in a global market while manufacturers face rising costs for their major raw materials – wood and oil-based resins/additives.
