He said pricing was driven by three basic factors – supply, market demand and cost – and that all three factors were currently putting a squeeze on price, most particularly for chipboard and MDF.
In early 2000, Mr McElroy said, the European panel board industry suffered from poor demand coupled with supply excesses, and over the past two years that situation had been compounded by massive cost increases.
Mr McElroy explained that European consumption of MDF and chipboard slowed dramatically in the first half of this decade – a bad time for the industry which had just put large increases in capacity in place.
The result, he added, was inevitable. Panel product prices fell dramatically and industry responded with massive consolidation, the closure of higher cost capacity and investment in order to compete in a low price environment.
Now Euroland economies are recovering and eastern European, Russian, Asian, Middle Eastern and North American economies are particularly buoyant. But industry rationalisations have resulted in supply shortages in various areas – while many of the cost components involved in the production and distribution of wood-based panels have escalated.
“It is not realistic to expect prices to stay at levels that appeared to be the norm by 2003-2004,” said Mr McElroy.
Many customers were now seeking reassurance about product supplies. Mr McElroy said: “But this is a paradigm shift that is not yet obvious to everyone in the supply chain – particularly those who have never been exposed to an environment of tightening supplies and prices.”
