The author and editor of WBPI continue to express their appreciation to all contributors at a time when form-filling and data returns to various organisations occupy a seemingly increasing part of the working day. The industry is faced with an ever-widening regulatory environment covering every aspect of its activities from employment law to health and safety, factory emissions, waste disposal, product codes and standards and transport of raw materials and finished product. To these can be added the management headaches caused by commercial considerations of wood costs and availability, resin prices, labour costs and more recently the prospect of rising interest rates.
Might these factors (and the manner of their application) have any bearing on the sluggish performance of the industries in North America and EU15 compared with eastern Europe, Turkey and Russia? Typically such circumstances would generate a drive to greater efficiency by operators modernising existing plants and building new ones. However, wood sourcing policies, planning permissions and environmental impact assessments have probably helped in making the decision to build new plants elsewhere. In numerous instances, operators have just ‘folded their tents’ and slipped away. A key finding of the 2006 survey is that EU15 capacity fell very slightly in 2005, compared with 14.4% growth in eastern Europe, Russia and Turkey. North American capacity fell by 6.8%.
For the EU15 and the rest of Europe, the situation might be slightly worse because of the nature of the survey itself. Revised data for 2005 – as in 2004 – pushed notional capacity upwards. Some of these ‘new’ capacities were applicable in the previous year and so capacity growth is only apparent growth. The survey is still missing some capacities in key countries. There are other published sources of national capacities but the WBPI survey tries to maintain its independence and use information collected directly from its contributors. Indeed it is often found that data provided to us is slightly different to that submitted elsewhere.
North America
The pattern of mill closures and industry restructuring – ongoing since 2000 – continued in 2005 and will carry on into 2006. Canadian Fibretech closed its two small Compak lines in Alberta (30,000m3 per annum); Dow Bio Products (230,000m3 per annum) ceased strawboard production in Manitoba and Northern Engineered Wood closed its mill at Wanham, Alberta (132,000m3 per annum). Uniboard closed New Liskeard (120,000m3 ) and line 1 in Sayabec (300,000m3 per annum). This totals 812,000m3 per annum, or 6% of 2004 capacity (with at least another one million m3 of closures in North America since 2002).
A new owner of the ex-Weyerhaeuser mills is shown in the listings – Flakeboard America Ltd – even though the change in ownership did not take place until 2006.
Masonite is shown as the new owner of the Primeboard mill in North Dakota, thereby saving at least one of the agri-fibre mills so beloved by new investors in the 1990s. This represents backward integration by Masonite, which will be the mill’s largest customer for material to be used in door production. It is worth noting that International Paper (IP) has now divested itself of all its composite panel plants. Firstly its Franklin and Waverly, Virginia mills were sold, then its holdings in CHH Australia, New Zealand and China were released and (in 2006) Polyrey – its particleboard mill in France – is to be closed.
It is intriguing that the major North American companies that are also heavily engaged in pulp and paper have closed or sold their particleboard (and MDF) businesses. This includes Georgia-Pacific,whose timber and wood products business was separated from the paper business first and it has been closing plants for several years. Also Weyerhaeuser selling its particleboard and MDF businesses in North America and Europe and the aforementioned IP. Louisiana Pacific (LP), although not in pulp and paper, has also abandoned particleboard and MDF – in this case in favour of OSB. The impact of the closures is offset a little by revised capacity data being received from several mills. Canadian capacity felt the brunt of closures in 2005 but, as will be seen, 2006 will bring about a reversal in fortunes. In Mexico, there are some small upward revisions in capacity and it is still believed that a small expansion will take place by end-2006 in Rexcel, Chihuahua.
The net effect in 2005 is a reduction in the total number of mills and lines in North America as shown in Table 1. Because many of the closures were relatively small mills, the effect was to raise average line capacity as shown in Table 2.
EU15 countries
It is readily apparent that there are significant differences between the 15 previous EU countries and ‘Other Europe’. Therefore, the findings continue to show the two regions separately. For the EU15, there have been a few upward revisions in mill capacity from the operators, but notification has been received of several prior mill closures which tended to offset the gains. Total capacity can be shown as a decline of just 13,000m3 over 2004. For 2005, there were two closures: Polyrey in France and the mill acquired earlier by Finsa in Mondonedo (Aglomerados Ecar). There was also another closure at Talsa, Spain. It is interesting that actual EU15 production is reported as growing by 1.5% and imports from outside EU15 countries grew by 3.8% to alleviate the tightening supply situation.
The average line size increased from 226,000m3 per annum in 2004 to 232,700m3 per annum in 2005. The changes in numbers of mills and lines are shown in Table 3.
Other europe
Capacity in this diverse region expanded by over three million m3 during 2005, although at least a third of this is the result of a revision to Russian capacity which existed in 2004 and was underestimated. There have been a number of revisions to mills and lines – increasing in Bulgaria and Russia and decreasing in Romania and Slovenia. Again these would have applied in 2004 as well, so actual growth during the year could be exaggerated. Nonetheless, there were real additions to capacity in Turkey (Kastamonu), Poland (Pfleiderer) and the Ukraine (Kronolvilv).
Accordingly, the number of mills and lines has been revised downwards as shown in Table 4. The exclusion of some smaller lines and the building of larger lines has resulted in a sharp increase in average line size from 119,000m3 per annum to 152,300m3 per annum in 2005. One of the major changes to the listings is found for Russia. The mill in the Ukraine, previously shown under Russia, has been removed and an extended Russian listing has been obtained from original sources. Unfortunately, individual mill capacities are relatively meaningless and some actual production data has been shown, with the exception of Kronostar, Scharija. Note that in a supposedly egalitarian society, no single owner or mill dominates output. Much of this capacity is old and has lacked modernisation. The Kronostar mill was the first of the western investments, coming on stream in 2004.
Domestic production has been estimated at 3.6 million m3 and demand is growing at 10-15% per annum. The furniture industry accounts for most of the consumption and exports (limited) go to former soviet states. Rising imports of both particleboard and furniture have been the impetus to the revival of the particleboard industry and the interest shown by western investors. The old mills with their poor quality – by western standards – have survived because the thick, dense boards are worked by the thousands of small carpenters and furniture producers as if they were solid wood. This situation is changing.
Future capacity changes
For both North America and the EU15, new projects are very few in number for both 2006 and 2007. Between the two regions there are just three new projects, of which two are expansions of existing lines. Tables 5 and 6 summarise the details. The North American scene is curious. Uniboard is reopening the New Liskeard mill and the line at Sayabec, we believe principally because of the other mill closures and the (temporary) closure by fire of Tafisa’s Lac Megantic mill. It is apparent from production data that supply is tight in North America and with no other mills under erection, supplies will remain tight. It might also explain a little of the thinking behind the Flakeboard acquisition of Weyerhaeuser’s mills.
Flakeboard is to be congratulated on becoming the largest particleboard operator in North America, with over 1.5 million m3 of capacity. The closure of the GP Gaylord plant will reduce that company’s capacity to 1.2 million m3 . Other closures include Rodman Industries and Columbia Forest Products, Hearst. Even with 1% of estimated capacity creep and the recommissioned plants, North American capacity will decline in 2006. Only some expected capacity creep will lead to a small expansion in 2007. The North American industry is probably very cautious about underlying future trends affecting the outlook for particleboard. Costs are rising, especially wood and resin – oil is priced in US dollars and the US resin manufacturers have not even the small cushion of a hardening currency such as sterling or the euro.
The future demand from the furniture industry beset with Asian imports is uncertain and some particleboard applications have been affected by OSB. There are also some signs that the housebuilding cycle has peaked, albeit temporarily. Unlike MDF, particleboard has no laminate flooring market to help maintain demand. It would appear reasonable to speculate that even without new particleboard projects, there will be yet more corporate activity among North American producers aiming to achieve growth by boosting their market share through acquisition. If supplies remain relatively short, then perhaps some of the large foreign players such as Pfleiderer, Tafisa or the ubiquitous Kronospan might be tempted to invest. North American offshore imports rose by 47% in 2005 but particleboard is not very economic to ship long distances.
In the EU15, several of the aforementioned factors also apply and only Spain and Sweden offer new, large projects. Norbord is rationalising production by closing one of its South Molton, UK lines. Capacity creep is reportedly quite modest over the period. The industry is also affected by rising furniture production in eastern Europe, not all of which is for domestic use, but for export to western Europe. Table 7 summarises the new mills among the newer EU members whose economies are developing rapidly such as Slovenia, Lithuania and Poland. Another mill is recorded for Turkey which is surely not the only potential mill which will be announced in this period. However, Russia is the revelation, with at least 1.7 million m3 coming on stream in the near future. There are upwards of eight proposed modernisations to existing mills but conditions in Russia may not be conducive to success for Russian owners – finance being the key. The western investors have the knowledge, experience and financial backing to push through their projects. Some of these new projects are large-scale to take full advantage of local cost structures. The Egger mill in Romania is reportedly 700,000m3 , as is Kronospan at Egorievsk. Pfleiderer Novgorod and the new Lithuanian mill are also well above average size.
The North American/European regional capacity, which grew by 4.4% in 2005, is set to grow further – by 6.7% in 2006. As Table 8 shows ‘Other Europe’ is the main driver. Its share of regional capacity will increase from 21.7% in 2004 to 30.7% by end-2007. No other region will increase its share in the same time period. It is likely that the growth of around four million m3 between 2005 and 2007 is greater than the rest of world put together.
Method of compilation
All mills were sent a simple enquiry form which was also available on a dedicated website www.intermark.plus.com. Mills are invited to submit their data here at any time. Published lists from organisations and associations are reviewed and compared with the existing WBPI lists. The mill data received for 2005 once again accounts for over 50% of the North American and EU industry. We were also pleased to receive a number of new responses from eastern European mills. Yet again we request your comments and suggestions as to how these listings can be made more useful for the reader, recognising that our listings, although objective, may be incomplete in one aspect or another.
