In 2007, World MDF capacity grew by 6.37 million m3, or 13.5%. This produced last year’s title “Panel crisis – what crisis?(WBPI issue 4, 2008, p15).
During 2008, MDF capacity grew by 3.7 million m3, or 6.9%. This was an obvious slowdown but again hardly a crisis, in spite of the monetary and economic crises swirling around the globe.
The survey stressed the difference between capacity building and actual production. Operating mills could well be feeling hard-pressed by reduced demand and rising costs, while new investments are being brought on stream; such investments were based on decisions made two, three or four years previously. The ‘rest of the world’ region  – the principal subject of this Part II  – added over 3.1 million m3 for 10.2% growth over 2007. This compares with ‘old world’ growth of just 2.6% over 2007.

What has become clear is the very differing MDF market developments between the principal geographical regions – and between countries within those regions. This relates, in part, to the variations in impact of the global economic crisis as well as the inherent differences between countries and markets.
As reported previously, North America and western Europe had reached, or were about to reach, the tipping point from boom to bust at the end of 2006.
By early 2007 the US housing bubble had burst but the inertia in the system continued to generate positive numbers for public consumption, leading to much speculation through the year of recovery by the third or fourth quarter. Even as late as that, there were still many predictions of a quick rebound in US housing and a denial in western Europe that its market was heading for problems.
However, in North America and western Europe the WBPI surveys over several years had shown strong indications of a lack of desire for significant new investment in MDF capacity, despite historical success. The world market leaders in western Europe were shifting their capacity building towards eastern Europe and Russia, while the North American groups were selling off or closing their European MDF (and particleboard) facilities.
The combination of superior economic growth, led by infrastructure development, domestic consumer spending and a shift in the geographical location of MDF-consuming industries – furniture and laminate flooring – had, for some time, caused a flurry of MDF capacity-building in Russia, Turkey, China, South East Asia and South America.
The WBPI surveys have duly reported the shifting balance of production capacity from ‘old world’ to ‘new’. As recently as 2007 the ‘rest of the world’ accounted for 57% of world capacity – even more if eastern Europe, Turkey and Russia are included. While not wishing to appear to forecast with hindsight, these trends are set to accelerate. But how do they relate to the global economic crisis?
The crisis for the MDF industry in the ‘rest of the world’ began in January 2007 when US buyers of furniture and flooring reduced or cancelled orders with overseas production centres, principally in China.
Western European countries followed suit (note the poor attendance at Asian furniture shows in 2007/8, by both visitors and exhibitors).
It is hoped that this macro-review of events will offer some reasoning not only into recent trends but also those in the immediate future.
From mid-2007 to mid-2008, capacity building in the MDF industry continued apace because, on balance, investors’ views remained positive. Then the financial crisis, whose rumblings were heard in early 2008, started in July of that year.
With restrictions on working capital, falling house prices and restricted mortgage availability, construction sectors in North America and Europe took another huge body blow. Simultaneously, consumer confidence collapsed, either through fear or, more tangibly, through loss of value of housing equity, share portfolios and savings interest.
Many businesses also faced funding restrictions for development or, just as importantly, working capital, by way of reduced or capped overdraft limits. Firms had to de-stock through the chain from end-user back to distributor and producer or importer. For MDF, de-stocking creates an additional impact on demand.
Readers will recall the doom and gloom in the media from Christmas 2008 into 2009. A few months into 2009, MDF producers reported an upturn in orders – but this was caused by the end of de-stocking.
Many countries in the ‘rest of the world’ weren’t directly affected by the 2008 banking crisis, most notably China and the Middle East. They were affected indirectly, like China, by a lack of orders from overseas; or, like Egypt, by a reduction in tourism. South East Asia, South America and China could fall back on domestic demand.

China
Chinese listings continue to grow. During 2008, 15 new mills and lines came on stream, representing 1,390,000m3 of new capacity. This is a little lower than predicted in last year’s survey and the actual volume increase is correspondingly smaller. Once again all lines, existing and new, are listed, but those to come on stream after 2008 are asterisked (*); the capacity total shown in the listing does not include those lines.
The number of lines recorded totals 400, compared with 387 at end-2007. Their aggregate capacity at the end of 2008 amounted to 18,811,000m3, which is a growth of 7.9%.
During this year’s survey it became apparent that several lines in China were operating above their original installed capacity and where known these have been incorporated into the 2008 totals. Commensurate adjustments were also made to the 2007 data and that total is now greater than that shown last year.
The 2008 total is only 300,000m3 above that predicted last year and overall the result represents a slow-down by recent Chinese standards. However, as will be shown later, this is only temporary.    © p29
ß p16   When written in June 2008, the survey identified 42 lines on order for delivery from January 2009. In June 2009, this figure has increased to 61.
Corporate development and consolidation remains a trend in China but to a much lesser extent than elsewhere. The listing shows 237 of the 400 lines in multiple ownership – an increase of just 10 over the 2008 survey. In actual volume, the groups dominate, but the Chinese market still shows numerous new, single-line, first-time entrants.
With new lines and modifications to existing ones, Weihua Group is the largest, with existing and prospective capacity of 1.74 million m3. Dare Group has dropped back to second place with no new MDF lines reported. However, between them they will add 1.14 million m3 during 2009/10.
The Luyuan Group (previously known as Suichang Wood Industry) occupies fourth place, but with the largest number of lines, and Shandong Heyou has risen to fifth. Liren Group (Lishui) has moved up to third, based on new lines and expansions to existing lines. Yingang Wood is now known as China National Salt and told the editor of WBPI it was interested in adding three new lines of 300,000m3 each to its current total of five lines and 746,000m3 capacity.
Admittedly, many new lines remain small – typically 50-80,000m3 per annum. This is driven by the regionality of local markets and the sometimes limited access to raw material. These groups, currently possessing or building larger lines, are very conscious of the raw material supply and presumably these days would not be allowed to make an application without being able to prove access to raw material – virgin or recycled.
Most of the major groups have some interest in other panel products          © p30 ß p29   such as particleboard, but one or two plan fairly large-scale OSB plants. The groups are also vertically integrated, with various types of furniture production units and, of course, laminate flooring. It has proved quite hard to transfer lost exports from these plants to the domestic market. Exporting raw MDF has also been very problematic. Exports in 2008 were 17% lower than in 2007 and in the first five months of 2009 are 51% lower than the same period last year.

Developments in Other Regions
South America was perhaps the most active region outside China during 2008 and seems to be entering a period of general panel expansion. Domestic demand is growing as well as export potential, though the export furniture industry is a significant driver.
It must also be said that existing plywood producers are repositioning themselves. Nearly 1.1 million m3 of capacity was added in 2008 (although 140,000m3 was a WBPI adjustment to the Duratex Agudos plant capacity – from 100,000m3 shown in last year’s list to 240,000m3 per annum).
In Brazil, both Satipel and Berneck brought on-stream new plants of 350,000m3 and 340,000m3 per annum, respectively.
In Chile, the Polincay company started-up 150,000m3 per annum.
Uruguay became a new country producer, with Uropanel opening a small 77,000m3 per annum mill.
Some sub-regions saw no change in operating capacity, which has been unchanged for a few years. These were Australia/New Zealand, Africa and North East Asia. The closures announced last year in Tasmania and Taupo, New Zealand, have been deleted this year. Daiken is now shown as the owner of the originally famous Canterbury Timber, most recently owned by CHH.
South East Asia was relatively quiet but Evergreen has taken over Hume Fibreboard in Nilai, Malaysia. Siam Fibreboard, another Evergreen operation, started its expansion in 2008. Last year’s survey showed 640,000m3 per annum, which was a little premature. Evergreen confirms that 260,000m3 was added to Siam lines one and two for a total of 580,000m3.
Elsewhere in the region, two lines were opened in India by Bajaj Eco-Tec, and Al Noor in Pakistan alerted us to the fact that its plant had a capacity of 61,500m3 per annum. Other Mende lines planned have been shelved.
Interestingly, Iran added its eighth MDF mill, Neka Choub, at 75,000m3 per annum.
Once again this information confirms the lack of real dynamism in those countries/ regions which first developed MDF production, namely New Zealand/Australia, US, western Europe and Japan.

Future Trends
Our last survey stated that there were 80 mills under construction from end-2007 to 2010, accounting for 13.1 million m3 of capacity. One year later, 80 mills can still be accounted for with a combined capacity of 12.5 million m3. Europe and North America will account for only about 2.5 million m3 of this growth – the remainder will derive from the rest of the world.
China will account for the lion’s share at around 5.7 million m3, as 32 lines are expected in 2009 (some being slippage from 2008) and a further 14 lines in 2010. Most importantly in 2010, Shanghai Wood Based Panel Machinery Company Ltd (SWPM) expects to start up its first continuous press for a Chinese customer. Major news is that SWPM has been acquired by Dieffenbacher and could now be said to be well and truly the largest equipment supplier in the world.
Strangely, only China Salt has suggested any lines after 2010. It would seem that China became the largest single country/region for MDF capacity in the world during 2008. It will extend this lead over the coming years.
Australia/New Zealand, Africa and Japan are expected to remain unchanged over the period. They will join the US and western Europe.
Korea, on the other hand, has the Kwangwon line of 100,000m3 some time in 2009. Furthermore, Dongwha expands ‘Korean’ capacity by becoming a partner in a new Vietnamese line slated for 2010.
The most intriguing region, capacity-wise, is South America. Around 2.4 million m3 is planned by 2011. SWPM will open four lines (perhaps three if Maseal does not proceed) in Brazil. These are only 120,000m3 per annum, but Duratex will open the world’s largest MDF line, at 760,000m3 per annum, in Agudos in 2009. Eucatex will also open a line in São Paulo.
Eucatex has another possible mill of 500,000m3 rumoured for 2011/12.
Berneck has another line planned in Curitibanos, coming on stream in 2010. In the meantime both the Masisa (Brazil) and Arauco (Chile) planned lines have been shelved.
Total South American capacity will exceed seven million m3 by 2010 and it will become the third most important region after China and Europe.
Changes in South East Asia will be steadier, with only four mills expected in the region. These are Vanachai, Thailand (2009); Advance Fiber, Thailand (2010); PT Sumatera Prima Fibreboard, Indonesia (2010) and Binh Phuoc in Vietnam (2010).
There are also stirrings in India/Pakistan. Teekays and Greenply in India have mills on stream in 2009 and SWPM will have one of its small (50,000m3) discontinuous lines opened by Peshawar Particleboard Ltd in Pakistan. Also announced for India is a new company – Star Panel Boards – planning to build perhaps two MDF mills after 2010.
It would not be surprising if more plants were announced in Iran.
The MDF industry has, to date, weathered the somewhat frigid economic climate very well. It is worth remembering that mid-2009 is two years on from the beginning of the downturn. It is evident that few companies/mills up until now have failed. The industry may yet have to endure a further 18 months of poor conditions. MDF has, by its versatile nature, proved a natural product for many end-use sectors and a resilient one for its producers.
The editor, and the author, are very grateful to all those who have contributed to this survey. We realise it is not a priority in these difficult times but your information is invaluable, enabling us to make the listings as useful as possible for all.

 

NB. Please note that the tables listing the MDF mills which accompany this text are only available to paying subscsribers to WBPI

The author John Wadsworth is the managing director of Intermark. Based in the UK, he has been researching and consulting in panel products globally for more than 27 years. He can be contacted by phone (44) 1376 501565; fax (44) 1376 501557; e-mail: inter.mark@virgin.net