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producing raw chipboard because it’s low value and low margins,” said one manufacturer.


Another producer TTJ spoke to had all its chipboard grades on allocation while another was meeting MFC orders but had raw chipboard and T&G on allocation. “We’re making as much P5 as we can,” said one manufacturer, “but all chipboard is in high demand so we have to juggle. We can’t give everything to everybody.” Traders hoping to fill gaps with imports have found a similar story in Europe. Demand across Europe, and the rest of the world, is high and a European manufacturer told TTJ the company was postponing planned expansion to one of its chipboard lines because it couldn’t afford the downtime in the current market. It had avoided putting customers on allocation but it was not taking on any new business. One distributor, unable to source P2 from UK manufacturers, had managed to secure board from Europe, but what would normally be a one-week lead time was pushed out to six weeks. Another manufacturer offered a June delivery for orders placed in February, while another had given up quoting lead times or prices altogether.


Road transport from Europe is also an issue. Following the problems at Christmas where thousands of European lorry drivers were stranded on this side of the Channel because of the Covid restrictions France imposed temporarily, many hauliers are reluctant to come to the UK. According to the Timber Trade Federation’s latest figures, chipboard imports have fared the worst of all the main import timber and panel products. In the 11 months from January to November last year, the UK’s chipboard imports volume was down 33.5% on the same period in 2019. Although there was slightly more activity in November 2020, the volume was still 8% below the same month in 2019.


The supply/demand imbalance means chipboard prices have increased way above the usual 2-3% – and been accepted more readily by the market. One manufacturer has introduced “double-digit” prices rises on a monthly basis. Another said the price of his commodity grades had risen by around 20% since Q4 while, by March, higher-value products would be up by 12-15%. The tight availability has also allowed the sector to increase the normally meagre profit margins on chipboard. “You can name your asking price at the moment. Our margin on chipboard has quadrupled,” one distributor told TTJ. “Mills have been selling it for nothing for years so if they’re making money, you can’t blame them.”


The price rises reflect not only chipboard availability but also the substantial increases


in manufacturers’ costs. Methanol prices rose by 50% between Q4 2020 and Q1 this year, transport costs are increasing because of the container shortage, and wood residue prices are also rising as the whole timber supply chain is at full capacity. “UK mills are busy, which is good because that brings residues but it pushes up prices on all wood, from recycled to roundwood,” said a producer.


Another manufacturer believed that raw materials supply would be the biggest headache this year, and it could impact on chipboard production.


“It won’t be a matter of how much you pay for a chemical but whether you can get enough of it. I wouldn’t exclude there being production outages in Europe because of problems with supply,” he said.


With the Covid pandemic dominating the headlines, it seems Brexit has been pushed to the wings. Its impact, however, is noticeable. One contact told TTJ that Brexit had affected imports to the UK as some companies had not made the preparations to handle them. Another said Brexit had not brought any surprises but the extra paperwork required, especially for trading with Ireland and Northern Ireland, had created more costs. “There’s no flexibility anymore and it’s more complicated,” he said. “We cope with it, we are prepared for it but it’s a completely unnecessary burden.”


Another acknowledged the extra form- filling but said bringing in product by ship was a streamlined process. “We don’t face the same problems as others bringing it in by road or the end user having to do their own clearance,” he said. Making market forecasts is never easy and the pandemic makes the future even murkier. This time last year no-one could have foreseen what lay ahead. The consensus is that the chipboard market will remain heated at least until the end of the first half, but that does come with a lot of ‘what ifs’. The Westminster and Scottish governments’ roadmaps for easing lockdown, announced in February, may well change consumer priorities.


Much has been made of people investing in their homes while holidays are forbidden but on February 22, after Boris Johnson revealed the plans for England, including a possible resumption of international travel on May 17, holiday bookings surged. EasyJet said flight bookings from the UK jumped by 337% and package holiday bookings by 630% compared with a week earlier, although from what would have been a low base. Many people, however, will opt to holiday in the UK, boosting chipboard demand from caravan manufacturers, who have been busy since the end of the first lockdown, and for hotel refurbishments.


“The UK spend on foreign holidays is more


than £50bn a year so if a small proportion of that is spent on new kitchens or furniture, that’s a massive swing,” said a manufacturer (see feature on pp51-54).


Another unknown is whether the pandemic and lockdowns have changed our expectations and behaviour permanently. Perhaps many of us will continue to work from home, at least a few days a week, and so refurbishment will be an ongoing priority. “There’s a lot of change happening and it will only help interiors,” said one contact. “This might be something that remains after Covid, that the home is more important than it used to be.” Once lockdown is eased, P2 demand may increase as furniture showrooms reopen and the exhibition and museum trade resumes. P5 demand may also rise as housebuilders turn their attention from completing houses before the end of the stamp duty holiday at the end of June to starting on new sites. Whatever the nuances of the market there is confidence that there is a consistent demand for chipboard that the Covid pandemic has only highlighted. “A lot of people point to Covid [for the current demand] and there’s an element of that but we should not forget that the whole chipboard market started to edge up over the past few years, and wood products in general have become more fashionable, so it’s emphasised a trend that was already there,” said one contact.


“In principle we’re in for a good period. There’s underlying demand which has been accelerated by Covid. It might slow down a little after Covid but the trend won’t go away.” ■


Above: Sawmill residue prices are rising as the whole timber supply chain is back at capacity


www.ttjonline.com | March/April 2021 | TTJ


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