Sector Market Update: Chipboard | 23
SUMMARY
■Chipboard sales are heavily impacted by the slowdown in housebuilding and KBB sales
■There’s an uptake of P5 protected products in the RMI market
■Producers are relying more on recycled timber because of a reduction in sawmill residues
KEEP CALM AND WAIT FOR THE UPSWING
The UK chipboard market is quiet, but it’s becalmed rather than sinking. Keren Fallwell reports
There is no doubt that UK demand for chipboard is subdued but traders are quick to stress there is still life in the market and no need to panic. “We are expecting this year to be challenging but we’re not feeling alarmed,” said a manufacturer. “It’s not a collapse; it’s a reduction in activity which is manageable. It’s a market that still has some volume.” For manufacturers, the year started reasonably well, perhaps as a result of customers needing product after destocking in December. “A lot of people were not sure whether prices might continue to go down – then they woke up in January with the crisis in the Middle East, shipping delays, and transport rates going up and suddenly thought they had to buy more,” said a manufacturer.
Prices were reduced two or three times in late summer/autumn but since mid-November they have remained fairly stable. One producer said there was talk of price increases in Q2, but that would depend heavily on whether demand picked up. Others expected little movement but at the same time manufacturers are facing rising costs, putting pressure on producers’ margins. One said they were working with a higher cost base than pre- Covid or the war in Ukraine, but added the inflationary pressures were not excessive. “There is some upward cost pressure but it’s a relatively stable environment,” he said. Because of the demand hiatus, it was not possible to raise prices so producers were taking the hit on increased costs. Another manufacturer agreed it was not a market with an appetite for higher prices but
the challenge would come if costs continued to rise.
Chemical supply has stabilised and prices have come down but this is offset by the higher cost of timber residues as a result of reduced sawmill activity and competition from biomass. Sawmills’ current lower output means recycled timber is even more strategically important to chipboard manufacturers.
As chipboard is largely a UK-produced product it is better insulated from the shocks other timber products can be exposed to; nevertheless, energy prices are volatile and chemicals, which are traded internationally, could be affected by shipping issues resulting from the Middle East conflict.
While UK manufacturers are resigned but reasonably happy with trading so far in Q1, merchants report encouraging interest from the RMI market, especially in protected P5 products.
“It’s becoming more recognised as a benefit that’s worth paying a bit more for,” one merchant told TTJ. “We’re increasing our turnover in chipboard by selling more added value product, not by selling more volume.” It is the decline in activity in the volume new build sector, however, that is having the biggest impact on P5 chipboard demand. It also affects KBB demand for P2 and decorative board.
In recent trading updates the major housebuilders acknowledge the market remains uncertain, and a chipboard contact told TTJ that the merger between Barratt and Redrow, announced in February, could unsettle the market for a while.
Above: Chipboard sales are impacted by the slowdown in housebuilding and KBB sales PHOTO: SYMPHONY
The latest figures from the National House Building Council (NHBC) reveal 133,213 new homes were completed in 2023, down 12% ►
www.ttjonline.com | March/April 2024 | TTJ
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