Panels & Furniture Asia March/April 2018

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66 NEWSLETTER MARCH/APRIL 2018 THE THE MALAYSIAN MDF MANUFACTURERS ASSOCIATION (MMMA) BUZZ The New Year 2018 and the Lunar Calendar Year of the Dog were heralded with great fanfare and proclamations of the virtues of the wood and timber industry with headlines such as: Timber Exports Continue Uptrend, Furniture Market Poised for Growth, Plywood Prices Sky Rocketing, U.S. Lumber Outlook Very Positive, Further Increase In Timber Prices, GST Bears Fruit in Indian Growth for Timber Products, Second Largest Post-war Economic Expansion in Japan, The Dragon Soars – Chinese Furniture Market, Bright Prospects for Wood Products Export, The World Prefers Wood Products… I could go on but I think you get the picture. These headlines are genuine and by and large backed up by statistics and data. For the timber industry as a whole, this has been very welcome news. However if we look more closely, in particular, to the particleboard and Medium Density Fibreboard businesses in South East Asia, the news is not as positive. Basic economics comes into play and the industry finds itself once again with a huge imbalance between supply and demand. Over the past five years and for the next three years, an average of four new particleboard and MDF lines have either started or will start annually within South East Asia. The majority of this investment has been made in Thailand, Vietnam and Indonesia. The main drivers for this growth have been the demand for wood panel products required for the automated mass production of furniture. The other important factor is the availability of a relatively cheap, sustainable raw material – Rubberwood. These two factors joined together have made South East Asia the most competitive producing region for MDF and particleboard in the world today. What lies ahead? So what does all this mean for the MDF and particleboard market in Asia for 2018? Unfortunately it is not looking very good at all. As supply raced ahead of demand, we saw a dramatic softening of particleboard prices at the end of 2017 and a similar oversupply situation developing for MDF at the beginning of 2018. This does not bode well for the industry and could result in dire consequences unless manufacturers act responsibly and with maturity. The situation is even more critical for Malaysian manufacturers as costs increase due to a strengthening currency and higher labour cost. Assuming that the global economy continues to grow robustly and the demand for furniture and panel products remains strong the industry will still face risks and challenges: 1. Investments in new plant and capacity remains in place for at least the next three years. The new lines ‘promoted’ by the big European machine manufacturers are far larger than previous models, with installed capacities of up to 2,000m 3 per day. Capacity increases are ‘step’ increases and not linear, so when a new line enters the market it has a disproportionate impact on supply. 2. Demand projections are based on robust global growth and strong demand from both traditional and emerging markets. Key demand drivers will be the U.S., China and India, any setbacks in these markets will adversely affect demand. Some MDF manufacturers are overly dependent on risky Middle Eastern markets; if these markets are disrupted, there will be a very large surplus supply volume potentially entering other markets. 3. Cost is relentlessly moving up as other raw materials (especially related to oil) and labour is gradually moving into an inflationary phase from a previous deflationary scenario. The U.S. Dollar has, by and large depreciated against major Asian currencies which has negatively affected business particularly in Malaysia. 4. The fi nal critical factor is the availability of a sustainable and relatively cheap wood-based raw material. In Malaysia we realised many years ago that the ‘Rubberwood Era’ was fast coming to an end and this could be seen by the relatively small investments made in Malaysia over the past few years. Malaysian Rubberwood is now the most expensive in SE Asia and is also in critical decline with regards to availability. Thailand on the other hand has, by far the largest planted areas of Rubberwood in SE Asia, which has resulted in huge ongoing investments and a phenomenal increase in installed capacity. Thai MDF and particleboard is probably the most competitive in the world today. Investments in Vietnam have been large and successful but they will quickly reach a situation where Rubberwood will be in short supply and prices will increase. Indonesia has the second largest availability of
THE MALAYSIAN MDF MANUFACTURERS ASSOCIATION (MMMA) Rubberwood but investment has been slower due to other problems such as infrastructure and logistics. A silver lining? The positives are that due to the imbalance of supply and demand prices remain extremely competitive. This continues to be good news for furniture manufacturers as their increasing costs are by and large being absorbed by the lower prices of particleboard and MDF. This will act as a catalyst to further stimulate demand. We will see that more and more producers of MDF and particleboard will move ‘down-stream’ and start to add value by producing semi-finished materials or even venturing into furniture production. Vietnam has the largest furniture industry followed by Malaysia in SE Asia, and one can foresee mergers and acquisitions across industries. In summary, Thailand has become, and will remain the most competitive producer of MDF and particleboard within South East Asia. This will continue for the foreseeable future as it takes advantage of its available Rubberwood resources. It will be interesting to see if furniture production in Thailand increases as a result because currently the industry is relatively small compared to its neighbours. Thai manufacturers are mostly big corporations that are able to utilise the latest technology and can afford substantial investments. To this end, manufacturers in Malaysia, Indonesia and Vietnam will struggle to compete. The Thai panel manufacturers will drive the market whilst the rest of us will only be able to follow, if we can keep up! NEWSLETTER MARCH/APRIL 2018 About the Author Peter Fitch is the founder of Segamat Panel Boards (Malaysia) and is currently the Chairman of the Malaysian MDF Manufacturers Association (MMMA) and Executive Committee Member of the Malaysian Panel Manufacturers Association (MPMA). Prior to working in Malaysia he worked for Plantation Timber Products (China) and Takeuchi MDF (Malaysia). Peter has been based in Asia for more than 25 years and has been in the wood panel business for more than 20 years.
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MICA (P) No: 138/05/2017 • ISSN:
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CONTENTS 18 44 36 4 EDITOR’S NOTE
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6 NEWS DYNAMIC CHANGES IN AUSTRALIA
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8 NEWS '2018 WILL BE ONE OF THE BUS
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NEWS 11 PINE - THE MATERIAL OF THE
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14 NEWS SOUTH KOREA RAISES GDP FORE
Page 19 and 20: NEWS 17 WOOD, THE HIGH- PERFORMANCE
Page 21 and 22: PANEL MANUFACTURING 19 PANELS & FUR
Page 23 and 24: PANEL MANUFACTURING 21 All things c
Page 25 and 26: PANEL MANUFACTURING 23 Company Year
Page 28: 26 PANEL MANUFACTURING PRODUCT HIGH
Page 31 and 32: PANEL MANUFACTURING 29 minimises as
Page 33: FURNITURE MANUFACTURING 31 Cities m
Page 36 and 37: 34 FURNITURE MANUFACTURING Vietname
Page 38 and 39: 36 IN PERSON Malaysian architect Az
Page 40 and 41: 38 IN PERSON This philosophy is evi
Page 42 and 43: 40 MARKET REPORT By Roberta Mutti a
Page 44 and 45: 42 MARKET REPORT Source: American H
Page 46 and 47: 44 MATERIALS About 40 per cent of t
Page 48 and 49: 46 MATERIALS AMERICAN RED OAK IN A
Page 50 and 51: 48 MATERIALS HARDWOOD MARKET REPORT
Page 52 and 53: 50 MATERIALS Thermally modified and
Page 54 and 55: 52 STRUCTURAL ELEMENTS March / Apri
Page 56 and 57: 54 STRUCTURAL ELEMENTS An engineeri
Page 58: 56 SHOW PREVIEW Just when you thoug
Page 61 and 62: SHOW PREVIEW 59 The Russian Pavilio
Page 63 and 64: 2018 by Panels & Furniture Group 4
Page 65 and 66: 24-27 October 2018 2 nd Edition THE
Page 67: WOOD CLINIC 65 indicated (see Fig.
Page 74: ADVERTISERS’ INDEX March / April
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Panels & Furniture Asia March/April 2018

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