Margules Groome Consulting participated in and presented at the 4th WoodChem & WoodTech conference held in Bali on 7 & 8 December 2016.
Rudolf van Rensburg, a Director of Margules Groome, set out the demand for Particle Board (PB) and Medium Density Fibreboard (MDF) in Southeast Asia, China and Japan and presented a view on possible future trends. This subject was timely as these products are experiencing unprecedented growth in the region. Although global, demand for MDF grew at a CAGR of about 6% over the past 5 years and PB 3%, the Asia region saw rapid growth in both products of 41% and 43% respectively. Strong demand for affordable furniture was the key driver of this growth.
China, Vietnam and Thailand remain the epicentre for new MDF and PB investments (Fig.1a,b):
Fig. 1 a)
Fig. 1 b)
Fig. 1: Global PB (a) & MDF (b) production development, % of total global
Based on the Asia region’s macroeconomic outlook, demand is expected to continue to grow. In Margules Groome view, access to certified and sustainable low grade logs and residues supply may pose a downside risk to this trajectory for the following reasons:
- Hardwood plantation development in South East Asia has been limited (excluding the pulp & paper sector) and the mainly very fragmented smallholder owner base constrains fibre availability and security for large industrial facilities. The challenges with these plantations are to get sufficient scale in any one location and consistently good growth performance. Few statistics are available on area developed and expected future harvest volumes while often the limited statistics that are available are unreliable.
- Harvests from native forests for sawn timber and veneer continue to decline. China, as part of its next Five Year Plan (2016-2020), placed a ban on native forest harvesting nationwide. Margules Groome estimates that the impact of this ban will be a net reduction of 30 to 40 million m3/a from China’s domestic supply.
- Both these factors limit fibre supply in the face of rapidly growing demand (Fig. 2)
Fig. 2: Asia Pacific Roundlog Demand versus Supply (Margules Groome view)
- Growing demand for low grade logs and wood residues for bioenergy in north Asia competes for logs and residues that are also required for PB and MDF manufacturing.
- Rubberwood residues are also used in the manufacturing of PB and MDF although constraints are developing on supply. Latex prices have been in decline for the past 5 years which is likely in Margules Groome’s view to be resulting in an above average supply of rubber tree logs as landowners traditionally replace old tapped trees during periods of market downturn. Thailand is one of few remaining regional countries that is still significantly expanding its rubber plantation areas. There is a risk that supply availability may quickly invert if latex prices were to start rising.
All the above factors combine to cause a future downside regional supply risk for low quality logs and wood residue material availability for MDF and PB manufacturing.
There may be future opportunities for collaboration between Australia and New Zealand growers and Asian manufacturers to help overcome raw material supply challenges.
For further insights, contact Margules Groome Consulting.
