Board sales nailed to Asia

SYDNEY - New Zealand companies that produce medium density fibreboard (MDF) must develop new export opportunities in Asia to remain viable, according to a study released yesterday.

Global marketing and forecasting group BIS Shrapnel said the major MDF producers in New Zealand - Carter Holt Harvey (which reported yesterday), Nelson Pine, Fletcher Wood Panels and Rayonier -- should consider the growth potential of Asia during the next five years.

MDF production in Australasia had declined from 1.8 million cubic metres in 1998 to 1.7 million a year later and no additional capacity was planned.

"But the industry is now set for another round of rapid growth in the Asia-Pacific region and Australasian producers could re-examine their strategies to some advantage."

MDF is a board that can substitute for particleboard, plywood or solid timber and was first produced in the United States in the 1960s.

Timber industry economist Bernie Neufield said extra excess supply in Asia would be rapidly swallowed, with demand set to outstrip supply, possibly as early as this year.

"The rapid Asian recovery will lift demand by nearly 30 per cent between 1999 and 2004, a period when very little new capacity will come on stream," he said.

Much capacity had been built before the Asian financial crisis in late 1997 when consumption dived.

"The Asian economies recovered much more quickly than expected and the recovery has been accompanied by a strong rebound in MDF consumption.

"But investors are cautious and growth in consumption will therefore significantly exceed growth in production capacity.

"The result will be rising prices, improved profits and new opportunities for trade and investment."

The study said China would be the largest consumer, but shortages would also occur in Taiwan, Japan and Korea. - NZPA