Panel shortage not expected to end soon.

Woodworkers can expect higher prices and continued allocations of particleboard and medium density fiberboard for at least the next two years. This is when new PB and MDF plants are expected to come on-line.

Rich Margosian, executive vice president of the National Particleboard Assn., said that allocations of panels will continue at least until the new plants open and begin producing boards -- a two-year process when considering the legalities of permitting and building facilities, and then the learning curve to train employees.

According to Margosian, the great demand for panel products by the surging furniture and cabinet manufacturing industries, is exceeding panel manufacturing capacities. Suppliers are being forced to dip into inventories to meet current demand, which is prolonging the panel shortage.

Exactly how much of a shortage of particleboard and MDF is difficult to gauge. Demand, according to Bernard Fuller, vice president of Resource Information Systems Inc., a company that tracks the panel industry, will reach 5 billion square feet (BSF) for particleboard in 1994, an increase of 19 percent over 1993, and 5.25 BSF in 1995. Demand for MDF will reach 1.3 BSF in 1994, an increase of 13 percent over 1993, and 1.4 BSF in 1995.

"The U.S. (panel) industry is running at a capacity of 5 billion square feet this year," said Kelly Shotbolt, president of the Canadian Particleboard Assn., and president of G-P Flakeboard Ltd. "(Panel shortages are) hard to quantify. It is probably no more than 10 percent under supplied, but even with that you are still looking at a 500,000 million square foot shortage."

This shortage has forced up prices for panel products dramatically, although not as dramatically as lumber and plywood prices have jumped, Fuller said.

"In 1994, we are looking at particleboard prices to escalate by approximately 15 percent in the South and by 13 percent on the West Coast. For MDF we are projecting prices to be up around 14 percent or 15 percent for this year," Fuller explained.

Fuller said shortages and escalating prices will not abate until additional supply comes on-line in 1996 or 1997.

By 1996, more than 1.76 billion square feet of MDF and PB will come on-line, assuming that all of the proposed new and expanded plants come on-line. This figure includes 1.35 BSF of MDF and 405 million square feet (MMSF) of particleboard on a 3/4 inch basis.

Two plants are scheduled to open in 1994 and are expected to bring another 165 MMSF of particleboard into the market. A combined operation between Georgia-Pacific and Flakeboard of Canada, called G-P Flakeboard in Bancroft, Ont., is expected to bring 140 MMSF into the marketplace. To the south, in San Juan Ixhuatepec, Mexico, another 25 MMSF of particleboard is expected to be produced annually at Maderas Conglomeradosis' new plant.

The additional particleboard and MDF could not come sooner for some companies. At least one major component manufacturer, BHK of America, has, at times, had to look to Europe to augment its panel needs.

Most companies, however, have had little choice but to wait their turn.

Dave Kern, a plant manager for Yorktowne Cabinets, said half-jokingly, "Sometimes I think the only way we are going to grow is if we buy another company, and start getting their allocation."

Currently, North American particleboard plants are running at more than 90 percent capacity. If they were at 100 percent capacity, the industry would be able to produce more than an estimated 6 BSF, according to the 1994 North American Capacity Survey put out by the National Particleboard Assn. Of this figure, 4.7 BSF will come from U.S. plants, 957 MMSF from Canadian plants and 392 MMSF from Mexican plants. MDF capacity is 1.44 BSF, including 1.27 BSF from the U.S., 156 MMSF from Canada and 14 mmsf from Mexico. (Capacity is defined as what a plant could annually produce under optimum conditions if it operated 24 hours a day, 6-2/3 days a week, 52 weeks a year.)

Fuller said the current demand is a "once-in-a-generation" market for particleboard and MDF producers.

While panel producers are enjoying the fruits of increased demand, there are some worries about future market saturation. The expected influx of panel products in 1996 and 1997 coincides with projections for an economic downturn for the United States.

"Most people (panel producers) take a look at their positive cash flow situation and decide they can expand capacity," said Shotbolt. "And, if there is an economic downturn, we could be faced with an oversupply situation like we did in the early 1990s."

PROPOSED PANEL PLANT STARTUPS IN NORTH AMERICA

Company                 Location                     Type   MMSF        Est.
                                                            (3/4 in.)   Date

Alaska Pulp Corp.       Sitka, Alaska                MDF    50          NA
Allegheny MDF           Mount Jewett, Pa.            MDF    90          1995
Allegheny MDF           Philadelphia, Pa.            MDF    N/A         1996
BLue Ridge Lumber       Whitecourt, Alberta          MDF    15          N/A
CanFibre                Toronto, Ontario             MDF    22          N/A

Cariboo Fiberboard      British Columbia             MDF    140         1996
Dominance Industries    Craig, Okla.                 MDF    75          N/A
Flakeboard Co.          St. Stephen, New Brunswick   MDF    360         N/A
G-P Flakeboard Ltd.     Bancroft Ontario             PB     140         1994
G-P Flakeboard Ltd.     Sault Ste. Marie, Ontario    MDF    110         1995

Georgia-Pacific         Monticello, Ga.              MDF    163         1995
Hokushin Co. Ltd.       Shelton, Wash.               MDF    100         N/A
Maderas Conglomerados   San Juan Ixhuatepec, Mex.    PB     25          1994
Mill's Pride Inc.       Waverly, Ohio                PB     70          N/A
Pontiac Fiberboard      McBain, Mich.                MDF    127         N/A

Tafisa(*)               Lac-Megantic, Quebec         PB     N/A         1995
Temple-Inland           Hope, Ark.                   PB     170         1996
Uniboard                Eastern Canada               MDF    N/A         1996
Not Identified          Clarion, Pa.                 MDF    100         N/A

* Plant expansion

Source: NPA, W&WP reports