The Fall in Demand for Furniture Should Stop MDF Price Rally in the United States
IndexBox has just published a new report: ‘U.S. – MDF – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.
Prices for MDF in the U.S. continue to shoot up amid a shortage of the product and the high demand from the furniture industry. Other factors that led to the jump in prices include the high cost of woody materials and resins for manufacturing MDF as well as increasing container freight rates. Strong demand for the product has led to a spike in imports to the U.S. High prices for MDF negatively affect furniture sales, which have been decreasing in recent months due to a slowdown in the construction boom noted at the first half of the year. The fall in demand for furniture, coupled with the beginning of a decline in the cost of wood raw materials should lead to a decrease in prices for MDF in the coming months.
Key Trends and Insights
While the cost of sawnwood is rapidly declining, the price of Medium Density Fiberboard (MDF) in the U.S. continues to rise. According to the U.S. Bureau of Labor Statistics, the producer price for MDFs produced on the domestic market increased by 8.4% from June to July of this year. July 2021 prices exceeded those from the same period in 2020 by 30.3%.
The reason for the spike in prices was the shortage of MDF in the American domestic market, which arose amid the high demand for furniture. In the first half of 2021, total furniture sales and home furniture stores in the U.S. grew by 38% compared to the same period in 2020.
Another significant factor was the noticeable rise in the cost of basic resources used to manufacture MDF, such as resins and woody materials. The producer price for thermoplastic resins in July 2021 increased by 63% compared to July 2020, while the price of thermosetting resins rose by 11.8% in the same period.
The jump in freight rates due to the lack of container traffic has had a significant impact on the final cost of MDF. According to the data from the Baltic Stock Exchange and the Freightos company group, the global container freight index of spot sea freight rates for 40-foot containers peaked in August 2021 and exceeded $10K.
The U.S. remains the world’s largest importer of MDF. Strong demand stimulated imports of MDF into America., which doubled from 2019 to 2020 and reached 2.3M m3. Canada, Chile, and Germany provide about 66% of all MDF imports to the U.S.
Due to steep prices, American wood-based product manufacturers have made huge profits this year. One of the largest producers of processed wood building materials in the U.S., Boise Cascade Co, reported a net income of $303M in the second quarter of 2021, which was 9 times the net income taken in for the second quarter of 2020. UFP Industries, Inc. posted a positive financial result, which took in record net earnings of $173M, a 161% increase compared to the same period in 2020.
The high prices for MDF are set to elevate the cost of furniture, reducing demand for it. While producer prices for commercial and household furniture rose by an average of 2% per month from May to July this year, total sales of furniture stores fell from $12.3B to $ 1.9B. Combined with the declining cost of woody materials for manufacturing MDF, the drop in demand for furniture should trigger a decrease in prices for MDF in the coming months.
American MDF Imports
In 2020, approx. 2.3M cubic meters of MDF were imported into the U.S.; growing by +32% compared with 2019. In value terms, MDF imports expanded by +4.6% y-o-y to $1.1B (IndexBox estimates) in 2020.
Canada (570K cubic meters), Chile (500K cubic meters) and Germany (431K cubic meters) were the main suppliers of MDF imports to the U.S., together comprising 66% of total imports. China, Brazil, Austria, Turkey, Viet Nam, New Zealand, Argentina and Mexico lagged somewhat behind, together comprising a further 27%.
In physical terms, Canadian MDF shipments to the U.S. grew by +22% y-o-y, while the American purchases from Germany increased twofold. Chile saw an 8%-growth of exports to the U.S.
In value terms, the largest MDF suppliers to the U.S. were Chile ($252M), Canada ($245M) and Germany ($203M), with a combined 66% share of total imports.
These countries were followed by China, Brazil, Austria, Viet Nam, New Zealand, Argentina, Turkey and Mexico, which together accounted for a further 26%.
The average MDF import price stood at $462 per cubic meter in 2020, with a decrease of -20.8% against the previous year. There were significant differences in the average prices amongst the major supplying countries. In 2020, the country with the highest price was Austria ($644 per cubic meter), while the price for Turkey ($265 per cubic meter) was amongst the lowest. In 2020, the most notable price growth was attained by Chile, while the prices for the other major suppliers experienced a decline.
Source: IndexBox Platform