According to a report last month from Pöyry Management Consulting, London, the wood panel surfacing market represents a part of the consumer products sector responding to the need for sustainability at affordable prices. During the last decade, the global wood-based panel surfacing business environment has faced a number of challenges. Today, mainly as a result of the world’s most severe recession in modern times, the sector is enduring a period of restructuring whilst trying to either maintain or regain profitability.

These are the key findings of the recently published report titled “The Global Panel Surfacing Business – Economic Downturn, Restructuring and New Trends” by Pöyry Management Consulting, the thought leader in wood product value chain strategies.

“The wood panel surfacing market is heading in a new direction,” says Dr. George Goroyias, Head of Sustainable Consumer Products. “The industry sector in the developed world needs to focus on consolidation, capacity rationalization and performance improvement initiatives. Rationalization will require not only managing inefficient capacity but also realizing value through the transformation of traditional business models toward horizontal integration into other value chains (ex:  bioenergy and waste management) and product innovation. In contrast, opportunities for greenfield investments exist in the emerging markets, but raw-material procurement and the establishment of supply chains will be the main challenge. The raw material, semi-finished and finished product flows will change (more complex, global, longer distances) and will create the need for new supply chain concepts.”

The global wood panel surfacing market is forecast to continue growing by 3 percent annually. Europe will continue to be the largest user of surfaced wood panels, accounting for more than 40 percent of global demand in 2015. Furthermore, Asia’s growth will continue, while North American markets will stagnate or even decline. Material substitution continues and the dominant position of low-pressure melamine will remain unchallenged. Thermoplastic foils and veneers are forecast on a global level to lose relative market share. Finish foils and low basis weight paper are expected to keep their share and show reasonable growth in Europe, the Middle East and Asia.

“We see LPM’s global market share growing from 36 percent in 2000 to 45 percent in 2015 as a result of new product development, particularly in laminate flooring but also in furniture,” says Lauma Kazusa, Sustainable Consumer Product Consultant. “Veneer’s declining market share is mainly due to increasingly limited availability of veneer logs and cost pressures, but veneers are expected to still show growth in absolute terms in some regions. Pre-impregnated finish foils are gaining market share in Europe due to a significant improvement of their print quality and performance.”

Thermoplastic foils and liquid coatings are the two segments where environmental pressures are the most significant, according to Ania Krolak, Sustainable Consumer Product Consultant specialising in these two segments. “PVC foils are gradually being replaced by non-PVC alternatives, and there is an on-going movement from solvent-based coatings toward more environmentally friendly water-based coatings with simultaneous effort to improve their performance,” Krolak says.

The wood panel surfacing industry cost structure of developed versus developing markets has affected the competitive landscape and positioning of new investments. Western capital has been redirected to high-growth areas where an emergence of local private equity capital is providing a further growth stimulus. The industry consolidation and globalization is an ongoing process, but the pace of change is slow although regional differences remain strong.

The value chain efforts to increase or maintain the profit margins show mixed results. Tomi Hartikainen, Project Manager and Sustainable Consumer Product Consultant, says: “An in-depth analysis of the financial performance of the European players indicates that the key link in the value chain, the wood-based panel producers, is weak. In the long run, this may have negative implications for the entire value chain.”

With an estimated value of EUR 50bn, the global wood panel surfacing market appears to capture less value when compared to EUR 250bn global furniture market. Panel surfaces are an essential part of the furniture consumer products sector and industry should focus on harnessing more value in the chain, especially in large production centers such as Europe and China, where the furniture sector accounts for nearly two-thirds of the global furniture production value.

Ultimately, consumer preference and purchasing habits drive surfacing material selection. Consumer preferences are translated into actions upstream in the chain through the global retail chains’ leaders that frequently have a unique footprint of ownership from raw materials to retail.

The global wood panel surfacing market is extremely dynamic, diverse and fragmented. Costs and competition will continue to influence the direction of the low-end furniture sector, and international trends, where the consumer preference for sustainable products at an affordable price will be a priority, will continue to shape the high end.

Using its global network, this new report shows an in-depth business and market analysis into the wood panel surfacing sector. This research involved a large number of discussions with key industry players and participants across the entire global value chain from wood panel manufacturers, decor printers, laminate flooring manufacturers, impregnators, veneer, paper and thermoplastic foil producers, furniture makers, distributors and traders, to the retail end. It includes a review of the current and future global wood panel surfacing business and also provides detailed country profiles for 17 major existing and emerging markets in this exciting and dynamic sector.