This year has been a challenge on many fronts, but the composite panel industry has persevered and prospered and looks forward to a brighter 2021. Represented in North America by the Composite Panel Association (CPA), the industry is made up of manufacturers that use fiber residuals, primarily sourced locally from wood sawmills, to produce particleboard, medium density fiberboard (MDF) and hardboard. These raw panels are transformed when adding decorative surfaces that create non-structural wood products for every application such as cabinets, furniture, home organization, mouldings, exterior siding and trim, and flooring. The panels have a high recycled content and are well received in the architect and design communities as green building materials.
2020 spring dip; fall recovery
Composite panel production and shipments were robust in 2019, supported by low interest rates and a buoyant residential housing market. This trend was expected to continue into 2020 when the calendar flipped from December to January. Little did we know what was lurking around the corner.
The residential housing market was poised for further strengthening in the spring as the COVID-19 pandemic ground the economy to a near-standstill. The months of March and April, like for many sectors of the economy, were some of the worst in the composite panel industry’s history. The duration of the market uncertainty was as impossible to predict as was the fate of the pandemic.
The economic shutdown, which required a large percentage of the workforce to work from home, created an unanticipated desire for homeowners to improve their living and working environments. This effect was felt by local home supply retailers to support a steep increase in home remodeling, which continues unabated. This market dynamic was complemented by a strong recovery in the residential housing and construction markets, where housing starts rebounded rapidly from spring lows and the availability of homes for sale shrank to some of the lowest levels on record.
These macroeconomic effects redounded to the benefit of the composite panel sector where shipments recovered significantly through late summer and early fall. These trends appear poised to continue into 2021, though continued uncertainty surrounding the pandemic will keep the clouds around.
Facility openings & upgrades
The North American composite panel sector has been experiencing massive investments in both new, greenfield facilities and upgrades to existing facilities. The facilities that have come online in the last year or so are state-of-the-art and mark the expansion of European and South American manufacturers into the North American market. These facilities include Kronospan in Eastaboga, Alabama; Egger in Lexington, North Carolina; Swiss Krono in Barnwell, South Carolina; and Arauco in Grayling, Michigan.
Also on tap is another greenfield plant in Willow, California called CalPlant 1, which will be the first of its kind in North America to use rice straw to produce MDF.
Together these new facilities represent 30 percent of the U.S. particleboard and 23 percent of the U.S. MDF production in 2020 (20 percent and 14 percent respectively, for North America).
The turbulence on the COVID front has been offset by relative calm on the policy front for composite panel producers. EPA has been busy in 2020, initiating a long-anticipated process to assess the human health and environmental risk posed by several widely used chemicals, including formaldehyde. Formaldehyde is used extensively in resins to bind the wood fibers into panels.
Congress amended the Toxics Substances Control Act (TSCA) in 2016. TSCA is the federal law that regulates the distribution of chemicals in commerce. The law included provisions requiring EPA to assess the risk of commonly used chemicals to address their safety. The formaldehyde risk assessment is an outgrowth of this Congressional direction.
The assessment has several parts including: a scope determination, risk and exposure assessment, and finally a risk management program. During the scope assessment, EPA reviews the common uses of the chemical to determine whether there are potential human health and environmental risk of potential concern. Once EPA has targeted the uses of potential concern, the agency prepares a risk and exposure assessment to determine the level and nature of concern. Finally, if EPA identifies risks that are not properly addressed, the agency will impose risk reduction strategies, which could come in various forms, such as limiting the uses of a chemical.
In August, EPA completed the scoping phase of the formaldehyde risk assessment. This step was a key focus for the composite panel industry. At issue was whether and how EPA would factor in the human health and environmental risk reduction associated with the existing TSCA Title VI rules, which set very low limits on the amount of formaldehyde emitted or off-gassed from composite panels.
EPA had proposed in March to exclude particleboard, MDF and hardwood plywood from the scope, owing to these TSCA Title VI requirements. The agency affirmed the exclusion of these panels from the final scope in August 2020. Hardboard panel products were not excluded, however; though these products are made with very low emitting formaldehyde resin and will not likely be a focus of the exposure portion of the EPA formaldehyde risk assessment.
The risk assessment and risk reduction steps will take two to three years to conclude. CPA will continue to engage with EPA as this process unfolds, though this development will provide U.S. panel producers and their furniture and cabinet making customers with some regulatory certainty.
Meanwhile, the California Air Resources Board (CARB), which implements a formaldehyde regulation in California that was the predecessor to the national TSCA Title VI rule, is poised to consider changes to their program in 2021. Those changes would potentially focus on formaldehyde exposure associated with children’s furniture. CPA will be monitoring this process closely and intervene as needed.
In Canada, CPA is expecting a new formaldehyde regulation to be issued by Health Canada in the first quarter of 2021. CPA has been working with the agency for the past several years to draft a Canadian formaldehyde regulation similar to that imposed by EPA under TSCA Title VI. Some composite panels produced in Canada are exported to the U.S., creating the need for there to be a level regulatory playing field across the border.
Similar efforts to develop a TSCA Title VI regulation in Mexico are ongoing but moving at a slower pace than in Canada. Many panel producers in Mexico do not export their products to the U.S. and therefore are not subject to the U.S. requirements. If that dynamic changes, CPA will renew its focus to assist domestic manufacturers to also create a universal standard for exports to the U.S.
The 2020 federal election could alter some policy directions in 2021, and CPA will be closely monitoring any impacts on the industry. Potential regulations related to climate change will be a topic of interest. Composite panel producers are well-positioned for this debate, as panels sequester large amounts of greenhouse gases, removing them from the atmosphere for many decades of productive use of finished products made with particleboard, MDF and hardboard. Moreover, many panel producers are able to use some fiber residuals to generate energy to run their panel mills, thereby conserving fossil fuels and avoiding greenhouse gas emissions.
Standards under review
CPA is an ANSI accredited standards organization and takes the lead on updating composite panel product standards. The process for updating the ANSI standards for particleboard (ANSI A208.1) and MDF (ANSI A208.2) has begun with draft revised standards expected for standards committee review by the end of 2020. These processes generally take a year to conclude and the expectation is that the updates to these standards will be complete by the end of 2021.
The four ANSI standards addressing the various categories of hardboard products (ANSI A135.4, A135.5. A135.6 and A135.7) were reaffirmed in 2020.
Author: Andy O’Hare is the president of the Composite Panel Association. Founded in 1960, the CPA represents the North American wood-based composite panel and decorative surfacing industries on technical standards, industry regulation, and product acceptance. CPA General Members include the leading manufacturers of particleboard, medium density fiberboard (MDF), hardboard and engineered wood siding/trim in North America, representing more than 92% of industry manufacturing capacity. CPA also operates the largest laboratory testing and certification program for composite panel products in North America, and the first one approved by the California Air Resources Board. For more information, visit CompositePanel.org.
Have something to say? Share your thoughts with us in the comments below.