Particleboard Procurement Category Market Research Report

Particleboard prices have grown strongly in the past three years owing to rising demand from the recovering construction sector. To help procurement professionals make better buying decisions faster, business intelligence firm IBISWorld has added a report on the procurement of Particleboard to its growing collection of procurement category market research reports.

Particleboard buyers have a buyer power score of 3.1 out of 5, with scores closer to 5 reflecting a stronger level of negotiation room for buyers. Acording to IBISWorld procurement analyst Hayk Muradyan, “buyer negotiation power has declined over the three years to 2013”. Particleboard price movements are heavily dependent on residential and nonresidential construction expenditure levels. Although prices fell during the recession due to sharp spending reductions from these sectors, they have shown subsequent strong growth as rising construction activity in the economy fueled demand for particleboard, leading to price increases.

In addition, the economic recovery has led to greater demand for lumber, which is the major input in particleboard production. This trend has generated large increases in input costs for suppliers, further stimulating particleboard price growth and harming buyers. “The rising input costs have also led to limited pricing flexibility for suppliers, as they struggled to maintain profitability”, says Muradyan. This has negatively affected buyer negotiating power because of minimal opportunities for major price discounts or cost-saving initiatives. Buyers have further been harmed because of high volatility in input costs and downstream industry expenditures. The economic recovery has led to significant spikes in the level of construction activity, with large yearly price fluctuations. This has reduced negotiating power and made inventory planning more difficult. Volatility is expected to continue at a moderate level as the economy returns to normality in the post-recession period.

Nonetheless, buyer power remains strong because of low market share concentration coupled with significant competition among particleboard suppliers. In addition, the commoditized nature of particleboard has led to a wide availability of suppliers capable of satisfying specific buyer requirements. As a result of these conditions, buyers can obtain favorable contractual agreements through bulk purchases of particleboard at lower per-unit costs. Long-term contracts can also mitigate price spikes through price caps and controls, as suppliers will be more willing to include favorable terms in contracts because of greater cash flow certainty.