Turning Point 2018>>1- Plywood Became Cheaper After GST
Year 2018 witnessed shift in the way plywood industry and trade had been operating so far in India. The tax reform brought everyone on same level playing field thus branded plywood became cheaper. The gap between top branded and mid segment players narrowed down that led to price rationalisation in plywood product category.
Year 2018 also witnessed a big shift in the way Branded players were operating. The top brands began aggressive efforts to penetrate in Mid level and other price segment by introducing many sub brands in same category. The efforts to promote sub brands or economical range launched by Branded segment players helped them to grow in size a little but it did bring the price levels along with it.
When asked, organised plywood makers responded that GST has helped them to brought down prices but the eagerness and desperation to expand the market base did cost them dearly because of flooding of sub brands in markets. The competition in plywood trade became fierce with increase in supply that brought the whole price level down by 6 to 8% on the whole.
The year passed by certainly posed a favour for end customers, but it became unfavourable (in terms of profits) for all type and size of players operating in plywood product category. The prices of raw materials increased but the overall price of plywood came down, thanks to appetite for bigger market share and ambitious approach to snatch it sooner than planned.
Turning Point 2018>>2- E-Way Bill Brought Unorganised Trade to Books
The long waited tax reform GST came into existence in July 2017 but E-Way Bill was not mandatory.
Year 2018 was recorded as Implementation year of E-way bill system, that made GST reform meaningful when it became a must from Feb 1st. The E-way bill helped the building material segment including wood panels and furniture items by bringing all players in to its net thus spreading the need to follow formal work culture.
Though E-way bill for inter-state movements started from February 1 but had been suspended after the crash of GST portal, it was postponed. The confusing scenario was a troublesome phase for organized players till E-way bill was fully implemented from June 1, 2018.
The interstate and intra-state movement with E-bill was implemented in almost entire state from June, that certainly brought wood panel industry and trade in formal practices though not fully yet partially.
Year 2018 witnessed a rise in Formal business after GST implementation. Post June 2018, wood panel sector reported higher tax collection indicating also reported upward leading to a big shift in the way trade people use to think.
It is widely agreed that 2018 witnessed the beginning of journey from informal to formal practices where almost 60 percent of the business has been converted to books. GST has been proved a game changer specially for building material sector and it will continue to be so in forthcoming years.
Turning Point 2018>>3- Putting MDF Plant Became A Risky Project
Year 2018 shall be remembered for huge surge in MDF production capacity. In this year entrepreneurs realised that MDF manufacturing does not guarantee assured success on the contrary it has become tiresome and risky project. The challenges for MDF producers started since beginning of 2108as domestic manufacturing capacity swelled along with consistent flow of imports.
India imported a 25 percent more MDF panels compared to last year where as the domestic manufacturing capacity grew over 100 % in 2018 with commencement of new manufacturing lines of Action Tesa in north and Green Panel in South. In totality supply touched far higher mark along with import compared to domestic consumption. 2018 second half, witnessed a fierce struggle in MDF market because market was certainly not ready to consume all of the growing MDF capacity. The manufacturing companies were found struggling with huge inventories till writing this page. The industry as of now reported to be operating at almost half of its capacity. The MDF producing companies were trying hard to push the sales by offering schemes on bulk order’s but they slipped to achieve the target resulting the stocks piled up at factories and warehouses.
MDF as a product category noticed a struggling phase for the first time in last ten years and is expected to remain similar for long until some magic replacement or big industrialisation happens in India. The Ply Reporter had anticipated the similar situation of MDF market in its annual predication report in January this year, which looks happening.
Turning Point 2018>>4- Plywood Remained Invincible Despite PB/MDF Rise
The new entrants, MDF producing companies and, suppliers were expecting that MDF would replace some of the portion of cheap plywood and accordingly moving ahead but it did not happen in 2018. The sales volumes of plywood per shop remained same or even higher if ‘plywood and MDF sales ratio’ compared parallelly.
The number of plywood dealers has grown and so is the size of plywood market. The similar growth trend is noticed in MDF and PB but plywood has captured some of its lost ground and has retained its share ratio per shop during 2018.
In 2018, the rise in quality, implementation of automation in plywood plants, rationalisation of prices post GST and rise in carpentry and interior work in renovation markets helped the plywood product category as a strong hold product. The survey conducted at various key markets by BSMR revealed that sales ratio of Plywood: MDF: PB: PVC per retailer shop is approximately 82:8:6:4.
The continued liking of plywood appeared to remain as priority because of customers and contractor’s unshaken belief on the strength and durability of the product. The numbers reflected in sales volumes of branded plywood and other value category grew along with over all plywood sales.
The second half in 2018, reflected that Plywood remain invincible product for plywood veneer selling shops and it does not look possible in imminent future very opposite to what was expected by experts.
Turning Point 2018>>5- Rise of Okoume Face in india
Year 2018 saw a big turnaround with acceptance of non-Gurjan species as face veneer in India plywood factories. Around 75 percent of plywood, board and door manufacturers have shifted to non- Gurjan face veneers which seem to be finally taken over by two species, Okoume from Gabon and PQ, originating from Guyana peeled in China.
The availmaterialise since ability of Gurjan timber in Myanmar did notbeginning of 2018 that led to steep rise in Gurjan prices and slowly low demand. Myanmar timber auction prices have gone far beyond affordability that crossed between 1200 - 1350 $ per hoppus ton (HT) that pushed away many users who aimed for plywood on affordable prices.
The year 2018 noted rise of Okoume acceptance that took monthly demand up to 250 containers which was never seen before. The Plywood industry in North accepted Okoume after new dipping formulations and that effort further snatched away significant share from Gurjan species face veneer. Even premium grade plywood too switched to Okoume, that means there has been a big shift in traders’ mind who were stuck with only Gurjan word and colour.
At present, the Plywood industry’s few varieties in face veneers e.g PQ, Okoume, Recon, Makai etc of which PQ and Okoume is fast emerging as the only contender left. Although industry has been using these alternate options with timebut the preference of Gurjan still remains limited to flagship brand produced by branded and semi branded manufacturers. Many Industries are still gearing up to implement complete PQ and Okoume thus switching from Gurjan completely that is inevitable in years to come. A reverse shift is only possible unless Gurjan become available and affordable.
Okoume face veneer aspreferred option in 2018-19 helped the Plywood Industries save a huge amount of money running in hundreds of Crores and it is believed that Gurjan face veneer will shrink to merely 15- 20 percent market share in time to come.
Turning Point 2018>>6- ‘All Time High Phenol’ Hpl Players Learnt Lesson
year 2018 witnessed all time high prices of phenol in India and would be remembered for that, which had disrupted to entire decorative laminates industry in month of October. The situation compelled laminates producers to halt its production for almost two weeks because the current pricing was unviable to produce materials. The unexpected rise in prices of phenol posted in October month, which crossed 150 mark, due to less inventory of stocks at ports. The phenol importers and suppliers were anticipated that India’s biggest phenol manufacturing unit Deepak Phenolics would begin production as per its scheduled date but it was delayed for a month due to some technical reasons that created demand-supply gap into the market.
It was noticed that the Phenol prices were hovering around 70-75 during October 17, which was crossed to 150 level in October 18, means almost over 100 % price rise. Although, Prices were not stayed at such level for a long time period, but it had created chaos like situation in HPL industry. However, the phenol prices had disturbed the decorative industry whole year due to unstable prices time to time. The prices were reported to up in beginning of year January month, which was crossed 100 mark, almost 25 percent up but it was cooled down in March month. Another phenol price jump was registered during June month again due to some international disturbance but again it was softened. But the robust price rise in October was unexpected for industry, which caused major loss to entire Laminates sector. This price hike raised a question for many laminates producers of their sustainability and it murmured in industry source that it was an opportunity for many producers to check their strength as well as where he positioned financial and how long he would sustain further. Although situation became normal in December month due to softening prices, it saves many producers to sustain further but High Pressure Laminate industry must learn important lesson in 2018 due to soaring prices of phenol.
Turning Point 2018>>7- Particle Board Prices reached to Bottom
Particle board was considered as the next generation panel, but in 2018, this product had lost its charm due to all time bottom level price offering. With increasing supply due to entry many small manufacturing establishments, the producers were impassionate to sell this material in market and offered both side pre-laminated sheets of 17 mm at Rs. 18 per sq ft. This situation forced Indian Particle Board manufacturing sector under tremendous pressure. Over supply and weak demand scenario was the reality as it happened in almost every segment. Producers acknowledged that there was utmost difficulty for survival at this pricing level.
The rise in supply of low quality pre-lam boards in market was created a price pressure in PB trade hence many of the distributors or importers or Producers opted to give extended credit period to gain on prices of their products.
Experts believed that prices of Particle Board dipped due to unhealthy and regional dominance of smaller particle board plants. It is noted that majority of Particle board plants in India are in tune of 180 to 200 cbm because such plants are economical and have been running since long. With around 10,000 cbm per day capacity at present, Indian particle Board industry has captured the imported Particle Board share. The particle board industry is largely divided in wood based and bagassebased categories where both are having almost equal capacities running in 5000 cbm plus per day.
On the other side, seeing the good demand in wood based particle boards, some producers located in Gujarat are converting their raw material from Bagasse to Wood. It is noted there are a dozen manufacturing units in Gujarat, who are set up for producing Bagasse based particle boards but the irregular supply and stocking burden of Bagasse, are forcing them to keep option open for wood as well.