Month of June was a buzz with talks of weak cash flow, weak demand and impact of rising competition. There has been sharp rise in manufacturing cost of Ply boards hence a price increase by 5-6% could be seen in July month itself. The price escalation in Eucalyptus, Poplar, Chemicals and Labor wages shall push up the plywood prices by 7-8 % in next four months. The plywood industry is expected to reduce or slowly stop Poplar plywood dispatches in next few months as timber price rise looks imminent. The branded plywood companies have already announced 4.0 % increase in prices. After GST, Branded plywood market is growing due to rise in sub brands. The semi branded plywood category In North & South is also increasing its market spread and sales growth after E-way bill.
The Decorative Laminate industry is the most impacted by cost increase in raw materials in the entire product category of wood panel decorative category. Raw materials like Paper, Phenol, Tissue, Moulds, Folders etc. have pushed up the manufacturing cost but the Semi branded, and the unorganized segment is struggling to implement price increase. Dollar has escalated the cost in 1.0 mm segment, which may push the branded laminate segment to announce a price increase of Rs 30 per sheet of laminate. The worst-hit product category is 0.8 mm thickness segment, where design and quality expectancy is very high but prices are flat. Although a Rs 20/sheet increase in liner category has happened two months ago.
The rise in laminates' manufacturing cost is so hard that many units have stopped taking orders of Liner laminate, blaming it as a loss-making product. Manufacturers are unable to pass on the cost risein 0.8 mm due to throat-cutting competition. The HPL manufacturing companies are reeling under suffocation and acute pressure on margins which shall eventually lead to closure or Change in management at few plants by next Financial year itself. Around half a dozen of laminate manufacturers from Gujarat, North India are struggling to sustain afloat.
The MDF segment is also staring at raw material cost rise but healthy margins and huge flow of finished material is expected to keep MDF prices under check. The top three players Action Tesa, Green Panel Max and Century are selling aggressively to fetch a larger market chunk thus turning the market in favour of bulk buyers.
I believe, the wood panel & surface material segment has sustained demand but Payments and need of Capital is alarmingly serious. The time for revising the rates has begun that can be only negotiated by Cash rich buyers. The Mid Segment companies need banking support and Capital but situation on banking front is adding pressure on industry and market flows. The scenario in coming months will be driven by capital rich players and times are very troublesome for weak ones. It’s time for distributors to be active, and every growing company/entrepreneur shall focus on payments, capital through bank and expanding sales network.