Laminate manufacturers say that the present price rises are due to sudden increase of their raw materials, which would not come down before May – June Month, hence market should ready for another prices rise if raw materials prices go up further. They were speaking during Ply Reporter E-Conclave on 'LAMINATE INDUSTRY ON CROSSROADS!' on 14th March 2021 in association with Fakirsons Pepchem Pvt Ltd. The discussing panels were Mr Krupesh Thakkar, MD, Rushil Decor Ltd; Mr Vikas Agarwal, President, ILMA; Mr Surinder Arora, MD, Virog Group; Mr Sanjiv Agarwal, MD, Globe Panels Pvt Ltd; Mr Vishal Dokania, Director, Cedar Decor Pvt Ltd; Narendra Khemka, Director, Saffron Decoratives Pvt Ltd; Mr Atul Patel, Director, Bell Laminates. The program was moderated by Mr Pragath Dvivedi, Founder, Ply Reporter and Mr Rajiv Parashar, Editor, Ply Reporter.
“Today laminate industry is on crossroads which being dragged by every segment like Melamine, Formaldehyde, Base paper, etc. Raw material prices are rising continuously in every component and for it China plays a bigger role. China has been biggest suppliers of commodities and today China’s domestic consumption is much higher than ever. So, India is getting costlier raw material and the input cost is continuously increasing for manufacturers.“
LAMINATE INDUSTRY SCENARIO POST PRICE RISE
Mr Krupesh Thakkar; The situation has arises due to crisis in supply chain through shipment from overseas suppliers. Now the situation is that even with double the payment, material is not available, so running an industry is a challenging task today.
Mr Vikas Agarwal: Everybody knows that the material is not available even with higher price so units are making loss. If it continues with no price rise of product the situation will lead to shut down, so now there is no option other than increasing the price of ready products.
Two years before when there was no export of kraft paper pulp from India, today it is 50,000 tones are being exported. We are facing antidumping in almost every raw material. We did not have much domestic production of Melamine, which is just 25% of consumption but we are facing antidumping duty on Melamine import. The similar situation with Base Paper also, so, rising shipping line freight cost, anti dumping duty, export of raw materials and a few select raw material suppliers’ unethical practices are creating difficulty for laminate industry. ILMA is trying their level best to curve the anti-dumping duty issue. We have also initiated for Melamine and base paper also to them out from anti-dumping. ILMA is trying hard to stop anti-dumping in all the segments.
Mr Surinder Arora: In current situation the manufacturers are sandwiched. Raw material soaring price is hitting hard the other hand distributors think that we are taking undue benefit of the situation. We have not seen such a tough situation of price hike in history. The customers are furious with price rise of ready goods. They are not aware of the raw material price rise but slowly the awareness is coming up and our price realization is taking place well.
In liner grade the price increase has happened five times because margin is very thin. It works like commodity that prices increase with increasing input cost and decrease with softness in raw material cost. This webinar will definitely support in terms of creating awareness regarding raw material price rise that it is happening at ground level.
Up to June everywhere there will be labor shortage due to marriage season in North and West region. This shortage will also affect the availability of raw material in the market. So, in my opinion the market will face short supply, so people should avoid the price gap confusion. If they don’t think about it they will have to face difficulties in coming time.
Mr Vishal Dokania - The demand will dictate everything, as with price issue the demand is also suffering, based on that it is difficult to say that how many will survive or how many not. Liner is volume game. It is economy scale whether it is purchase or supply or production side. Being a cost sensitive product it will be settled over price either with engineering efficiency or cost efficiency in internal system. If we talk of liner specifically, freight plays a big impact. So, the localized supply will increase, because there is not much value addition in it. It can become more or less regional supply product, because it would be very difficult to produce liner in West and ship it to east and still be competitive.
“Crossroad can be crossed only when the industry gets some amount of support from the market and some from the suppliers’ side for raw material availability and affordability.”
Not only the manufacturers, but the down line distributors and dealers will be affected. Either manufacturers shut down production and risk loosing large workforce or make what is available. Today the supply is biggest problem. Last week we all were doing to source the raw material, nothing else, the price is secondary, so that we can run the plant, keep the supply running and service to the customers/distributors. The sudden price rise in these three months causes lack of trust with our suppliers and also manufacturers and distributors.
If we don’t increase price, we will have to shut down production. In that way no one will be benefited. In cement industry Iron and Cement prices have increased tremendously, still the construction work is going on, so material is needed and there is only way to increase the price and keep sustaining with whatever resources one has.
Mr Sanjiv Agarwal: We can not blame to anyone, because it is due to short supply and something is created for profit booking, as with higher price plenty of material is available. In Kraft at over Rs 45 one can have huge booking. Melamine is definitely having short supply due to China factor. But, in Kraft there is very high black marketing. The waste paper conversion cost is Rs 8, so, if the waste paper is at Rs 22.5 and with conversion cost it comes to Rs 30.5.
ON THIRT TIME PRICE RISE AND NEXT
Mr Surinder Arora : You are absolutely right that it is going to come. Market is ready to pay our costing.
Mr Vikas Agarwal: If third price is accepted, we will achieve the losses.
Mr Vishal Dokania: There is simple equation that when the raw materials prices get down tomorrow, we will definitely reduce as is very competitive market. No company is able to command unreasonable price rise, fundamentally.
Mr Atul Patel: In Morbi everyone has already increased. I personally produce 3.5 tone Kraft paper per day, so in today’s time even in $350 we are unable to import material. In Morbi, nearly 30 paper mills are there in which 10 to 15% are closed due to raw material crisis.
“It is clear that the industry will be on crossroads if market doesn’t support. Laminate is a must have material for furniture markets, home interiors. So, industry stakeholders should reduce the hurdle by increasing the price. Industry is requested to work towards it collectively and the trade fraternity are requested that if the industry does not succeed, market in India will not succeed, as on which product we will be dependent on import we will have to face difficulties. In coming time the crisis in laminate will extend to June – July.”
Mr Narendra Khemka: We have announced the third rise by last week of March and we don’t think the industry will be in comfortable zone without it. I would like to say the channel partners that the price rise in laminate is equal to the increase in raw material input cost. We should clear their doubts that we are not profit booking in this situation. I don’t think the buyers are uncomfortable in paying the price, because what product are available for the consumer are an alternative to laminate that is costlier than laminate.
ALTERNATE PRODUCTS OR LOWERING LAMINATE THICKNESSES
Mr Krupesh Thakkar: India market is very big and you can sell all products here either laminate or pre-lam or WPC, etc. Even if it takes the share of other segment, it doesn’t affect the other segment anymore because India has huge demand and the laminate industry is growing by 8%. If the raw materials price increases we should pass it and vice versa.
Mr Surinder Arora: Those who tried to sell the product by reducing the thickness; don’t have bigger volume sales. We should sell the material in a genuine way, and what we claim in the product catalogue of communication must have in practice. When we say 10% is allowed in ISI norms that doesn’t work.
I would like to say that Kraft paper rate will never be at previous level for at least two years, because purchasing everything has become in advance. We are not able to balance the hike of raw material price rise even after several meetings of industry body and their efforts to stop anti-dumping on imports. We are reducing our profit and asking the customers to support us, so that the industry can run smoothly. In India a huge number of liner production have come last year and there would have been at least 15% growth in three years. Its consumption increased due to its affordable price and increase in application. So, due to price rise, the product application will divert and its substitute comes into picture.
Mr Vikas Agarwal - The total material costs have increased by Rs 120 in 1 mm, Rs. 80 in 0.8 mm and Rs. 70 in liner grade in last six months and in this price rise Kraft paper contribution is 60%.
Mr Sanjiv Agarwal: The dealers are also ready to accept it. Actually the dealers already know that raw material price has increased.
MESSAGE TO DEALERS
Mr Krupesh Thakkar- we discussed moving on from the crossroads, at present the only solution is to increase the price. We discussed with government to have a way out and we have taken a very good initiative in phenol also. If it would not have done the prices would have been more.
Mr Vikas Agarwal: I would like to request the customers the accept the current price rise and when the raw material cost drop we will definitely drop the price, so please support us. We have come to a long journey together and together we will overcome the hard times.
Mr Sanjiv Agarwal : I would like to request the suppliers to increase the price what is genuine. Do not try to get extraordinary margin, because their survival is dependent on ours survival. The dealers are much aware today they know about the prices even before us, so they are ready to increase the price.
Mr Atul Patel: We discussed the matter with local association and suggested to increase the rate first, because the kraft paper, phenol, ethanol and melamine prices are not going to come down in four to six months. So, without increasing the piece nothing will happen.
Mr Vishal Dokania: The manufactures’ self cash management is very critical. It is being heard that lot of suppliers are asking advance payment for raw material in place of earlier there was at least 60 days credit period. If this cash cycle stops the principal manufacturers of every distributor will be going to face very tough time. The factory owners will reduce the inventory and supply will be late and the whole cycle will go into downward trend the moment cash flow gets stuck. If the prices do not increase and people are forced to sales at lower rates there would not be innovation on products.
We understand laminate is a trend industry like a fashion industry almost. Everyone wants new papers, catalogues, textures and it cost money upfront for the manufacturers. So, with stop in cycle, the innovation will suffer a lot. So, rotation of fund and material is absolutely critical. We have heard that lot of manufacturers are forced to take shutdown, that is a worst case scenario of the industry. Whether it is raw material shortage, fund or order, if manufacturers are planning shutdown due to fund for raw material what will happen to their dealers and distributors.How are they going to sell their product and rotate their funds?So,‘THE INDUSTRY IS AT CROSSROADS’ are apt words for it and we need to move forward by one-another’s support.
Conclusively for the next three months the situation is weight and watch. We hope this discussion will be spreading positive note balancing the industry scenario. This is a message that payment need to pass on faster because the supplies are asking for no more credit and even asking for advance payment. This is also a chain and every stake holders are requested to work together supporting one another.
Mr Narendra Khemka: I would like to say to the suppliers to think it on the basis of long term relationship and manage the situation supporting the industry.The distributors and channel partners need to support in terms of payment cycle and keep it in mind for smooth functioning as the material suppliers are giving preference to those industries which are giving their payment and supporting them.
Mr Surinder Arora: Laminate is low cost good product for interiors becoming substitute for many more products earlier. Price rise is not an issue; it is a long term game. We are trying to stop further increase if the raw material price does not increase. I would like to take our dealers and customers in confidence that the coming up price rise is no going to have immediately.