There is trouble brewing for the entire decorative wood panel industry due to raw materials and container freight. Actually, this is a full-blown crisis where particularly laminate manufacturing industries are staring at a temporary closure or partial shutdown. The sudden spike in melamine prices and almost no availability in the country has created a panic among trade and industries. Melamine prices are being quoted at Rs 350 per kg till writing this news. In fact, prices are secondary, the melamine availability is nowhere except GSFC.
Many of the plants are reportedly running on rationed melamine sourced locally or bought on the week to week basis. If the situation does not improve, many factories might opt for shutdown or halting the supplies of materials according to urgency and price. Because the reports are shrieking wide open that there is hardly melamine to run full as usual for the majority of the units. HPL manufacturers are hoping for some solution from imports, but as of now, there is no hope of improvement before November.
“If the availability of melamine does not improve, more than 50% of laminate industries will cut down the production by half and impact will also spill over to Plywood, Particle Board and MDF segment as well”3
According to Ply Reporter’s info mining, the shortage of Melamine is likely to prolong for next 2 months, or more. The Ply Reporter spoke to various importers and suppliers who believe that the crisis is not short term because the availability of Melamine in the international market is scarce and equally troubled by container issues.
Talking to the Ply Reporter Mr. Ashok Saraf from Sunita Commercials Pvt Ltd blamed the fiasco of Melamine on International reasons where supply mismatch is the prime cause. The demand in Europe, USA and China is robust and due to supply chain disruption, increase in sea freight, supply is less than overall demand,” said Mr. Saraf. Since India is highly dependent on imports of Melamine because the sole domestic producer fulfills merely 25-30 % of India’s need, thus supply shortage of Melamine is too bad at present’ adds Mr. Ashok Saraf.
As Indian production figures in the wood panel and decorative industry have grown, the demand for Melamine has almost nearing double-figure during last 5 years whereas domestic production has been on same levels. Speaking on the issue, Mr. Mahendra Gupta from Fakirsons says that Indian Melamine producer ‘Gujarat State Fertilizers & Chemicals Limited, is running at full capacity during the last two months and selling on prices around Rs. 200 per kg. They have also increased the production but domestic demand has outpaced the local supply as demand for Melamine has increased, which has forced us to depend on imported Melamine. In the present scenario, there is an acute disturbance in demand and supply scenario, however, GSFC is supplying to their regular customers as per agreed commitment.
Mr. Ashok S Rathi, PartnerAnkur Rasayan and Secretary, Tamil Nādu Chemicals Storage Association said, “Price of Melamine has risen to the alarming situation and an alltime high levels which has created a vacuum and to resolve this, All Stakeholders including government bodies should come to support in improving supplies, which is the only way where prices will come back to realistic levels.
MELAMINE CONSUMPTION IN WOOD PANEL AND LAMINATE INDUSTRY
Melamine is used for making melamine formaldehyde resin, which in turn is majorly used in producing Laminates, Plywood, MDF, Particle Boards etc. Melamine formaldehyde resins used for good hardness, resistance to scratch, stain, water and heat. The ply reporter finding indicate that Melamine consumption has increased by double during last 4 years due to massive expansion in production capacities of Decorative Laminates, MDF, Plywood and Particle Boards.
The Ply Reporter estimates that ‘Wood Panel and Decorative laminate industry and few other segments consume approximately 11,000 MT Melamine every month, which was around 7000 ton, three years ago. Surge in capacities added in MDF, Prelam, flooring and and Laminate industry led to the rise in demand for Melamine. With growing demand for Melamine, the local industry has become more dependent on imported Melamine because the domestic producer feeds approximately 25 to 30 percent of the total requirement.
The Directorate General of Trade Remedies (DGTR) has recommended reducing Anti-Dumping Duty to 161 UDS from 331 USD on import of Melamine from China in their Sunset Review. This is certainly a positive step in the investigation such as increasing transparency and reducing the duty. The Finance Ministry should implement this recommendation as soon as possible to help the user’s industry. It is also noted that Wood Panel and Laminate industry consumes approximately 90 percent of melamine total demand.
If the situation does not improve, many factories might opt for shutdown or halting the supplies of materials according to urgency and price. Because the reports are shrieking wide open that there is hardly melamine to run full as usual for the majority of the units.
With growing demand for Melamine, the local industry has become more dependent on imported Melamine because the domestic producer feeds approximately 25 to 30 percent of the total requirement.
THE WAY OUT
The Ply Reporter has tried to dig out the scenario and finds that another three months are going to be worse for the industry to procure sufficient supply of Melamine. The shortage of containers and high prices of ocean freight will remain a concern at least till the year end or can prolong to next year. This way procurement of imported Melamine will remain a herculean task for importers and Industries.
The fear is India's production capacities will get hardly half of the melamine required every month. Thus, the Industry has to either reduce production or the associations must opt to shut the plants for a week or more. There is actually no way out other than increasing the finished product prices till the scenario improves.