Plywood and wood panel products manufacturing has been badly hit by rising timber prices, which have been reported to have reached an all-time high. The high cost of timber has directly impacted the input cost of finished products. According to a report from Yamunanagar, the price of poplar wood, which is used to make all types of plywood, board and doors, has increased by 25% due to a lack of supply. Similarly, the Eucalyptus timber prices have also noted a high jump from Rs. 450 per quintal to Rs. 850 per quintal within a year. Timber contributes a major share of manufacturing of plywood products, so the producers are forced to increase the prices of finished products. Timber suppliers say that prices will not come down in the near future because of limited supply.
As per the report from Yamunanagar (Haryana), Punjab, Uttarpradesh, Uttrakhand and other north India markets, the industry has been compelled to increase the prices of finished products, which has been affecting the lifting of materials. Industry sources also revealed that capacity utilisation has dropped drastically because of less demand and many small units are forced to stop production. As per the report, industry associations belonging to Punjab, Haryana, Uttar Pradesh, Delhi-NCR etc. have announced price hikes in different product categories few months before.
In the end of the month of May 2022 commercial grade plywood and block board prices have been increased by the plywood manufacturers across the industry clusters in the country. The plywood associations have announced their respective price rises from 60 paisa to 80 paisa per glue line. The majority of them attributed it to rising material costs, particularly for chemicals and other items, which have increased the cost of production.
TIMBER SCENARIO IN HARYANA AND PUNJAB
The plywood clusters in Yamunanagar (Haryana), and Hoshiarpur (Punjab), are experiencing severe shortages of timber. There are over 400 factories in Yamunanager and nearly 40 in Hoshiarpur, but at least 25% of them have closed due to scarcity, and many more are struggling to survive in these difficult times. The next two months are expected to be more difficult, as the price of timber is expected to rise by 10 to 20% from its current level during the rainy season. Although the shortage of timber is a phenomenon in industry but, this year the situation is more aggravated than before.
market through demand and supply mechanisms. The wood logs of poplar trees are now sold in 2 categories according to the circumference of the logs. Over/Under refers to sizes greater than 14 inches, Sokta refers to sizes between 14 and 10 inches, and Firewood refers to sizes less than 10 inches. In June 2021, the rates of Poplar wood were prevailing at Yamunanagar Mandi were OVER/UNDER at Rs 950 to 800 Rs/quintal, Sokta at Rs 560/quintal, firewood at Rs 250/quintal, which is now after one year in June 2022, is not available in OVER category and the price of Poplar’s UNDER category (with a girth of 12 inch to 14 inch) is being sold at Rs 1500/ quintal and Eucalyptus at Rs 850.
The Yamunanagar district is known as the plywood capital of India and has one of the largest timber markets in Asia. The industry people in Yamunanagar and Hoshiarpur at this constraint situation are not in a position to stock the timber at a high cost. One of the manufacturers say in this price fluctuation and scarcity of timber, the classification of the girth of timber has also been broken out. Earlier, OVER was considered as 18 inches to 24 inches, which has been reduced to 14 inches plus, and UNDER, which is being considered as 10 to 14 inches.
From 2011 to 2015, there was an abundance of timber in the market that affected its price stabilization. The price dropped significantly, and the interest of farmers towards it also curled, and many of them even uprooted the plantation due to the non-supportive nature of the industry towards farmers. At that time, the industry players had replied in a meeting that it is decided by demand and supply.
INDUSTRY SCENARIO
It is expected that at least for one and a half years, there will be a tough situation and survival in this period is very challenging. In the last 15 days, the availability of timber has dropped significantly and its rate of revision is expected to increase by 10%. The demand in the market is also slow due to the fact that the production is also low. In the coming months in the rainy season, it is expected that production will be curtailed by 35%.
Currently the factory operation at Yamunanager is at 60 to 65% of its maximum. The next two months are going to be very challenging. If the demand rises, there would be a short supply of ready material from Yamunanagar. There is a lack of awareness regarding timber plantation among the farmers as well as the industry at large. The big companies are taking the initiative to promote plantation and assure the farmers of getting a minimum support price, but the mid segments industry clusters are not doing anything in this regard because they are unorganised and scattered.
Ply reporter had predicted that “Timber to Touch Peak In 2022.”
The wood panel industry is set to witness the peak in timber prices in 2022. The scenario is going to emerge when a manufacturer will evaluate the cost of timber used per square feet with respect to yield and the girth of the log. The timber availability will be highly squeezed and wood-based industries will be forced to purchase logs of poplar and eucalyptus of lower girth on higher rates. The scenario will reflect throughout the country this year irrespective of species.
The poplar prices are expected to cross 1150 mark this year whereas Eucalyptus is expected to hover around Rs 750/tonne levels for high quality timbers. The prices in Kerala for rubber wood are also expected to remain on similar levels. In the East, the timber supply will also tighten because demand for timber is growing with each passing day.
The arrival of new wood-based industries in Punjab, Haryana and expansions happening in Uttar Pradesh and Uttarakhand is certainly pushing towards higher imbalance that will be reflected in 2022 on its peak. The new capacities in MDF and particle board will certainly boost sentiment among plant growers thus sales in timber nurseries will also scale up to new heights in 2022.
But on the whole, the wood panels industries are set to witness the most acute timber shortage in 2022. The Ply Reporter foresees timber crisis hitting plywood industries at the most because the plywood market is not supporting the price increase in plywood category so far. In the month of September 2021 Timber Prices Cross 1000, Big Pain for Panel Producers.
INDUSTRY LEADERS’ OPINION
Mr Narendra Bansal, Director, Alloy Steel & Castings, Yamunanagar: The wood supply to the plywood factories is very low due to the fact that its operations are becoming challenging now. The scarcity of timber is due to fewer plantations in the previous plantation cycle. This is going to continue for two years. Until then, the industry has to face challenges. The scarcity of timers may be due to stocking at the suppliers’ level. The increasing number of MDF plants is also affecting the availability of timber to the plywood manufacturers. Due to their demand, the timber cropping is happening in every two to three years, which is also creating a scarcity of higher girth timber. They require any types of timber and lower girths up to 10 to 12 inches are also being taken by them.
The industry is also not in the position to control the production due to high expenditure. On the other hand, margin has already vanished as there is less demand in the market also and the increased price of ready goods is not seeing realization. If this large scale plantation happens, then only the industries can survive in this stiff competition.
Mr Amit Goel, Director, GMG Plywood and Crosta panels, Yamunanagar: The timber shortage is there before the plywood industry in Yamunanagar due to the high MSP given by Haryana and Punjab governments to the farmers of rice and sugarcane. Farmers have been avoiding plantations in recent years. 2011 to 2016, there was an abundance of timber in the market that affected its price stabilisation and it dropped significantly. We hope in the coming two years the issue of timber scarcity will be resolved. The Indian plywood industry can compete in the overseas market despite the high sea freight rate, so the industry should look for a perfect solution for sustainable availability of timber. The industry should take a concrete step to support farmers in terms of price so that in confidence to have a fixed earning, they will take an interest in plantation on a regular basis. It will support the streamlining of the rotation of plantations and the quality output of timber.
Mr Manish Kedia, Director, Bhutan Tuff: Timber scarcity is at its peak in Haryana and the factory operations are highly affected by it. Many of the players have reduced their plywood production by 50%. The reasons for the scarcity of timber are fewer plantations in the previous plantation cycle and the emergence of new panel factories like MDF and wood particle board plants, which use low-girth timber. The high raw material prices are posing challenges to the industry in terms of the high cost of production. And the non-realisation of the rising price of ready products is reducing its margin. Now people are on the verge of just survival and remaining in the market. In that situation, over 50% of factories are facing increasing difficulties. Besides, there is a labour shortage also because those who had gone to their native places in the month of April for cropping and mirage season have not come yet.
Mr. Sanjay Garg, Chairman, SRG Ply & Boards, UP: We are also facing a scarcity of timber in UP. The reason behind the farmers' not having ready timber plants as during the low rate of timber they had not planted trees. In the coming three years, the industry will face challenging times as timber procurement will become tough. The sales are also going down. The month of June witnessed very little demand. In this constrained situation, the industry players are finding ways of survival or looking for other things. The industry, being unorganised, is not able to find any concrete solutions. At least for their survival, they must get organised and face the situation altogether, as without industry, their existence is also at stake.
Mr Bimal Chopra, Director, Metro Plywood Group, Yamunanagar: The industry is facing an extreme shortage of timber. The rainy season has not even started and such a scenario of timber scarcity is prevailing before the industry. Whatever timber is coming is of the mixed type, with lower girth up to 14 inches. Poplar prices are high. The reason is that there were fewer plantations in the previous cycle. Now it is being seen that the plantation is good in the entire Haryana and Punjab region.
The industry players are in a dilemma, as shutting down the plant also results in a loss and its running cost is very high, which is not viable. Secondly, the price realisation in the market is not being seen. Many of the players have to shut down their plats as in the next two months the price is again going to increase. With a large number of factories coming up at a regional level, the supply from Yamunanager to those states has dropped. There is a blackout before the industry players. The solution to it is to be united and take out something concrete, but being unorganized, the industry is killing itself.
Mr Shyam Agarwal, Director, Haploos Plyboards Pvt Ltd (Hillwud), Yamunanagar: Previously, the plantation was low, and that is reflected now in terms of the scarcity of timber that is pushing its price up. Many factories are running at 60% capacity, and many (nearly 25% of units) have shut down. With the rising price of ready panels, the demand is decreasing. To overcome this situation, the industry has to work with farmers on plantations. Because the industry is unorganized, nothing concrete is being accomplished through collaborative efforts. This is an individual fight due to a lack of awareness among the industry and farmers.
Mr Sant Kwatra, Director, Neelgiri Wood Crafts, Yamunanagar: If the timber price is increasing, the price of ready products will have to increase at any cost. If the farmers do not get the right price, why should they grow plants? This is the demand and supply mechanism. Yamunanager is a large plywood manufacturing cluster catering to the entire nation. If we increase the price, the regional players, like manufacturers based in UP and other states, will overtake the market as their timber is cheaper than ours by Rs 150/quintal. Kerala has its own market. This is a challenging time for Yamunanager. Almost 15% of factories have shut their operations. I think that this monsoon season will affect at least 10% of industry as there is a cash crunch, input costs are increasing, and people are suffering from capital expenditure with low investment strength. Now, prediction also does not work as the market is uncertain with a lot of counterfeiting going on in the market. This is the darkest phase of this industry in the last 25 years.
Mr Baldev Singh, Ramneek International Pvt Ltd, Punjab: Few of the big players are buying the highest quantity due to the high scarcity of timber in the Hoshiarpur plywood manufacturing cluster. The timer supply to other factories is just 20%. The paddy season has started due to the fact that the felling of timber is low at this point of time, which is every year’s scenario. We are seeing a very tough time. We have left stock for just 10 days. The production is going to be the lowest this year. If we increase the rate of ready goods, the market is not going to accept it as the demand is also very low.
Ten days ago the price of core was lower, but now they are going to increase its price by 10% at least. It appears that the cost of factory production will rise as the cost of timber procurement rises by the lakhs every day. It was dropping by just 5%, but this year the production is expected to drop by 50% due to the unavailability of wood.
Mr Manish Agarwal, Director, Guruji Group of Industries, Yamunanagar: We hope for a speedy recovery as with our difficulties, the traders’ fraternity is also facing constraint times and running their business at the lowest margin. In the last 31 years, we have not seen such a high level of unavailability of timber in the industry. Secondly, MDF could be the factor that is hitting the plywood industry in both ways, like availability of timber and somehow taking up the market share of plywood. In future, MDF and particle boards are expected to capture the plywood market by 3 to 4% every year.
Mr Birendra Kumar Jindal, MD, Ambika Plywood Industries Pvt Ltd, Rudrapur: Beginning with 2014-15, the plantation was very low compared to two years before, so now the timber scarcity is visible to its peak before the industry players. It is expected that it will continue up to 2025. We cannot fill this gap artificially, so in the constrained time with aggravating difficulties, the plants have no option to shut down. Factories are running at 50%. For the industry's survival, the players need to be united and come to a common platform, set norms for sales and purchases, and reduce the production running the plant for one shift, or else the players are prone to making their own losses.
The same would be happening in the timer availability and price mechanisms also, because at present, their plant does not have a huge volume of consumption. With the current plantation, timber availability will gradually increase after one and a half years, putting the Yamunanager industry at ease. Dealers are advised to proceed with caution and to continue making payments to the manufacturers. Creating an industry cluster and making efforts for plantation is on the table, but in practice, there is no work. There is a proposal to convert at least 5% of agricultural land to plantation, which would not affect crop production but would increase the availability of timber and benefit farmers.
Mr CP Agarwal, MD, Jai Hanuman Plywood Industries, UP: In UP, the timber scenario is poor, and in coming times the situation will aggravate to the next level as the rate of plant felling is high and plantation is not going on at that rate. As a result, an increasing number of factories in UP are facing a timber shortage. Popular plantations were also there in UP, but now only eucalyptus is there and that is under pressure. We are afraid that the same situation in Punjab and Haryana will happen in UP also in the near future. The production costs are increasing but the demand is also there in the market for quality offerings.
Padam Jain, Director, New Pragati Plywood Industries, Pvt Ltd, Yamunanagar: Years ago, when the price of timber had reached its lowest, the farmers in the coming years would not have gone for plantation. By rotation, the cycle will be completed by next year, so there will be a huge scarcity of timber in the northern region. The farmers with government MSP moved towards cropping and sugarcane. The plantation is going well now with the high rate of timber. But, it will take time to yield; in the meantime, the industry is not able to compete with other parts of the country's states like Eastern India, West Bengal, Bihar, and Kerala. Plywood manufacturing has become regional. Currently, we are running at 50% capacity. The process of closing (nearly 100 is already closed) and selling out the plants and machines has begun in Yamunanager. To overcome the situation and ensure the sustainable availability of timber in the future, the industry has to think about supporting the farmers in terms of a minimum price realisation of their produce. Many people are taking the initiative in this regard.
Mr Samir Goel, Saraswati Agro Industries, Punjab: The demand of plywood in the market has dropped with its rising price. The price of eucalyptus has crossed all time high. Due to it the production has also reached to 60% level. The opening up of the MDF plants is another challenge before us as they are ready to pick thin plants. That leads to the cutting of un-matured plants also. In the rainy season, the scarcity is going to increase. It is unexpected when the situation will improve, as it has been happening for the last one year. The factory owner is at a loss. The workers have gone with low production. All are suffering from a "wait and watch" situation. There is only one solution to increase plantation at a high rate.
Mr Sanjay Kansal, Director, Satguru Agro Industries, Punjab: In plywood manufacturing, timber costs nearly 60 to 70% and the timber availability is uncertain for over two years, so the cost of production is high. The rate of plywood may have increased more, but the market is slow and that is holding the price increase. For one and a half years, the plantation has been going on at a good pace. It will take time to ease the availability. At present, the production is at nearly 50% to 60%. There is no hope in the near future and no alternative is possible.