Plywood industry witnessing flattish growth

Plywood industry witnessing flattish growth

Leading plywood players have diverted their attention to medium-end category to drive growth and to increase volume. However, most of them have resisted entering the lower end of the market which is high volume low margin segment dominated by unorganised sector

Plywood industry is passing through one of its toughest phases as demand continues to be subdued with industry growing merely 2–3%. As real estate demand remains muted the industry players are trying with various tricks to keep up the growth momentum.

Changing strategies

For example, CenturyPly has started Century pro Club wherein a loyalty programme is undertaken to incentivise contractors. The company has successfully implemented the programme in two states and by next Financial Year the programme will be scaled up to cover whole of the country. On the other hand, Greenply Industries has recently introduced Green Club 5 Hundred with 500% lifetime warranty – an upgraded version of Green Club (introduced in 2000 with 300% lifetime warranty) with additional technical features like antibacterial coating, additional layer of face veneer and extra glue line protection. So far, the new warranty programme has been well received in the market, according to company sources.

Saturated premium segment

Leading plywood manufacturers say that premium plywood market has saturated where they are seeing flattish or marginal growth. As a result, leading plywood players have diverted their attention to medium-end category to drive growth and to increase volume. However, most of them have resisted entering the lower end of the market which is high volume low margin segment dominated by unorganised sector.

Raw material prices

However, softer raw material price is a saving grace for the industry which has helped them to survive in the tough market without hiking the prices much. Going forward, plywood manufacturers don’t see much challenges on raw material front, at least in short to medium term.

Face veneer issue

Dust seems to have settled down on face veneer issue for the plywood manufacturers. Prices of face veneer are not only falling but now they have multiple options as Myanmar too has opened its gates. Interestingly, price of timber in Myanmar has come down as more than 50% of the units have closed down there due to its decision to ban timber exports in the past. Last year, for example, timber in government auction was sold at $1100 – $1200 per hoppus ton. As against this, now timber is available for $ 700 per hoppus ton.

Quality-wise Gurjan veneer from Myanmar is found to be better than Okoume veneer from Gabon. However, Indian plywood manufacturers were forced to shift to Okoume veneer when Myanmar imposed ban on export of timber a few years ago. With Myanmar policy changing which allows export if bought at government auctions some of the leading manufacturers prefer to use Gurjan veneer for premium plywood. Meanwhile, as the price of Okoume veneer has also gone down in last few months, by as much as around $40 to $50 USD per CBM may bring some cheers to plywood makers.

Price of core veneer

However, upward movement in the prices of poplar wood is a matter of concern for the plywood manufacturers. Further, as always, this year too during Monsoon price has gone up 3-4 paisa per mm and plywood manufacturers expect the price to normalise after Monsoon.

On the other hand, many small factories in Punjab-Haryana belt which enjoyed duty exemption may close down due to withdrawal of benefit and also stricter surveillance under GST. This may reduce the demand for poplar wood thus bringing down its price to realistic level. It should be noted that poplar wood was sold Rs 1,100 per quintal in 2012, but the prices started declining in 2013 and touched Rs 400 per quintal in 2015 following a huge gap in demand and supply. Now once again it has started moving towards four figure mark. Nearly 40-50 factories have reportedly closed down in the recent months due to steep increase in the wood cost. Last year, UP government too has become liberal in giving licences for new veneer peeling plants.

Price of glues and chemicals

Another positive for the industry is the fact that the chemical, specially phenol and Formaldehyde, prices have gone down in recent months thus giving some relief for the plywood manufacturers. However, manufacturers fear if the crude oil price firms up and rupee further depreciates, whatever advantage they enjoy may go away.

Despite current flattish growth witnessed by the industry, manufacturers are upbeat about the future prospects of the industry in medium to long term perspective. Rapid urbanisation and increased emphasis on housing are the two factors which will help the industry to get back to the faster growth track. Also, stricter surveillance mechanism once put in place, there will be gradual shift in market share in favour of organised segment. All these factors help the industry to remain optimistic despite the current challenging times.

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