Indian medium density fibreboard (MDF) industry has a very short history as its real story started only in 21st century. Thus, India is not a significant player in global MDF market and accounts for hardly one per cent of global MDF industry. Indian MDF industry with a size of just Rs 2,500 crore rarely makes any headlines. But it’s not the past but the future that makes this wood panel board very interesting building material.
With a history of about a decade or so, the size of MDF market is hardly about Rs 2500 crore (FY 2020) which in global context is an ‘ignorable’ market size. Of this, about 80% is accounted for by the domestic production and the rest is met through imports.
Small size of MDF market is mainly due to India is still a plywood-centric market where nearly 4/5th of the wood panel consumption is accounted for by plywood. On the other hand, globally about 65% of wood panel consumption is that of engineered products like MDF, Particle Board, etc while plywood makes up for the rest.
Trend is changing
However, the trend is changing and in the last 4-5 years and MDF’s acceptance has been growing strongly. And in 2020, especially after lockdown, this tilt is felt even strongly as the demand for furniture has seen sudden increase and that too people have started buying readymade furniture than getting it done through carpenters due to social distancing norms and hygiene concerns. Even otherwise people have started preferring readymade furniture as custom-made products by carpenters take a lot of time. This apart, many retail stores are supplying off-the-rack premium & medium range furniture, and online furniture websites like Pepperfry, Snapdeal, Urban Ladder and Fab Furnish are offering a wider choice for ready-made furniture as well as instant aftersales service. The culture of ready-to-move-in offices/retail outlets, with low-cost modular furniture is also gaining popularity in India.
MDF is economical
Apart from giving a better finish to the end product, MDF has another advantage in its favour in that its economical than certain categories of plywood. It is estimated that MDF is 50% cheaper than premium plywood and 25-30% cheaper than mid-segment plywood. Further, pricing differential between cheap plywood and MDF has come down to 7-8% as prices of poplar, traditionally used plywood by unorganized manufacturers, have spiked in the last 1.5 years.
Further, price difference is also there between domestically manufactured MDF and the ones imported from elsewhere. Pricing differential between domestically manufactured thick MDF and imports is 6-8% while in case of thin MDF (less than 6mm) the difference is as much as 28-30%. In case of imports, significant inventory needs to be maintained (due to considerable lead time between order placement and actual delivery) which this leads to higher inventory costs thus giving domestic manufacturers a natural advantage of 5-7%. Also, imported MDF becomes viable only in markets near to ports due to logistics issues and northern markets are catered to through domestic production.
MDF finds new applications
Market survey reveals that new applications of MDF are increasing in wardrobe, kitchen and furniture by replacing commercial ply. According to experts, export of ready-made furniture is another big opportunity for India though competition from other South East Asian nations will be strong. Further, industry sources say that MDF has been replacing thin plywood of 4-6mm thickness as the latter’s rising cost of production and low quality has affected demand among furniture makers.
Recently, the Director General of Trade Remedies (DGTR) recommended continuation of definitive antidumping duty (ADD) on imports of MDF having thickness of 6-mm or more originating in or exported from Malaysia, Thailand and Sri Lanka for a further period of five years. This has almost nullified any threat of imports in case of thick MDF. Meanwhile, the decision on ADD on thin MDF, less than 6-mm, is still pending as the investigation on the matter is going on.
According to MDF manufacturers, demand for MDF has grown impressively post June 2020 driven by sharp increase in demand for modular furniture. The ready-made furniture (OEM) market has been booming post COVID and the demand from this segment is structural and is likely to remain for longer period. It’s the tier-2-and-below towns which are the main centres of demand while major cities such as Mumbai, Bengaluru and Hyderabad are very slow in recovery from the pandemic. However, once the major markets recover completely, there is likely to be even more favourable impact on demand.