Century Ply has decided to hold back its MDF (Medium Density Fibreboard) expansion plans for the time being. Last year in October the company had set up its first MDF plant having 600 CBM/day capacity. In the previous quarter the company had surprised the industry by announcing its plans to expand MDF capacity from 600 CBM to 1000 CBM/day.
The company had set up its MDF unit within 16 months and had achieved the break-even level within the first six months of the operation. Encouraged by these results, the company announced its expansion plans. Then, for the company it had made economic sense as by just investing another Rs 110-120 crore, the company could add another 60% capacity to the existing plant.
However, MDF market has undergone lot of changes during the last few months which has forced the company to rethink on its strategy. In the last 3-4 months 2000 CBM/day MDF capacity has come up in the country taking the total installed capacity to around 4400 CBM/day. While production has doubled during last 3-4 months the demand hasn’t grown at similar pace leading to massive price cuts and low margins. Leading manufacturers have resorted to price cuts to retain their market share. During the last few months, some MDF manufacturers have cut the price by 6-6.5%. Century Ply has cut prices by 5% in the recent past.
With Greenply’s new MDF plant in Andhra coming up in next couple of months, there will be another 1200 CBM/day capacity addition which will put further pressure on price. International price of MDF too has come down by 10% during last few months. However, this has not affected domestic price much due to rupee depreciation during the same period.