Home News Demand may outgrow MDF supply in the short term

Demand may outgrow MDF supply in the short term

Presently, tide is favouring the medium density fibreboard (MDF) manufacturers and it is likely to remain so at least in short to medium term. While demand is rising, especially post lockdown, there may not be much change on supply side as capacity addition projects are getting delayed due to various reasons.

Manufacturers of MDF are stretching their capacity utilisation to the maximum. For example, in the third quarter, Greenpanel had a capacity utilisation of 93% which in the fourth quarter will increase to 100%. Century Ply is aiming to achieve almost the same volume as was in last year despite the lockdown had resulted in closure of manufacturing units for more than a month. Meanwhile, imports have come down almost to nil due to increased duties and non-availability of containers.

Interestingly, there is no likelihood of any capacity addition in the near future by the existing or the new players. Some of the capacity addition projects are delayed due to various reasons. For example, Rushil Décor’s 800CBM plant in South was originally planned for 2019 completion but the project is not yet ready. Though its scheduled for commissioning in April 2021, one need not be surprised if the completion date is extended further. In case of Century Ply, though the UP state government had given go ahead for the MDF project, the green bench had later on quashed all recently issued licences by the government for wood-based industries. Now the company is planning to expand the capacity at Hoshiarpur unit from 600 CBM to 1,000 CBM which may happen only next year as minimum 12 months are required to complete the project. Apart from this, the company is also evaluating south based locations for greenfield MDF project which is likely to have 700+ cbm per day capacity, and would be requiring 18 months for commencement of commercial operations from the date of finalisation the site.

Similarly, Greenpanel too has embarked upon capacity expansion to take its capacity from 540K MT to 660K MT, benefit of which will be visible only in FY23.

With no capacity expansion in the offing in the near future nor are there any threat of imports, price may not remain at the pre-lockdown level. In fact, price has already been hiked twice, once in December 2020 and second time in January. Further, price hikes at regular intervals are also very likely.

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