It was a surprise, everyone was expecting further reduction in medium density fibreboard (MDF) price but manufacturers thought otherwise by effecting a hike. Leading manufacturers of MDF, that is, Greenpanel Industries, Balaji Action Buildwell and Century Plyboards, have hiked the prices by 3.5%-4% which has come after 25% fall in the price in the last 18 months. However, price hike is restricted to thick MDF while the thin MDF prices remain unchanged. Further, price hike is effected only in North India.
Market is surprised because there is overcapacity in MDF sector and further capacity is expected to be added in the comping months. Even Century Plyboard is contemplating brownfield expansion of its capacity. Rushil Décor is setting up a greenfield plant in South India. Present capacity in North India is 0.96 million CBM while the demand is not even half of that.
So, the present hike may not be able to set a trend for further hike in the coming months. Meanwhile, it might have arrested further slide in the price, at least in the short term. However, one is wondering whether this collusive action of the MDF manufacturers will go unnoticed by the Competition Commission of India?
However, manufacturers have kept thin MDF out of the purview of the present price hike. It should be noted that unlike thick MDF, there is no anti-dumping duty levied on thin MDF imports. Thin MDF accounts for nearly 30% of the MDF consumed in India. With no price protection (by way of anti-dumping duty) stage is set for further fall in the price of thin MDF (with thickness below 6 mm).
MDF capacity is set to go up to 2 million CBM by next financial year and thereafter there is no further declared capacity addition. In other words, capacity is set to hover around that figure for sometime. However, it may take much more time for the demand to match up with that figure. Hence, the consumers are not too disturbed by the present price hike.