The increasing number of new units manufacturing decorative laminates in North India and Morbi Gujrat has left India’s HPL market trembling due to excess production of decorative laminates. Over production of laminates has put laminate producers in a very tight spot hence under tremendous pressure to keep the prices low. The profit margins are seen going down in every quarter across the product sector.
In the past two years, around 40-45 new laminate manufacturing plants have become operational in Haryana, Punjab, Gujarat and Delhi NCR. The production capacity has risen from 2.85 crore to 4 crore sheets per month thus creating a far greater supply scenario than present demand. Despite the rise in raw materials, overheads and other unseen expenses, profits are below the norms of running an industry say North India based pioneers in decorative laminate manufacturing.
Although the demand for decorative laminates have improved since last 5 years, but over production is taking a toll on prices very deeply. The production capacity has increased by 5 times compared to demand and growth estimated in last two years. According to an office bearer in Laminate Association, the present growth in the market is said to be around 14-15 percent largely driven by less than 0.8 mm product categories.
The excess capacity and production has put big pressure on finished product prices which have already come down by 10%. Study finds that 1 mm segment might post marginal growth, where as 0.8 mm and door skin would register robust growth. The scenario simply indicate that existing capacity will take another 5 years to be absorbed that too if new plants or massive expansions take a pause. “With increased supply and prices going down laminate producers are distributing material on cheap rates and long credits in markets that will ultimately suffocate them with changing market dynamics. There is certainly a highly expected scenario where plants will not be able to run on their expected capacities in very near future,” says ILMA president Mr. Vikas Agarwal.
The new arrival in laminate manufacturing is happening largely from the plywood manufacturing segment, where new generation is diversifying to HPL. Keeping the same segment in view and decorative laminate manufacturing becoming the most suited for the new generation, plywood producers have gone in to laminate plants without doing any market survey of research for taking a long-term view on this category.
Sensing the rising competition, existing players are increasing their capacity keeping their calculation to reduce overheads thus making whole HPL segment highly over-crowded. The ply reporter ground data reveal that 2018-19 will not be easy for manufacturers or sellers due to huge pressure on margins and taxation issues. The ballooning capacity will have its toll on weak players by 2018 end or 2019 hence one must enter in this product with proper home work. According to data, it has been observed that there are on an average 150 distributors who are operational in every metro city for various laminate brands apart from company owned branch offices and go downs. The over-crowd for this segment is not at all a good sign for a healthy market place in near future.