With an all time high drop in ocean freight rate the import volume of MDF is increasing. The market experts say that since the last six months the ocean freight rate is continuously declining and in the month of February 2023 it fell 13.3% month over month, which was a recorded decline and also further decline is expected. First fortnight of March 2023 average Asia – Europe container rate decreased 17% compared to a week prior to March 2019 rates.
This significant come-down suggests Asia – Europe ocean trade has entered price war territory as demand continues to slide and carriers are keeping some excess capacity active. The reversal in the situation has hit domestic manufacturing, as the country was once net exports last year. But, the manufacturers are still confident that once the new capacity gets established the import will remain at less than 10% of total consumption.
It is to be noted that in the financial year 2022, India was the net exporter of MDF due to higher prices in the international market, logistic issues and growing acceptance of its products in global markets. While five years before, India was importing MDF nearly one third of its total consumption. The demand for MDF more than doubled during this time and with rising completion with imports. Industry sources say that all types of MDF are being imported and the volume of thick MDF import is also increasing.
The ply reporter study indicates that the ratio of imports of MDF and local manufacturing would be 15:85. The price difference is high, nearly 15 to 20% from domestic MDF that is impacting the domestic manufacturing. The market sources say that with an unstable geopolitical environment and drop in demand in Europe and other western markets the imports are returning with retaliation as nations like Vietnam and Malaysia redirected output to India. The 16.5 mm imported plain MDF costs Rs 33/sqft in general.
The study also indicates that the short cycle players are getting involved in imports directly or indirectly so the penetration of imports is likely to boost as there are many new players that have come up into it. This year the expected MDF production capacity rise is 35% so India's overall demand over the coming years will most likely have little effect as the capacity expansions are being done on the basis of far cited observation supported with the surge in demand and domestic production of readymade furniture and large export opportunities rather than on the basis of profit margins. As a result, the industry's installed capacity will go up by nearly 70% in the next two years.