MDF with 20% of Plywood Share can exhaust 8000 CBM of MDF capacity that India will have in two years

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IF MDF GETS ONLY 20% OF PLYWOOD SHARE, THEN THE 8000 CBM MDF WILL EASILY EXHAUSTED

The Managing Director of Rushil Decor Ltd, Mr Krupesh Thakkar, producers of VIR MDF, VIR Decorative Laminates and various other products, spoke to The Ply Reporter magazine, on Vir's new upcoming mega MDF plant of 600 cbm per day capacity in Andhra Pradesh. Being a senior and seasoned manufacturer in Indian decorative & panel industry, Krupesh Thakkar expressed clear views on MDF industry and trade. This 'one to one' interaction with Mr Krupesh Thakkar is very informative and worth reading for every wood panel trade person, who is willing to understand the growth opportunities.

If you consider countries like Malaysia, Indonesia, Vietnam, they provide holistic training to their manpower. This differentiates the quality. The technology, machinery used is same as in India, only the way a project is carried out is different. What they can produce, we can produce here as well. As far as the prices are concerned, the inventory carrying cost can be managed in India as well. We also charge 5 % premium cost just like them. So, import replacement is certainly possible and will happen.

Q. What is the capacity, location and expected date of the beginning of operation of the upcoming new MDF plant of VIR MDF?

A. Though we have officially announced October 2020, we are trying to start the project in February 2020 only. The capacity is 600 CBM per day, out of that we can produce MDF sheets of thickness ranging between 2 mm to 35 mm. Multiple sizes are possible after new plant of VIR MDF such as 8x6 ft, 8x4 ft, 6x3 ft and 6x4 ft.

Q. Where exactly is the location? How far is it from your existing plant and Bangalore?

A. The plant is located in the Atchutapuram town of Andhra Pradesh. It is approximately 1000 km from Bangalore and 38 km from Vizag. It’s on the other side of the south copared to location of our existing MDF plant.

Q. Is the location advantageous for timber availability?

A. There has always been a question mark on the availability of timber in India. Timber tends to be not available quite easily, especially in locations which have paper mills. However, if a paper mill is located somewhere, timber must be there. But because the price of timber keeps soaring internationally, the cost of timber remains high in India.

Q. So, does that mean, with more paper mills/plants in that area, the timber cost is bound to increase even more?

A. There is a viability of each plant. The advantage with us is that we want barked timber. The farmer is usually more interested in selling barked timber, because he doesn’t want to spend money and effort in de-barking the timber. The infrastructure and other expenses will end up in 30% losses for him. Therefore, he remains up for selling the timber with its bark. Currently in Andhra Pradesh, the practice of selling barked timber is only there. So when we will start the plant we will also propose to them to sell it with bark, so that it remains easy for them.

Q. It is said that the buying levels for MDF industries & paper mills are on the similar levels. Is it possible that with the advent of paper plants, all the timber supply is going to end up there?

A. No it’s not like that. There’s a temporary competition which is at the very initial stage, like when we started our plant, in Chikmangloor, the price of timber was around Rs 2500 per ton, but due to buying competition it reached to the levels of Rs 4000 per ton. Due to the use of debarked timber, the cost went higher.

Q. Can you tell us the nearest station from New MDF facility of Vir. Also can we know the approximate distance of other MDF or Particle Board plants from your plant?

A. The nearest major station to VIR MDF new plant is Nellore. Among other two big plants like Greens MDF factory is around 650 km away where as Associate Particle board plant is around one is on the sides of Bangalore i.e. near our old MDF plant near 280 km, which is approximately 1000 km from new plant.

Q. So, basically VIR’s new MDF plant is in a completely new zone with no plants of the same product in that particular area. That sounds an advantage. Are you making any effort to increase availability of timber in that area?

A. Yes. We have a team that promotes plantation by meeting and counselling the farmers. They advise them to plant trees promising them that we’ll buy them when they are full grown. With such kind of strategies, we hope that in the next five years, we’ll buy the raw material for the plant from its 50 km surrounding area itself. But for now we are targeting 100-120 km radius for getting the material.

Q. What wood species are available there and their tentative density?

A. Acacia, Eucalyptus, Melia Dubia, Casuarina etc are the main species available there now. Casuarina and Eucalyptus are quite similar. There is less bark content in casuarina, making it an apt choice for paper mills. That’s why; it is sold also at a premium price.

Q. Is there a possibility of importing ‘wood pulp’ in India? What would be the investment cost in India for imported chips?

A. Not pulp, but there is a possibility to import ‘imported chips’. We get a lot of offers from South American countries. The cost of imported chips in India cost a rupee higher compared to local wood. The cost of importing in bulk quantity is approx. Rs 4.5 per kg which also depend on various factors like logistics, dollar etc. The imported wood chips usage will be taken in consideration in near future because these chips are already debarked.

In India, people wish to get a nice and strong product in affordable rates. MDF is cheaper than plywood; if you talk about strength, it’s stronger than particle board. Particle board has an altogether different market which is targeted by manufacturers of cheap furniture.

Q. If we consider big OEMs and quality buyers view who give high marks to imported boards over domestic produced, do you really feel entire ‘replacement’ of import is possible?

A. If you consider countries like Malaysia, Indonesia, Vietnam, they provide holistic training to their manpower. This differentiates the quality. The technology, machinery used is same as in India, only the way a project is carried out is different. What they can produce, we can produce here as well. As far as the prices are concerned, the inventory carrying cost can be managed in India as well. We also charge 5% premium cost just like them. So, import replacement is certainly possible and will happen.

Today Indian MDF companies have started exporting to Srilanka, Bangladesh and are opening new avenues in exports due to the quality offered. And this wouldn’t have been possible if Indian MDF companies were not manufacturing good quality.

Q. What is your view on small sized MDF plants?

A. Small and conventional MDF plant consumes more resin and hence it is not cost conscious. Surviving in a competitive market like India, it would be difficult for small plant people.

People who are bringing Calendar Press technology, I want to tell them that this technology is outdated. It consumes more Resin, higher Sanding loss and quality issues etc. At least in the Indian market, getting benefit out of MDF manufactured by Calendar Press is difficult.

Q. What’s the difference in quality between a 125+ crore’s Chinese MDF plant verses a 600 CBM plus plant from Germany of worth 400 crore?

A. I have a Chinese plant running for me already, if I compare it with my German, it has its own selling USPs. One is that it saves about 10% raw material; resin saving is additional in tune to 10-12%. In market rate you can get 4-5% premium easily on European machinery, because it gives equal density, gives good finish, making it easier to get 4-5% premium. All this will add up to investing 100- 150 crores extra in a German plant, and that is worth it and viable. Certainly it gives pressure in beginning but you win in long run actually.

Q. Do you think the MDF market will continue to feel the pressure of competition in years to come? Please tell us the scenario in thin MDF segment too.

A. Of course, there will competition and a pressure on profitability too, but if we deliver good quality product, we are sure to get premium as well. The thin MDF faces enormous competition and large companies avoid making it because it has profitability and price issues. The production cost of thin board tends to remain high than that of the thick boards. But in India the price situation for both are same. I think there should be a difference in their prices in future. It is important. It will be only then the MDF manufacturers will be able to provide a thin version of their product.

Q. What about the anti-dumping of the product?

A. It is still not applicable for the thin MDF. But, we would make efforts to have it implied on thin boards as well in future since even the foreign countries are dumping those in India in the name of exports. They usually send to India their excess production.

Small and conventional MDF plant consumes more resin and hence it is not cost conscious. Surviving in a competitive market like India, it would be difficult for small plant people. 

We have a team that advise farmers to plant trees promising them that we’ll buy them when they are full grown. With such kind of strategies, we hope that
in the next five years, we’ll buy the raw material for the plant from its 50 km surrounding area itself. But for now we are targeting 100-120 km radius for getting the material.

Q. How has been your journey with Austin plywood manufacturing so far?

A. It has been a very good experience where we have come from a commodity product of Face veneering to Branded Plywood. We have established our brand in top quality bracket in one decade which is a pride for entire Austin Plywood family. I thank and congratulate all team members and stockiest and retail partners of our Austin plywood. I am confident that in next decade we will have more new products and focused marketing and branding strategy to benefit the entire ‘Austin brand’ partner.

Q. Do you think in the long run MDF can give a chasing competition to particle board?

A. In India, people wish to get a nice and strong product in affordable rates. MDF is cheaper than plywood; if you talk about strength, it’s stronger than particle board. Particle board has an altogether different market which is targeted by manufacturers of cheap furniture.

Q. How much of MDF will replace plywood in future?

A. Plywood will be slowly replaced by MDF. If MDF gets only 20% of plywood market, then the 8000/10000 CBM MDF capacity will get exhausted.

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