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MDF Penetration Will Continue to Grow, Margins to Drop

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Evidently year 2020 will have lesser of imports and more of domestic MDF boards sold in markets that will make way for more capacity utilization. The big sized MDF plants of Green Panel, Action Tesa and Century market share is certainly going to grow, followed by Vir MDF. Since capacities are rapidly being added where as demand is not growing that faster, thus margins will remain under check. Year 2020 will also witness certain rise in timber prices by 15 to 20 percent hence there could be a stress for plants on margin front.

By mid of 2020, Indian MDF capacity will be touching 7000 cbm per day hence availability of MDF per market will be higher that will fuel more margin tightness on dealers front. Seeing past trends of India market, MDF segment also witness quality fragmentation and variety of new thicknesses by new players just to play the game on price basis. It is expected that 2020 will have more of price game compared to quality and brand. Further reduction in standard thicknesses and density of boards will be an area, where the Ply Reporter anticipates more fragmentation.

During 2019, India has initiated a probe into alleged exports subsidization by Indonesia, Malaysia, Sri Lanka, Thailand and Vietnam on fiberboards. The commerce ministry's investigative body, Directorate General of Trade Remedies (DGTR) has already started the probe to examine whether the subsidy from these five countries in fireboards impacting the domestic MDF industry or not.

The three major plants ‘Greenpanel, Century Plyboards and Rushil Decor have filed an application on behalf of domestic industry alleging providing cover from subsidization on fiberboards, thus demanding levy of countervailing duties on the imports of the goods. On the whole, the year will be a defining a turning curve, where application in paneling will be more tilted towards MDF compared to plywood. The coming time will certainly see, MDF replacing cheaper grade plywood from contractors’ furniture making and wall paneling. MDF will also witness deeper presence due to being more affordable and variety of option in Pre-lam boards category from organized brands.

The Ply Reporter sense that ‘from here on, MDF market will see a gradual rise in demand and capacity utilization. Overall there could be 55 to 60% capacity utilization happening in 2020 compared to 40% during 2019.

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