During September and October, in two months, the market demand grew so fast and sudden that no one actually imagined during COVID-19 lockdown phase. In this period not only Plywood, MDF and Particle Board, but all the range of products related to building materials including tiles, paint, electrical fittings, piping apart from steel and cement observed decent jump in demand. Surprisingly many of the consumer durables from non-building material category did not reflect such trend.
The Ply Reporter continuously gathered information with curiosity during August, September and October through surveys. The team focused upon consumer behaviors after covid and respective product demands. “What made the demand jump suddenly and from where actually the demand is coming from” asked majority of curious company owners and marketeers?
With continuous efforts of the team Ply Reporter having regular communication with industry stake holders from across the country, including traders, wholesales, contractors, carpenters, furniture manufacturers as well as large consumers like purchase managers of builder segment and CFOs apart from random walk-in customers at retail shops, the Ply Reporter became clear with flow of pent up demand and empty supply network. The sample size for this survey was in thousands.
When metro cities were under complete lockdown, with pause on industries, the demand in rural, suburbs, tier3 cities continued although at slow pace. It was also evident during Ply Reporters’ webinar, that retailers even operated business during 5am to 11 am during lockdown too and fed materials. Many of the contractors/carpenters were doing work silently hence material in the funnel (stock) was disappearing.
COVID INDUCED LIFE STYLE CHANGES
One thing was clear that, demand during August to October was largely coming from those consumers who were continuing before lockdown or have started renovating their homes with new needs emerged after covid. Changing circumstances led customers and companies to adjust faster with the new normal of changed work culture and life style. To stay effective and safe, customers spent significantly increased due to change in furniture, interiors, creating home offices, storage spaces and kitchens. It also led to demand for wall tiles and flooring tiles apart from pipes, etc. The similar trend was noticed with jump in demand for fitness equipment, trade-mills, bicycles, carom boards which was never so steep in past many years. Consumers wish to have safe living homes hence 12 percent of respondent were from “Home renovation arouse due to Covid’ category.
NIL PRODUCTION FOR ALMOST 3 MONTHS
The key reason found for steep rise in demand was very low inventory lying at stock points during AugustSeptember. After lockdown, from March 22 to June 15 the operation at majority of the industries related to wood panel decorative was on hold. Workers issues prolonged the idle period of plants that created a 3 months supply vacuum to markets on the contrary, stock points sold their materials with cash and carry model and collected payments. Actually the production in plywood laminate industry for almost three months could not reached to markets, leading to huge demand from primary points. The almost empty stock funnel from factory to consumers led to sudden demand jump after august.
In building material industry if the construction remains on hold, the project cost increases sharply so predecided projects with pre-allocated funds resumed their renovation or construction work immediately after lockdown relaxations. In such projects, funds are already marked hence no wise man delay things to increase the project cost hence all work started immediately after lockdown ended and this also led to immediate demand generation against previously speculated. Many people who have money and wanted to own a better property for living actually began building it after lockdown too, that led to good demand from premium customers too.
When enquired ‘from where the demand is coming and whether it is sustainable’, the experts, promoters and even the companies leading professionals were not able to answer. The data received from different consulting agencies too reflected vague and contradictory hints. What Ply Reporter found is clearly a mix of ‘New opportunities plus pent-up demand’.
TWO MARRIAGE SEASONS MERGED
With covid fears after 15 march (generally a season of marriages in the country) the marriages were postponed, but the preparation for marriages continued and a hidden demand at furniture makers, home improvements was constantly there. When metro cities were under complete lockdown, with pause on industries, the demand in rural, suburbs, tier3 cities continued although at slow pace. It was also evident during Ply Reporters’ webinar, that retailers even operated business during 5am to 11 am during lockdown too and fed materials. Many of the contractors/carpenters were doing work silently hence material in the funnel (stock) was disappearing. In channels, the building material inventories of ply, laminates, decorative, tiles etc were depleting where as plant productivity was full of hiccups. The survey during August, revealed that tier 2 and tier3 cities, sold materials to local, unorganized furniture makers and contractors during May-June and July and hence after opening of lockdown and liquidity support from government initiatives demand shot up. With very dismal inventory in supply chain, real estate and interior segment of the industry witnessed a sudden rise of demand.
PENT UP DEMAND: HOW LONG THE PRESSURE WILL REMAIN?
According to a Ply Reporter data, Indian laminate market stared at around 57 million sheets order pendency during October followed by 40 million in November month. A similar pressure was noted on MDF industries where order exceeded 60 percent of the installed capacity. There were plywood orders pending for almost 20 days. Even the companies with small sales network were also witnessing good demand or pending order issues. The demand escalated to such levels that many of the manufactures began thinking and planning of capacity expansion.
When enquired ‘from where the demand is coming and whether it is sustainable’, the experts, promoters and even the companies leading professionals were not able to answer. The data received from different consulting agencies too reflected vague and contradictory hints. What Ply Reporter found is clearly a mix of ‘New opportunities plus pent-up demand’. Somewhere the spillover of the old work and fulfilling the empty stocks at different level in supply chain management has led to the sudden demand boom in past two months.
HOW LONG THIS DEMAND WILL SUSTAIN?
The present scenario is posing bright scenario till January 2021 for all the players but those having large production will definitely begin to feel the heat by January beginning. The companies with small production will have a bright demand scenario till March, but the players with high capacity will be facing ease up pressure in December itself. Because there are many jobless and even working from home professionals are still spending less or the necessary spending due to salary cuts.
The growth is visible now in industrial activities as in laminate there is nearly a gap of over 7 crore sheets due to lockdown for three months, that’s some part will be fulfilled in next three to four months. Actually in laminate there was already lot of inventory before so, when it will be fulfilled, the market will definitely indicate about it in prior.
It is witnessed that the residential housing is going faster and plots and flats sales are greater than ever before. The builder’s market during August and September observed four times more sales every month after covid compared to pre covid sales in the corresponding period. Our visits in Noida, Gurgaon, Bangalore, Hyderabad, Mumbai CBD regions echoed the same finding. The demand is generated with changed scenario across the country as work from home culture has given liberty to work from anywhere in the country
Specially the IT and Consulting industry, Law firms, design firms have offered lot of professionals a opportunity to work from home. It has been given with cost cutting also. The government of India also brought a change in legal obligations for works and allowed even WORK FROM HOME on permanent basis. It will being a change in office culture like the offices before which was well decorated will lose its importance with increasing interest of work from home and the homes which was not given importance for work stations will observe a change giving its importance. It also indicates that the residential needs are increasing and it will increase further with increasing stability of jobs and job circles.
WHAT 2021 HOLDS FOR INDUSTRY & TRADE?
During Diwali we all observed that the crowd in the market was so heavy that there is no fear of Covid, but post Diwali the glaze of the market has gone. It may the effect of once again rising fear of covid in next fifteen days after Diwali. But, actually the market sentiment is getting slow not only due to covid, but also people have taken their positions.
The growth is visible now in industrial activities as in laminate there is nearly a gap of over 7 crore sheets due to lockdown for three months, that’s some part will be fulfilled in next three to four months. Actually in laminate there was already lot of inventory before so, when it will be fulfilled, the market will definitely indicate about it in prior. The other clue is that if the payment is getting slow the definitely the next impact will be on demand. At present also many of you are observing a bit slow in payments.
The irregular market with uncertain scenario will gain pace and in a way by May 2021, India market seems to be crawling back on track to stable pre covid levels.
KEY POINTS & TAKE AWAYS
- The continued jump in demand during SeptemberOctober was largely driven by pent up and new opportunities (Almost 60 percent of demand tracked is pent up).
- The restriction on imports, distance from Made in China article after clashes, professionals shifting their offices to homes literally adding a new interior and furniture material demand from homes led to sudden rise.
- The office furniture makers are badly hit, but home furniture makers are flooded with demand, which is higher by 35 to 40 percent to pre covid levels.
- Empty warehouses and supply gap at stock points led to demand boom all of sudden.
- The raw material prices jumped leading to a sustained order pressure on companies even during November supported with pent-up demand.
- The steep rise in prices of Raw materials (it is inevitable due to disturbed supply chain at international level) the channel partners need to support their manufacturing partners, pass on the increased price to consumers slowly also by compromising some of the profit margin. If the customers feel, any product is getting beyond their capacity, they just switch to a cheaper substitute thus customers trust shall be hold and retained with genuine passing on the rise.
- The price fluctuations in raw materials to continue until March-April 2021, till international logistic companies began normal operations, container shortage eased up.
- The coming time post May 2021 is golden for the wholesales that are currently very much focused to only metro cities. Their de-centralization of operation to other cities will be much more beneficial for them as well as their associate companies.
Market Update with Pragath Dvivedi, is an online live broadcast program with the founder editor of Ply Reporter Mr Pragath Dvivedi - one of India’s topmost journalists and publishers of wood panel and building materials news & market-research. The programme is being telecast every month and its second edition was aired on 29, November, 2020 at facebook, Youtube and others social media platforms which was sponsored by Duro Ply - one of the leading top plywood and blockboards manufacturers in India. To be updated with industry happenings, right analysis and forecasts like & share: https://www.facebook.com/plyreporter