Despite the prevailing bearish undertone, plywood manufacturers across the country have recently hiked the prices of plywood which has taken the user industries and consumers by surprise. Plywood price has gone up by 3-4% which according to the industry is to cover the increased overheads post lockdown relaxation in the country.
Meanwhile, it’s also reported that unorganised sector is facing problems both on labour and material fronts. If the problem persists for longer period the unorganised sector may find the going tough and eventually the situation may lead to consolidation in the industry.
Plywood manufacturers found June a better month than the previous month as the demand saw an uptick resulting in better capacity utilisation. Demand was healthy for the low-mid segment plywood, which helped manufacturers to reach capacity utilisation of 40-50% by the last week of June. There was a good recovery in demand for economical grade plywood, blockboards and flush doors from states like Haryana, Punjab, Uttar Pradesh and Kerala. Commercial grade plywood, which is priced below Rs 50/psf saw satisfactory demand from tier 2-3 cities and rural markets.
Though since May 5th markets have gradually opened up, till now only 65-70% of the markets have commenced operations. Meanwhile, demand has reached just 40-50% of pre-COVID level demand which shows the fragility of the market. Demand is emerging mainly from pending or ongoing projects and there is no sign of orders from the new projects that were planned before the Covid-19 pandemic. In rural areas demand is mainly from individual homeowners.
Among the various wood panel materials, demand for MDF is better than other materials. MDF is manufactured only in the organised sector and is less labour intensive (meaning less dependent on labour unlike other materials) and therefore, has seen a smaller number of problems post-lockdown.