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MDF prices could fall further

Leading manufacturers expect a further fall in the price of MDF (Medium Density Fibreboard) in the coming months, though such fall may be marginal. They expect prices to fall by 1-1.5% further which is not much compared to the intensity of fall seen in March-May last year. Also, manufacturers are not much worried about the potential fall in the price as they feel it will be a temporary phenomenon. They are confident of making good the fall in the price through increased volume.

Confidence among the MDF manufacturers is slowly returning and Century Ply’s recent decision to revisit its MDF manufacturing capacity addition.  Soon after commissioning its MDF plant in 2017, the company had announced its plans to expand the capacity from 600 CBM to 1000 CBM/day. However, intense competition and steep fall in the price of MDF later on had forced the company to put the expansion plans on hold last year. Now the company has once again revived its plans thus displaying full its confidence in the prospects of the MDF market. At present there are no major MDF capacity additions expected excepting 180,000 cbm by Rushil Decor, that too in 2020-21.

During the third quarter of the current fiscal most of the MDF manufacturers have shown good growth in the volume though realisation has stagnated. Manufacturers are trying to achieve revenue growth through volume increase. The excessive MDF capacity in the system and high capex/low asset-turn might deter unorganised players to enter the market giving some hope of profitability improvement once this capacity is absorbed in the next 18-24 months.

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