India’s implementation of stricter high quality management guidelines to curb imports of medium-density fibreboard (MDF) is yielding outcomes, clearing room for development for home wooden panel firms.
MDF, an engineered wooden, is a well-liked various to conventional wooden each due to its larger suitability for merchandise resembling modular furnishings and its affordability. The Bureau of Indian Requirements’s guidelines for MDF imports have been applied in February.
In April, MDF imports declined for a second consecutive month, with volumes falling 27% month-on-month and 69% year-on-year to 2,954 tonnes, confirmed the most recent obtainable authorities knowledge compiled by ICICI Securities. Many of the imports into India in April have been from China (about 37%) and Thailand (about 30%), the info confirmed.
Home wooden panel firms have been fighting acute margin strain, elevated timber prices, and an absence of pricing energy as a consequence of overcapacity within the trade. The inflow of low-cost imports had added to the strain.
MDF imports at the moment are anticipated to stay tepid, which ought to assist in sooner ramp-up of latest home capacities. This may finally enhance the sector’s capability utilisation, which is hovering at 55-60%.
In line with India Rankings and Analysis, India’s MDF trade capability is estimated to have elevated to about 4.5 million cubic meters (cbm) in 2024-25 from about 3.5 million cbm in FY24.
“Demand is anticipated to enhance, however the presence of enormous home capability means absorption may take time,” mentioned Rohit Sadaka, director and head, supplies and diversified Industrials, India Rankings.
That mentioned, with easing issues of overcapacity, firms might now be capable to move on the burden of elevated timber prices to prospects with gradual value hikes in FY26, he added.
Timber costs rose as a consequence of provide scarcity and are anticipated to ease with produce from new plantations coming in from the second half of this monetary yr.
These elements ought to progressively assist the sector’s profitability. However for now, given the demand-supply imbalance, shares of most wooden panel firms have been crushed. Shares of Greenlam Industries Ltd, Greenply Industries Ltd, Rushil Décor Ltd, and Stylam Industries Ltd have corrected by 5-22% over the previous yr. Century Plyboards Ltd is an outlier, however with a modest 2% returns.
Aside from low-cost imports, listed wooden panel firms additionally face competitors from unorganised corporations, which have a tendency to cost their merchandise decrease. This implies firms will struggle for market share, which in flip may comprise sharp margin enchancment for listed firms till demand meaningfully outpaces provide.
