The Indian Plywood Industry Faces Challenges Amid Rising Costs and Market Uncertainty

The Indian plywood industry is currently at a critical juncture. Although end-user demand remains relatively stable, manufacturers across the country are grappling with sharp fluctuations in raw material prices, supply chain disruptions, financial constraints, and growing competition from alternative products. In an exclusive conversation, Mohammad Faisal, Managing Director of Oxywood Ozone, shared his views on the industry’s current challenges and future prospects.

Is the Middle East conflict affecting the plywood industry?

Yes, the ongoing conflict in the Middle East has caused continuous fluctuations in the prices of both timber and chemicals, which are key raw materials for the plywood industry. At the onset of the war, chemical prices surged dramatically, leading to an unexpected increase in production costs. Before manufacturers could revise product prices to offset these higher costs, U.S. President Donald Trump’s announcement of a ceasefire agreement caused chemical prices to decline sharply. Traders then used this price correction as a reason to pressure manufacturers into rolling back their price increases. Ultimately, it is the manufacturers who bear the losses in this constant cycle of price volatility.

Why are manufacturers unable to increase product prices despite rising raw material costs?

Whenever raw material prices rise, it takes time for the increased costs to be reflected in the market price of finished products. Manufacturers often have existing orders that they consider their responsibility to fulfill at previously agreed prices. In addition, many traders insist on receiving supplies at old prices even after production costs have increased. In several cases, manufacturers give in to these demands, even though doing so results in financial losses.

How is the current market demand?

Market demand can still be considered reasonably good. However, manufacturers are not receiving prices that adequately cover their rising production costs. As a result, the industry is finding it increasingly difficult to meet market demand profitably. The prolonged Gulf conflict has further increased uncertainty, making it essential for manufacturers to remain cautious and financially disciplined.

How can the industry protect itself during these challenging times?

Running an industry is not just about installing machinery and producing goods. It also requires the financial strength to manage procurement and sales efficiently. Finance plays a crucial role. Manufacturers operating with limited capital are often exploited by both raw material suppliers and buyers of finished products. Their inability to compete effectively forces them to compromise, which eventually affects the entire industry.

What is the future of the plywood industry?

Recently, there have been complaints regarding the quality of plywood available in the market, which is a matter of serious concern. When manufacturers sell low-grade plywood as premium-grade products, traders also market it as premium quality. This damages customer confidence in plywood as a whole. Such practices are dangerous because they create opportunities for substitute products like MDF and WPC, which are rapidly expanding their presence in the market.

What solutions are available to address the timber shortage in South India?

The timber shortage is not limited to South India; it is a nationwide issue. A practical solution would be for the government to lease land to the plywood industry specifically for plantation purposes. If the government introduces a policy allowing the industry access to land on long-term leases of 5–7 years, it would encourage large-scale plantation, create a positive environment, and strengthen the industry’s long-term raw material supply.

Another concern is the continuous issuance of licenses for new manufacturing units across the country. This is disturbing the balance between production capacity and market demand. While global economic conditions have weakened demand, production capacity continues to expand. Both the government and the industry need to seriously evaluate this imbalance and adopt measures to ensure sustainable growth.