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India’s largest lumber company has been expanding its operations in China.
But how have the country’s major timber companies been able to compete with China’s massive lumber industry?
A team of researchers from the Institute of Development Economics and Research in India has analysed how the growth of India’s major forest companies has been driven by shifting domestic demand for timber, and their inability to diversify away from a global supply chain.
“These are not really major players.
They’re just local players that are very big in India,” says Jitendra Prabhu, one of the team’s authors.
“But it’s also the result of an attempt by the government to control their own production and distribution.”
The researchers analyzed data from the last five years from the World Trade Organization (WTO), and found that over the period 2012-2016, India’s forest companies grew by 1,700 percent, while China’s grew by just 300 percent.
“The only reason we saw a huge increase was because we didn’t look at their production in India at all,” says Prabhus.
The data also showed that while China had the biggest increase in exports, India had the largest growth in imports.
The team’s research found that India’s companies grew their global footprint at a faster rate than their domestic footprint, with the growth rates in China and India, respectively, being 1,200 percent and 1,100 percent.
The data also indicated that India was growing its domestic footprint at the fastest rate in the world.
India’s biggest forest companies are owned by companies like Mundra Logistics and Timber Industry Corporation, which has a turnover of about $7 billion.
Mundra is the largest lumber producer in India, and its profits account for more than 50 percent of India the countrys total revenue.
But the company’s share of the global market has been declining over the last few years.
According to Mundra, the company has seen a decline in its global revenue due to the global timber industry’s rapid growth.
“The growth of the timber industry has not only affected our revenue, but also has impacted our cost of production,” says Mundra CEO K.S. Srivastava.
“If the growth in the industry continues, it’s not going to be sustainable for us to survive as a company.”
In recent years, Mundra has had a hard time adjusting to the slowdown in the global lumber industry, with a large part of its revenue going to China.
In a recent interview with CNBC, Srivas said that Mundra’s current outlook for revenue and profits was negative.
“Our business is facing a slowdown in both the global and domestic markets,” he said.
“We’ve also faced a slowdown due to international developments in Asia.
And the slowdown has also impacted the timber sector in India.”
Srivastav’s company Mundra Lumber has been struggling to adapt to the changing market and demand for its products in China, and Mundra had to reduce its production and exports to China to survive.
In an effort to diversifying, Mundraska has recently started a partnership with another Chinese lumber company, Togam, which is building out a massive plant in India.
But Srivastsav says Munda’s strategy is still working.
“There are a lot of changes happening in China,” he says.
“So Mundra will continue to operate as usual.
But in India we are seeing the impact of the change.”
India’s largest timber companies are trying to diversified away from the global supply chains.
They have started to invest in their own plants and are now building out plants in India and the US.
But that hasn’t brought much in the way of new products, which could be the problem.
“We need to get new products to India that are going to meet our requirements, so we can continue to grow the business,” says Srivats.