A 7.2-degree earthquake in China not to impact PVC import in India

An earthquake measuring 7.2 degrees on the Richter scale that struck Tajikistan bordering western China early Thursday is unlikely to have any major impact on India’s import of polyvinyl chloride (PVC), the primary plastic raw material. India currently meets nearly 58 percent of its local PVC demand through imports, with some buying from China. India imports most of its PVC resin from Taiwan, South Korea, and Japan.

According to reports, the earthquake that hit China’s border had its epicenter at a depth of 10km (6 miles) in Tajikistan, which is located about 82 kilometers from the nearest border with China. The tremor of the earthquake was strongly felt in China’s Kashgar and Artux cities in the western part of the Xinjiang region. Reports claim to be at the early stage to claim any casualty or loss of properties, and collapse of the building due to the tremor. But, experts do not rule out damage.

“It is very early to assess any damage from the earthquake that erupted early this morning and shook China’s western border with Tajikistan. Nothing can be said at this point in time as the assessment of damages is yet to do by any authority in China. Hence, we anticipate no trade disruption or imports of PVC from China. However, the scenario might change going forward,” Surendra Sharda, Director, Accura Polyplast Pvt Ltd, an Ahmedabad-based PVC pipes maker.

India’s annual PVC resin market demand is estimated at 4.12 million tonnes and is forecast to increase to 7.03 million tonnes by the financial year 2030 growing at a healthy compounded annual growth rate (CAGR) of over 6 percent until the end of the current decade. Its demand for PVC in the manufacturing of electric vehicles and the surge in application in the healthcare industry is the major driver for the current decade.

PVC comes under the category of synthetic polymers and is a part of the vinyl chain. These polymers are highly desired in various industries owing to their non-flammability, ease of processing and molding, and superior strength. Pipe-grade PVC accounts for over 40 percent of the overall demand for PVC in the country as the product is extensively used in the production of water distribution and underground irrigation pipes. Government policies in the budget of FY 2020 for improvisation in facilities for piped water supply in rural areas have given a much-needed push in the demand for PVC in the domestic market.

Another large percentage of PVC demand comes from the construction industry where the resin is utilized in the manufacturing of profiles, films, and insulation. However, due to the economic slowdown, the halt in construction activities has led to a considerable decline in PVC demand in the last few years. In contrast, demand for PVC in packaging applications has witnessed significant growth after the coronavirus (Covid-19) outbreak in the last year of the financial year 2020.

Interestingly, the rising awareness of maintaining good hygiene as a preventive measure against the virus has made the food and beverage industry increase the utilization of flexible packaging to assure the complete safety of the packaged products. The demand for PVC in the packaging sector is likely to further propel in the coming years. Also, the PVC resin demand has rebounded from pipe manufacturers as the construction sector showed a revival in activities with the fast growth in government allotments.

Price rebounds
PVC resin prices in the benchmark east China hit the highest levels in almost one month after demand surged from local producers. Data compiled by Polymerupdate Research showed PVC resin prices surged to trade at Yuan 6400 a tonne (the lowest) this week, the highest since Yuan 6300 tonne (the lowest) reported in the first week of February 2023.

Similarly, PVC resin prices in south China jumped to trade currently at Yuan 6550 a tonne (the lowest), the highest since October 2022. Trade sources believe that PVC resin prices remain always higher in south China due to high transportation costs and lower availability. Although India does not import too much quantity of PVC from China, the prevailing market price there always sets the benchmark for other big exporters through which India gets directly impacted.

India-the world’s biggest importer
India is the world’s biggest importer of PVC. With domestic production unable to meet consumption needs, processors and converters rely heavily on the import markets to keep their plants running. However, the market had been plagued by an unexpectedly tight supply by the second half of 2020, and prices in the spot market doubled. PVC is seen as a key economic indicator as its growth is tied to the gross domestic product (GDP) with a particular link to demand from the construction sector.

The global PVC output is estimated at a little over 60 million tonnes of which China contributes 43 percent. The combined share of the United States and the European Union stands at nearly 27 percent with a cumulative volume of around 16 million tonnes. With around 1.6 million tonnes of annual output, India stands nowhere on the global PVC production map as its volume contributes a mere 2.7 percent. With its mere production, India meets only 42 percent of its demand from domestic sources, while the remaining 58 percent is met through imports largely from China and the United States. So the global variation does impact PVC prices in India.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com