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Select polymers and feedstocks prices decline in two weeks on slow offtake

On Friday, November 12, 2021 at 10:45 IST

The prices of select polymers and feedstocks have declined by 2 - 6 per cent in the last two weeks due to undercutting of profit margins by importers and domestic suppliers as demand has eased and shipping strains have started to fade.

Data compiled by Polymerupdate showed the prices of rotomoulding grade linear low density polyethylene (LLDPE) have slumped by 6 per cent since the last week of October to trade currently at $1380 a tonne now, down from $1470 a tonne two weeks ago. Similarly, prices of polyvinyl chloride (PVC) and styrene have softened by 5 per cent each to trade at $2000 a tonne and $1270 a tonne from the level of $2100 a tonne and $1330 a tonne respectively from two weeks earlier. Ethylene, propylene and other feedstocks have also weakened in the Indian markets since the last week of October. Other rates like polypropylene (PP), high density polyethylene (HDPE) and low density polyethylene (LDPE) have been assessed unchanged in the period under consideration.

BREATHING SLOW
Price movement of select polymers and feedstocks in India ($/tonne)

Particulars

October 26, 2021 November 10, 2021 Variations (%)
LLDPE (Rotomoulding CFR India) 1470 1380 (-)6
PVC (CFR India) 2100 2000 (-)5
Styrene (CFR India) 1330 1270 (-)5
Ethylene (CFR India) 1120 1070 (-)4
Propylene (CFR India) 1005 965 (-)4
ABS (Injection South Korea) 2570 2510 (-)4
PTA (CFR India) 880 860 (-)2
Source: Polymerupdate

Note: In case the price assessment is not available of the mentioned date, a nearby date is considered

A senior official with a large polymer trading company said, “The polymer trade is currently passing through an undercutting stage. While importers are compromising a bit of their margins to sell their inventory which they have built over the last few weeks, domestic suppliers have reduced their selling price to get their inventory offtake cleared. Also, traders get purchase orders by lowering their price quotes to compete with the domestic producers and importers.”

The polymer value chain has been facing severe challenges since the outbreak of the coronavirus (Covid) pandemic nearly two years ago. With the Covid pandemic outbreak, manufacturing units went on to periodic lockdowns in order to avoid public gathering and thus, the possibility of Covid spread. With this, both the upstream and the downstream units suffered a lot. Movement of raw materials and finished products got hampered. Inventory offtake of finished products at plants proved a big problem. Consequently, both the upstream and the downstream units reported a sharp decline in their turnover and profit during the last 12-18 months.

But, now the situation has started improving with a sustained decline in new Covid cases. With the gradual opening of the world economy, the demand of both raw materials and finished products has jumped sharply. Since the pipeline inventory drained during the Covid lockdown, sudden spurt in demand helped polymer prices skyrocket since June quarter 2020. But, polymer prices have taken a pause for now.

“The price decline has come as a major relief for the downstream producers as they have been reeling under very high polymer prices for over one year. During the last few weeks, polymer demand has gone down, perhaps, because of Diwali vacation in processing units. But, this weak demand trend is a temporary phenomenon,” said Surendra Sharda, Director, Accura Polyplast Pvt Ltd, an Ahmedabad – based producer of BLP pipes and fittings.

The polymer market is steadily going into supply surplus scenario in India. Those who had booked their imported consignments in July and August from distant countries like the United Starts, Europe or Latin America, have started getting their delivery now with easing of port congestion. Also, with the year-end approaching, the demand cycle has also weakened with processers focusing on drawing a plan for the next year.

“So, polymer prices are set to remain weak in the next two-three weeks until the market subsumes the available quantity. Once the existing supply gets consumed, the new orders will start probably towards the first week of December. So, the current price decline is temporary. Polymer prices will bounce back and continue thereafter until major producing nations like Japan, Russia and Taiwan resume their factory operations to the normal level,” said a senior official with one of the largest polymer importers in India.

Several large scale polymer plants especially in the United States, Latin America, Europe and Asia are operating with their lower capacity. A number of manufacturing plants across the world still remain closed as they await pick-up in demand. Factories in China are suffering due to electricity shortage, economic uncertainty emerging out of Evergrande’s possible bankruptcy and government’s policy on common prosperity.

This is worth mentioning here that a month before scheduled implementation of the BIS (Bureau of Indian Standard) quality norms on October 12, almost all manufacturers, traders, importers and suppliers abstained from fresh orders. The downstream industry placed orders only to regional players to get delivery in the shortest possible duration to avoid uncertainty in the raw material supply.

Thus, global trans-national trade in polymer industry was confined to the need-based regional trade. But now, the government’s decision for six months extension on BIS quality implementation has helped the downstream industry to draw a clear roadmap for their future business growth.

Given that the government aggressively focuses on infrastructure development, the largest consumer of polymer-made plastics products, India’s polymer demand is likely to remain robust in future.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com


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