Indian Plastic Producers Flag Concerns Due to Surging Polymer Rates
- 04-Mar-2021 12:00 PM
- Journalist: Robert Hume
Abrupt rise in the polymer rates across India has prompted downstream plastic producers who are grappling with acute raw material shortage and feedstock inflation since past few months to operate at less than 50 per cent of their installed capacities.
Indian polymer prices have surged nearly by 13 per cent in the last two months forcing several MSMEs (Micro, small, medium enterprises) to cut their run rates. Officials of All India Plastics Manufacturers Association have revealed that around 50,000 plastic processing industries which involve more than 50 lakh workers and use polymers in sectors like food processing, healthcare, pharma, etc. are operating below desired levels due to soaring raw material rates and acute supply shortage. The personnel expressed fears over shutting down of over 20,000 MSMEs if the crisis extends for longer duration.
Almost all public sector units (PSUs) and producers such as Indian Oil, GAIL, OPAL, Haldia Petrochemicals (HPCL) and MRPL have positively revised their polymer rates between Feb-March. Polymer prices in the last 8 months have jumped by 45 to 150 per cent, due to acute shortage of raw materials and soaring upstream rates. Responding to the price surge, several industry associations have approached the Indian government to ban the export of the raw materials for at least a year and allow the duty-free import of basic raw materials not produced in the country.
Reliance Industries (RIL) has increased the price of almost all grades of Polypropylene (PP) by INR 12,000 per MT w.e.f. 1st March. As per ChemAnalyst data, prices of the PP-Raffia jumped to around 1,21,080 per MT and PP-Random Copolymer rose to INR 1,31,103 per MT on 1st March. RIL has already announced revision in its high-density polyethylene (HDPE) pricing by about INR 10,000 per MT w.e.f. April. Rates of Polyvinyl Chloride (PVC) have also surged by INR 6,000 per MT in the first week of March. After revision, PVC Suspension rigid grade K67 is currently being traded at INR 1,26,480 per MT while Suspension flexible grade K67 is being traded at INR 1,27,480 per MT.
The rise in the price of polymers will inevitably impact the profits of its consumer industries. Though some buyers showed unwillingness to procure material in this seemingly volatile and ever-rising scenario, resilient demand has exacerbated the market tightness. Increased prices are in turn affecting the margins of its user industries. The agricultural sector, the key consumer of PVC pipes could be the worst-hit as materials like plastic pipes, drip irrigation system, water tanks etc. may witness abrupt surge in rates.
As per ChemAnalyst,” The country's economic output in the December quarter showed 0.41 per cent growth year on year while its manufacturing PMI seems steady around 57.5 in Feb. despite holding the second highest COVID-19 cases globally. To ensure sustained economic growth, the government would have to waver the cost inflation pressures over the MSMEs and frame new policies for polymer producers to ensure the adequate domestic availability.”