India PE, PP demand to soar on food - Reliance

26 February 2007 21:03  [Source: ICIS news]

HOUSTON (ICIS news)--India's plastics demand will soar as changing food trends drive packaging growth of 14-16%/year through the rest of the decade, Ajay Shah, Reliance Industries vice president for polyolefins businesses, said on Monday. 

A growing middle class would see expansion of retail chains in the consumer sector, Shah told the Society of Plastics Engineers (SPE) 2007 International Polyolefins Conference in Houston.

Currently, formal retail outlets account for only around 2% of India's $350bn ($266bn)/year retail market, which Shah said is posting annual growth of an "astounding" 40%.

The food sector - including 46m tonnes/year of fruit and 80m tonnes/year of vegetables - is dominated by street vendors selling bulk commodities or loose-packed items, he said.

The lack of packaging results in losses of up to 30% of the produce along the distribution chain, compared with a spoilage rate of only 2% in developed countries, Shah said.

Flexible packaging demand would reach 1.7m tonnes in 2007, up from just 700,000 tonnes in 2001, he forecast. Bulk packaging demand would hit 900,000 tonnes, up from 500,000 tonnes in 2001.

Shah said the market for milk is another example of the huge growth potential for packaging. Only 22% of India's milk is delivered to consumers in packaged form, with the rest typically dispensed by door-to-door distributors carrying large cans.

India's polyethylene (PE) production capacity would grow to 2.9m tonnes/year by 2010 from 2.0m tonnes/year currently, but would still lag demand, he said.

On the other hand, polypropylene (PP) capacity would exceed demand in 2010 even though consumption is growing at 14%/year pace, Shah said.

Reliance itself has 900,000 tonnes/year of new capacity coming on-stream in mid-2008, while two other producers have debottlenecking projects underway. India's PP capacity would reach 3.6m tonnes/year in 2010, he said.

Given the PP oversupply outlook, a greenfield polyolefins project planned by state-owned Indian Oil could be deferred by a year or possibly 18 months, but it would eventually be built, Shah predicted.

"The [PP] surplus will continue for years to come," he said.

The SPE conference continues through Wednesday.

($1 = €0.76)


By: Stephen Burns
+1 713 525 2653



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