27 September 2007 10:10 [Source: ICIS news]
SINGAPORE (ICIS news)-Stronger than expected growth in the packaging segment is expected to boost Indian polypropylene (PP) demand by 13-14% in the financial year ending 31 March 2008, from 1.5m tonnes/year in 2006-07, industry players said on Thursday.
This compares with a year-on-year demand growth of 11-12% in 2006-07.
“Raffia PP bags for cement, fertilizer and foodgrains packaging, which account for 30% of the PP consumption in India, have seen 15-16% demand growth in the period 1 April-31 August 2007,” a local producer said. Demand from the retail sector, which constitutes 15% of the total PP consumption, has also shown strong growth at 15%, it added.
“Retail packaging, whether in the form of bi-axially oriented PP (BOPP) film or raffia, has seen a boom in recent months. The use of PP for crates in supermarkets has also been on the rise,” said a second producer.
However, demand for impact PP (IPP) film in food and textile packaging has declined in preference to BOPP, as consumers were becoming more quality conscious, said the first producer.
Demand for PP from the automotive segment has also shown impressive growth of 15-16% in the period April-August 2007, the first producer said.
“However, its overall contribution is not as significant as that of other segments, as it accounts for only 7-8% of total PP consumption,” it said.
Also contributing to the strengthening demand for PP is the wide price gap between polystyrene (PS) and PP, currently above $150/tonne, said a polymer converter.
This has prompted several converters to substitute PS with raffia grade PP, it said.
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Relatively tight supply in the early part of the year coupled with strengthening demand is expected to result in a 20-25% rise in PP imports in 2007-08 to 125,000 tonnes/year, said suppliers and traders.
Exports of PP from
“Local demand is so strong that it makes more sense to cut back on exports and cater to the domestic market,” said the first supplier.
This is despite a 45% hike in PP exports by Reliance in April and May this year. The company exported 50,000 tonnes/month in these two months, largely on account of the export oriented unit (EOU) status bestowed on its
However, in subsequent months, Reliance has cut back its PP exports to 30,000 tonnes/month, spurred by the strengthening value of the Indian rupee versus the US dollar.
The Indian rupee has risen to a nine-year high this week, even as the US dollar has continued to plunge, reducing export margins.
But Reliance as well as Haldia Petrochemicals Co, the only two PP producers in the country, are anxious to hold on to their market share in export destinations such as Europe, China, the Middle East and Africa, as export volumes are set to surge next year, when Reliance’s new 900,000 tonne/year PP plant at Jamnagar and Haldia’s PP expansion in West Bengal come on stream.
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