India PP cut to achieve parity with imports

01 November 2007 10:21  [Source: ICIS news]

SINGAPORE (ICIS news)-Indian producers slashed domestic prices of  polypropylene (PP) by up to 3.6% or Indian rupees (Rs) 2.50/kg  on 1 November in a bid to improve their competitiveness against imports, the producers said on Thursday.


The reduction took the market by surprise as market sentiment was strengthening amid bullish demand and surging crude values.


The producers said the move was not prompted by demand or supply fundamentals, which continued to be strong. “The main factor behind the reduction was a desire to achieve price parity with imports,” said a producer.


Traders said that the reduction has dampened sentiment somewhat in the Indian market. “Earlier domestic prices were around $15/tonne higher than import prices, but now domestic prices are $15-20/tonne lower than import prices,” said a trader.


Exporters of PP into India said that there was no justification for the price reduction. “It sends out a wrong signal to the market, countering the bullish sentiment,” said a global supplier.


Traders said the reduction was an attempt by Indian producers to safeguard their domestic market shares from the impending onslaught of imports from a slew of new PP capacities due to come on stream next year in the Middle East. “They are trying to insulate the market against imports even as domestic demand for PP is strengthening,” said a second trader.


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, according to industry players.


This compares with a year-on-year demand growth of 11-12% in 2006-07.


Prices of PP raffia, injection and film grades were cut by Rs2/kg to Rs63.50-65.50/kg EXW (ex-works). Bi-axially oriented PP (BOPP) film prices were reduced by Rs1/kg to Rs64.50/kg EXW. Copolymer grade PP was subjected to the maximum reduction of Rs2.50/kg to Rs67.50/kg EXW.


Prices of polyethylene (PE), polystyrene (PS) and polyvinyl chloride (PVC) have been rolled over from October into November, producers said.


Reliance Industries and Haldia Petrochemicals are the only two PP producers in India.

By: Prema Viswanathan
+65 6780 4359

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