FocusIndia polymer trade slows ahead of Budget

15 February 2008 04:34  [Source: ICIS news]

By Prema Viswanathan

SINGAPORE (ICIS news)--Polymer trade in India slowed to a crawl this week and is expected to be sluggish through February as buyers delay purchases in anticipation of lower excise duties in the country’s Budget, suppliers, traders and end users said on Friday.

India is expected to release its Budget for the 2008-2009 fiscal year on 29 February.

“Suppliers and converters have sought a halving of excise duty to 8%, but realistically, we would be pleased even if the government reduces the duty to 12% from the current 16%,” a polyvinyl chloride (PVC) converter said.

PVC trade has been worst affected by the pre-Budget slowdown this year, as the announcement of anti-dumping duties (ADD) on PVC imports from northeast and southeast Asia and the US has caused offers to rise sharply in the import market.

“All the import offers we are getting are above $1,100/tonne (€748/tonne) CFR (cost and freight) India, so we are not buying too much at the moment,” a second PVC converter said.

Domestic prices are lower, but due to the shortfall in the local market, end users have had to depend increasingly on imports, the converter added.

“I get only 1,000 tonnes/month of PVC from a local supplier, whereas I need at least 3,000 tonnes/month to meet my requirements,” he said.

A reduction in excise duty would make local material more competitive, forcing importers to bring down their offers, a trader said.

Suppliers too were anxiously waiting for the budget announcement, as they expected demand to pick up significantly after a possible tax reduction.

“Any reduction in excise tax will improve liquidity in the market, even for big end users who have deeper pockets and can claim a refund,” said a polystyrene (PS) supplier.

“We expect demand for consumer durables like television sets and refrigerators, which has been sluggish in the past few months, to pick up after the Budget,” he added.

For polypropylene (PP) and polyethylene (PE) too, hardly any transactions were heard this week, as buyers held back from purchases in anticipation of a tax reduction.

Local producers have also been deterred from stepping up exports, due the steady decline in the value of the US dollar, and better netbacks in the domestic market due to the strengthening of the rupee.

Indian traders and end-users of polymers were also hoping for a removal of a 4% special additional countervailing duty (CVD) imposed on all petrochemical products. Although most of these players (except those in the PP film segment) can claim a refund on the CVD on furnishing the relevant documentation, it is seen as a big deterrent to trade.

PP film traders and converters were denied a refund of CVD in the last budget.

“PP grades like raffia and injection are eligible for the CVD refund, so there’s no reason why PP film should be denied this facility. But ideally, we would much rather that the CVD is completely eliminated,” a PP trader said.

However, none of the market players expected import tariffs on polymers to fall in the forthcoming budget.

“Import duties for polymers were slashed to 5% from 10% last year, so it would be unrealistic to expect the government to reduce them further this year,” said a PP supplier.

($1 = €0.68)

By: Prema Viswanathan
+65 6780 4359

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