FocusMost Indian polymers rise 12% but Q2 gains in doubt

13 January 2009 05:35  [Source: ICIS news]

By Prema Viswanathan

SINGAPORE (ICIS news)--Indian polymers except for polystyrene (PS) have surged by as much as 12% in the past month largely due to production cuts that limited supply to the market, but the gains may not be sustained in the second quarter, industry sources said on Tuesday.

Low inventories coupled with restricted availability allowed polyethylene (PE) and polypropylene (PP) to gain about $90/tonne (€67.50/tonne) last Friday to $800-950/tonne CFR (cost and freight) India from a month earlier.

Over the same period, polyvinyl chloride (PVC) also inched up $40/tonne to $670-690/tonne CFR India, while PS fell by up to $80/tonne to $720-880/tonne CFR India, according to global chemical market intelligence service ICIS pricing.

PS prices have been on a downtrend amid adequate availability and weak demand.

“With crude prices falling and the economic outlook worsening by the day in India, demand for PE, PP and PVC could take a hit in the coming weeks,” said a polymer trader.

“It would be unwise for polymer suppliers to be too bullish,” he said.

At 12.07pm Singapore time (0507GMT), February WTI was down 39 cents at $37.20/bbl, even after a 7.9% decline on Monday.

Taking into account the weakness in vital sectors of the economy, some Indian producers were wary about being too bullish on the polymers market.

“Currently, we are seeing good demand for PP, PE and PVC from the agriculture and food packaging segments. But the construction and automotive segments, which have been major drivers of demand in the past, are now at a low ebb. This is a cause for concern,” said a polymer producer.

Tight supply and low inventories among end users have been major factors behind the recent price surge, said a polymer converter.

“Most suppliers of PP, for instance, say they have exhausted their allocations for January and are only willing to offer for February. Converters’ stocks, on the other hand, are quite low, as we have been buying only limited volumes in past months, in anticipation of lower prices,” the converter said.

Supply has been restricted mainly due to plant outages and production cuts in Asia and the Middle East. “But now polymer plants have begun to operate normally, so availability should improve,” the converter said.

An expected easing of the tight supply could dampen market sentiment, especially for PE and PP, said a second polymer trader.

“There are several new PE and PP plants due to start up in the next few months in the Middle East. In India alone, the start-up of Reliance Industries’ 900,000 tonne/year PP plant in March this year will significantly increase availability,” the trader said. The new plant would offset a reduction of supply resulting from a maintenance turnaround at Haldia Petrochemicals’ cracker complex in West Bengal due by end-March.

An end to the nation-wide truckers’ strike, which has resulted in a supply bottleneck for both polymers and plastic goods, would also accelerate deliveries and ease supply, said a second polymer converter.

Major polymer producers in India include Reliance Industries, Haldia Petrochemicals, Gail India and Supreme Petrochem.

($1 = €0.75)

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By: Prema Viswanathan
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