10 February 2009 15:29 [Source: ICIS news]
By Malini Hariharan
MUMBAI (ICIS news)--Does it take a just a few hundred dollars to ease the pain of last year’s price crash and profitability squeeze?
Concerns about the global economy, fundamental demand recovery and the impending onslaught of new capacities from the
Domestic prices were raised by 6% in early February and were well over $1000/tonne as producers cashed in on restricted availability and the return of buyers. This is the fourth time that domestic polyolefin prices have been hiked since December 2008.
“I can sell at $1200/tonne today if I can get material. Product is flowing from even the US and Europe into
Another trader explained that the tightness was not restricted to Indian producers. “Even my Korean suppliers have placed me on allocation as they are busy meeting Chinese demand.”
“Indian processors are holding very little material. They had diluted stocks when prices crashed last year, so they have to rebuild,” he said.
Some market players, however, found it difficult to digest the rapid rise in prices and producers’ claims of holding very low stocks.
Conspiracy theories abounded, with some attributing the recent price hikes to a bigger game plan by local producers to encourage imports and ask for duty protection at a later date. Another theory was that the shortage was artificially created.
“Local producers would like to create an environment of tight supply. So if a buyer comes with a request for 100 tonnes, they will only offer 50 tonnes even if they have product,” said one market player.
Additionally, in such a scenario, the same buyer would float its enquiry with all producers and its requirement gets multiplied, creating a picture of strong demand, said the market player.
But producers insisted that reduced operating rates in the last quarter and plant problems were responsible for the current market situation.
At the height of the crisis last year, Reliance Industries, the country’s largest polymer producer, had shut its 1m tonne/year polypropylene (PP) plant at
Reliance had also faced production issues at its polyethylene (PE) and PP plants at its other production sites in January.
In addition, Haldia Petrochemicals Ltd (HPL), the other big polyolefins producer, had cut operating rates at its cracker and at PE and PP plants in November last year.
And the supply situation was further aggravated by a strike by state-owned oil companies and truckers in January.
“Orders piled up because of the truckers' strike. And now we are not able to service all, as there is a limit to how many trucks we can move out in a day,” said one producer.
He also highlighted the aggressive production cuts that were implemented across
“This was unprecedented,” he said, referring to the deep cuts in production at Chinese and South Korean plants last year.
While the recent upturn in pricing was attributed largely to restocking by processors, producers were optimistic that Indian polymer demand would show healthy growth in 2009-2010.
This was despite a slowdown seen last year. Linear low density PE (LLDPE) demand was estimated to have grown by 3-4% during April-December 2008, while high density PE (HDPE) demand was flat. PP demand-growth estimates ranged from 3-7%.
But producers said their optimism was based on the expectation that India's GDP would grow by 6-7%/year, which is slower than previous years but far better than most developed economies.
Additionally, Indian demand from the packaging, agriculture and infrastructure sectors continues to grow, they said.
The next few quarters should show whether this optimism is misplaced. Until then, producers are clearly making hay while the sun shines.
($1 = €0.77)
For more on polyolefins visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections