FocusIndia PE, PP rise 7% as domestic demand strengthens

02 April 2009 06:37  [Source: ICIS news]

By Prema Viswanathan

SINGAPORE (ICIS news)--Indian producers have hiked their domestic polymer prices by up to 7% or $80/tonne (€60.8/tonne) this week to mirror the sharp spike in import values on the back of strong demand, sources close to the companies said on Thursday.

While some end users were concerned that the price increases will place additional pressure on margins, others said that the rise in polymer prices had resulted in a surge in orders for finished goods.

“Deals for polypropylene (PP) and polyethylene (PE) imports into India have risen by up to $100/tonne since last week, providing the impetus for a hike in domestic prices," said one of the sources.

Deals were heard this week for PP at $1,050/tonne CFR (cost and freight) India for raffia grade PP, $100-120/tonne higher than the $930-950/tonne CFR India reported last Friday by global market intelligence service, ICIS pricing.

The improving sentiment in the key China market, where PE and PP prices have been surging due to supply shortages, has been exerting upward pressure on prices of imports into India, industry sources said.

High propylene, ethylene and naphtha feedstock values also supported the polyolefins price hike, a second source said.

“Even the volatility in crude prices, which has dipped to $49/bbl from $54/bbl a week ago, has not dampened sentiment, as buying interest is very strong,” said a trader.

Tight supply due to outages and diversion of cargoes to the lucrative China market also provided support for the Indian polymer price hikes, traders said. The delay in the start-up of Reliance Industries’ new PP plant at Jamnagar to end-April and the expansion of Haldia Petrochemicals’ PE and PP plants to October dispelled hopes of an early easing of supply, they said.  

"Currently, domestic supply of PP is so restricted that we have been waiting for weeks for material to be delivered,” said an Indian PP converter.

Demand was strong, with buying activity picking up with the start of the new Indian financial year on 1 April.

“We would like to build our inventories now, as demand from the packaging and agriculture segments is quite robust, but the high prices are a deterrent,” said a PE end user.

Some end users said they had earlier wanted to keep inventories low in anticipation of an influx of low priced imports from new Middle East plants in April. However, the delay in the start-up of close to 8m tonnes of capacity due on stream in 2009 left them with little option but to scramble for domestic cargoes.

Producers raised PP prices by Indian rupees (Rs)3-4/kg to Rs60-64/kg DEL (delivered), excluding taxes. PE prices were raised by Rs2-3/kg to Rs63-67/kg DEL.

Key PE and PP producers in India include Reliance, Haldia and Gail India.

 ($1 = Rs50.62, $1 = €0.76)

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By: Prema Viswanathan
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