20 August 2009 06:04 [Source: ICIS news]
By Prema Viswanathan
SINGAPORE (ICIS news)--India’s polymer demand has surged 22-38% in the past four months – the sharpest increase in four years – but the outlook may not remain so bullish if prevailing drought conditions persist, market sources said on Thursday.
“Ironically, the scant rainfall this year has caused the pipe-laying season to be extended, resulting in stronger-than-usual demand for polyvinyl chloride (PVC),” said an Indian producer.
PVC consumption was estimated to have increased by 38% in April-July, the first four months of the fiscal year 2009-2010 that starts in April and ends in March, from the corresponding period last year to 620,000 tonnes, according to market sources.
Normally, PVC demand begins to taper off in July, with the advent of the monsoon season, which was delayed this year.
The demand surge in PVC had been mainly fuelled by a robust irrigation segment, suppliers and buyers said.
“The construction sector has been sluggish this year due to the economic downturn, but the strong growth in irrigation has compensated for this,” a PVC converter said.
Polypropylene (PP) demand also shot up by 22% to 720,000 tonnes in the past four months on the back of strong showing in the packaging segment, said a producer.
“Although packaging for branded goods has not taken off very well this year, non-branded packaging has shown phenomenal growth,” the producer said.
Demand from the pharmaceutical and cosmetics sectors had been strong, said an end user.
Low density polyethylene (LDPE) consumption surged by 30% in April-July 2009 to 130,000 tonnes, said a producer.
“Easier availability of LDPE this year compared to last year contributed to the growth in demand. Buying interest was particularly robust in the milk and oil pouch segments,” a converter said.
High density PE (HDPE) and linear low density PE (LLDPE) also saw a 14% rise in consumption to 750,000 tonnes, sustained by packaging as well as blow-moulding applications, especially for chemicals.
“Although demand for shopping bags, which use HDPE and LLDPE film, has been declining due to environmental concerns, we have seen a huge increase in buying interest for PE film in the food packaging and steel sectors,” said Ashok Rao, CEO of Daman Polymers, a PE converter.
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PP converters were equally bullish, with one converter saying that Indian consumers had defied the global recessionary trend and supported the market.
“We could have seen even stronger demand growth in the past few months if it were not for supply constraints, which, thankfully, are easing now,” Rao added.
However, the picture might not be so rosy in the coming months of the fiscal year, a trader said.
“The current drought conditions, if they continue, will severely dent rural consumption and result in a slowing of polymer demand growth,” he said.
Producers are also worried that the full year consumption figures may take a hit if the drought persists.
“We may still see double digit growth for polymers, but the full year outlook is unlikely to be as bullish as in the first four months of the Indian fiscal year if rainfall doesn’t improve,” said a second PE producer.
Another fallout from the drought would be the impact on the power sector.
“Hydro-electric power will be even more scarce if the drought persists. Already, we are facing power-tripping four times a day in
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