FocusIndia polymers' robust demand in ‘09 likely to continue in 2010

12 February 2010 03:33  [Source: ICIS news]

By Malini Hariharan

MUMBAI (ICIS news)--Indian polyolefin and polyvinyl chloride (PVC) demand expanded by 11-30% in April-Dec 2009 - the strongest pace in the last few years – on the back of packaging and infrastructure sectors with the trend expected to continue in 2010, producers said on Friday.

The strong growth in the first three quarters of fiscal year 2009-2010 also belied earlier expectations of a slowdown.

PVC and polypropylene (PP) recorded the fastest growth rates during April-December 2009, compared with the same period in 2008, driven by demand from the packaging and infrastructure sectors, producers said.

PVC demand was estimated to have risen by 30% to around 1.35m tonnes on strong sales in the pipes segment, the biggest end-use sector for PVC, they added.

“This was a surprise as we were anticipating growth of 10-15%; the economy was not doing well at the end of 2008 and we were bogged down by this. We thought the numbers would not be good,” said one PVC producer.

But sales remained brisk for most of 2009 despite a delay in monsoon and drought conditions over parts of India. Local producers sold an estimated 775,000 tonnes while around 560,000 tonnes was imported into the country.

“There has been some slowdown in sales since December; some destocking is happening. But 24-25% growth for the full year [2009-10] should be possible,” said a second PVC producer.

A third producer was more conservative projecting growth of around 20% for 2009-10.

PP demand rose by nearly 29% to 1.6m tonnes during April-December 2009, although growth rates were expected to be moderate to around 20% for the full fiscal year.

Film, raffia injection moulding and non-woven sectors did well and PP also benefited from a revival in the auto sector, said one market source.

Despite introduction of provisional anti-dumping duties on PP in February 2009, India imported about 300,000 tonnes during April-December 2008, up from about 100,000 tonnes in the same period in 2008.

With the commissioning of Reliance Industries Ltd’s new 900,000 tonnes/year plant at Jamnagar Indian exports also increased, rising from 200,000 tonnes to nearly 500,000 tonnes.

In polyethylene (PE), low-density polyethylene (LDPE) showed the strongest growth with demand rising by about 25% to 260,000 tonnes aided by easy availability and a favourable price differential with linear-low density polyethylene (LLDPE).

LLDPE demand was up 16% at 690,000 tonnes while high-density polyethylene (HDPE) demand expanded by 13% to 980,000 tonnes.

“The packaging sector has been doing exceedingly well. We are seeing good growth in pipes for water distribution and conduit pipes for telecommunication cables. Drip irrigation is also a promising sector," a second market source said.

"The only area that is a problem is PE bags where there is negative growth because of environmental concerns,” he added.

The second source also pointed out that polyolefin producers had benefited from a strike called by jute workers late last year. The strike had curtailed jute production and forced the government to place orders for raffia bags for packaging of food grains.

This had resulted in additional PP demand of 25,000 tonne and the figure would rise further if the strike continued, he added.

Market players were confident about long-term growth prospects but were cautious in their assessments for the January-March 2010 quarter.

Buying had slowed down in recent weeks as processors were apprehensive of a downward revision in polymer prices and a possible change in excise duties on finished plastic products in the Indian budget due to be announced on 26 February, they said.

Producers also stressed that the high growth numbers see in 2009 were party because of negligible growth recorded in the previous year due to the financial crisis.

“There was some pent up demand at the beginning of the year; we should not set much store by this year’s growth numbers and think that India can grow at this level continuously,” cautioned the third PVC producer.

But he added that 9-10% PVC growth in 2010-11 looked possible.

The second market source concurred: “This year’s high growth is partly because of inventory correction. But an interesting fact is that unlike other markets [around the world] which showed negative growth in 2008, Indian polymer market grew by 4-5%. So even if you take the last two years the Indian performance is still good.”

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By: Malini Hariharan
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