OUTLOOK '11: Indian PP, PE markets gear up for fruitful new year

28 December 2010 02:00  [Source: ICIS news]

By Prema Viswanathan

SINGAPORE (ICIS)--Indian polypropylene (PP) and polyethylene (PE) producers and traders expect supply to be abundant in 2011, more than enough to cope with the increasing demand in the country.

However, end-users are not in agreement that this will mean good tidings for them. "We have often seen local producers diverting cargoes to destinations where they can get better netbacks, such as China, leaving Indian buyers in the lurch," said a PE end-user.

Another end-user of PE was more optimistic about supply prospects in 2011. "With Indian Oil (IndianOil) set to ramp up its operating rates to 100% next year [2011], we should find it easier to procure cargoes," he said.

Moreover, there was plenty of material coming in from the Middle East which could meet any shortfall, he added.

The PP market presented a slightly mixed picture. Reliance Industries' scheduled turnaround at its 1.9m tonne/year PP facility at Jamnagar in February would tighten supply in the country, said traders.

"Any PP inventories that the company may build up ahead of the turnaround will be earmarked for priority customers and for the key China market, which is expected to pick up in the first quarter of next year, after the Q4 lull," said a PP trader.

PP imports into India have also dwindled following the imposition of anti-dumping duties (ADD) by the Indian government on imports from Saudi Arabia, Oman and Singapore.

On the demand side, the picture is quite rosy for PP, with end-users saying that exports of finished goods as well as domestic consumption were quite healthy and looked set to remain so in 2011.

Demand for copolymer PP for the year ending March 2011 was estimated to hit close to 300,000 tonnes/year, up by 20% from 2009, thanks to strong demand from the packaging and automotive sectors.

"The launch of the Tatas' low-priced Nano car has been a game changer in terms of automotive production and has significantly increased demand for copolymer PP," said a source close to a PP producer.

However, consumption of PE is likely to face a setback due to a Supreme Court ruling issued in December 2010 against the use of plastic film for packaging gutka (a tobacco-betel nut mix very popular in India) on environmental grounds.

"This will be a big blow for Indian polymer producers and traders, and also for converters, as the consumption of polymers in gutka packaging is as much as 50,000 tonnes/year," said a PE trader.

Nonetheless, other sectors - especially that of PE pipes - were displaying strong growth thanks to the robust recovery of the construction sector, suppliers and end-users said.

"The food packaging segment is also doing well, contributing strongly to the growth of PE consumption," said a Mumbai-based end-user.

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By: Prema Viswanathan
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