FocusIndian polymers seen firming despite current setbacks

31 January 2012 04:04  [Source: ICIS news]

By Malini Hariharan and Ong Sheau Ling

SINGAPORE (ICIS)--India’s polymers and plastics sector is expected to expand steadily in the long term, coming out from a challenging first three quarters of the 2011-2012 fiscal year because of an economic slowdown and high inflation, industry sources said on Tuesday.

Polymer demand growth was affected by a weakness in the key industrial sectors, such as automobile, and tight credit policies introduced by the Indian government to curb inflation.

“Polyethylene (PE) demand is likely to expand by only 3-4% in 2011-2012 as the offtake by the film and pipe segments has been hit,” a source from GAIL (India) said.

“High-density PE (HDPE) demand has been affected by restrictions the on the use of plastic carry bags across various states in the country,” the source added.

He was speaking ahead of India’s largest plastics event, the 8^th International Plastics Exhibition and Conference or PlastIndia, which takes place every three years.

PlastIndia is held on 1-6 February in New Delhi this year.

The situation in the country’s polypropylene (PP) market was no better with some players expecting demand to shrink by 1-2% in 2011-2012.

“Demand from every major end-user segment of PP has been affected,” a local industry player said.

For instance, raffia, the largest end-user segment, was hit by a drop in cement production as a result of a slowdown in the construction industry.

In addition, the weak automotive industry affected PP copolymer sales in the country.

PP copolymer grade product is a raw material used in the manufacture of automobiles.

The poor performance in 2011-2012 comes after a robust 2010-2011, when PE demand grew by 12-13% to 2.5m tonnes and PP demand rose by 19% to 2.6m tonnes.

However, market players said they remain confident about the long-term prospects of the Indian market.

The low per capita plastics consumption in India at 8kg-10kg is below the average global per capita consumption at 27kg and is indicative of this market’s potential, the players said.

In the long term, growth is expected to be driven by increasing plastics consumption in several sectors, including packaging, infrastructure, agriculture, automotives, healthcare and fast-moving consumer goods (FMCG), the players added.

Many players are optimistic that 2012 will be a better year for the industry.

“Automotive sales for December and January show significant improvement compared with previous months,” a converter based in Dammam, Saudi Arabia said.

Buying sentiment is likely to improve as prices have started to rebound since early January because of the recent power outage at Al-Jubail industrial park in Saudi Arabia, the appreciating Indian rupee and rising raw material costs.

Some Indian converters have started to stock up on their inventories and ramp up their converting units in expectations of the improving downstream finished goods sectors.  

In addition, the market players said there are high expectations that India’s interest rates will be lowered in the coming months.

Interest rates were raised 13 times since March 2010. According to the Reserve Bank of India, the country’s central bank, the interest rates have been at 8.5% since October 2011.

The six-day PlastIndia exhibition will showcase a wide range of products, including raw materials, processed plastic goods and machinery.

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