Price and market trends: India polyolefins prices to stay soft on high inventories

19 October 2012 09:51  [Source: ICB]

Spot prices of polyethylene (PE) and polypropylene (PP) in the Indian domestic open market are expected to remain soft, weighed down by mounting stockpiles of finished goods given ample availability of locally-produced resins, market players said.

India white good shop Rex Features

Rex Features

Weak demand for white goods is causing oversupply at wholesalers

Most Indian importers are staying on the sidelines, unwilling to stock up, also in view of a possible reduction in domestic list prices in the near term following the Indian rupee's recent appreciation against the US dollar, they said.

Discussions for local and import products in the west Indian domestic open market were lower by Indian rupee (Rs) 1.00-3.00/kg ($19-57/tonne) from 5 October, they said.

Price quotes for linear low density PE (LLDPE) film were at Indian rupee (Rs) 88.00-89.00/kg DEL (delivered) Mumbai on 11 October, while those for high density PE (HDPE) film at Rs89.00-91.00/kg DEL Mumbai.

For PP raffia/injection, prices were at Rs93.00-94.00/kg DEL Mumbai, market sources said.

Domestic prices of PE and PP have been falling since mid-September, shedding Rs4.50-6.00/kg or 5.0-6.3% to date, as assessed by ICIS.

"The local rupee has nearly appreciated 7-8% in just one month. Local prices here have to be adjusted," a Mumbai-based trader said.


Local polymer major Reliance Industries Ltd has cut its PE and PP list prices twice this month, with price reductions totalling Rs3.50-5.50/kg. On its second adjustment on 6 October, RIL shaved its list prices by Rs2.00-3.50/kg, sources close to the company said.

"Price adjustment [in the list prices] was essential to reflect the strengthening of the rupee," an RIL company source said.

RIL's price cut prompted the lifting of price protection implemented on 4 October by other local polyolefins makers such as Indian Oil and Haldia Petrochemicals.

Price protection was introduced previously to boost buying interest, as these producers were unwilling to lower list prices at that time.

"Local producers are taking their turns to reduce their list prices. Since we have no idea when the next price revision will come, it is safer not to stock up," a second Mumbai-based trader said.

"Demand is just fundamentally weak," a key converter based in Damman, west India said.


For instance, in white goods or household appliances - the key downstream sector for PP copolymer - there was little improvement in sales, leading to an accumulation of inventories at wholesalers, market players said.

"The sales of white goods are a good indication of the Diwali demand. So, given such poor business these days, the pre-Diwali demand is literally absent," another processor based in Damman said. India will celebrate Diwali - the festival of lights - in the middle of November.

High inventories of locally-produced resins is also hampering fresh purchases, local buyers said.

"Local makers are holding on to plenty of LLDPE and HDPE grades. We see no hurry to buy," a New Delhi-based trader said.

India PolyolefinsDelayed arrivals of September deep-sea LLDPE film products - which were procured at prices that are at least $100/tonne lower than the prevailing values in the open market - aggravated the price pressure on the Indian polyolefins market, traders said.

"Offers for cargoes on the high seas got lower and lower day by day. This is hitting the market confidence," a third trader based in Mumbai said.

Some HDPE film material of Saudi Arabian origin for prompt delivery was offered by Dubai-based traders at Rs88.00/kg DEL Mumbai late on 10 October.

Supply of PP copolymer in the domestic market, meanwhile, has recently increased, as Indian Oil started new production of this particular grade last month, industry sources said.

"[Domestic PE, PP] prices may just continue to fall," a fourth Mumbai-based trader said.

Some product grades, however, are not moving in the same downward direction as the majority of the polyolefin products.

Spot LDPE film prices were discussed at Rs94.50-96.00/kg DEL on 10 October, stable from 5 October's close by ICIS, local traders said.

An outage at RIL's LDPE facility on 1 October is helping support prices at current levels, they said.

"There is supply shortage from Reliance, so at least LDPE film prices are still holding up," an Indian converter said.

Spot prices of LLDPE injection in India have also remained largely stable, also on supply issues, as port congestions in Saudi Arabia have been delaying the arrival of cargoes from the Middle Eastern country.

Suppliers of LLDPE injection in the India market include SABIC, Exxonmobil and RIL.

By: Ong Sheau Ling
+65 6780 4359

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