Price and market trends: India PVC market becomes a global battleground

17 May 2013 09:52  [Source: ICB]

Domestic growth expected at 10% in fiscal 2013, as China and Europe material adds pressure

India's polyvinyl chloride (PVC) market has become a "battleground" for global producers, increasing competitive pressures, a senior executive at an Indian producer said.

 Growth in India's domestic demand for PVC will be driven by infrastructure and agriculture needs

Copyright: Carol Mitchell

"The PVC battleground is [in] India where we import around 1m tonnes/year versus about 3m tonnes/year of local capacity. India is the most important global market," said the executive on the sidelines of the Asia Petrochemical Industry Conference (APIC) in Taiwan on 9 May.

Imports from China and Europe, along with Mexico, have increased competitive pressures, said the source.

"In April we saw around 32,000 tonnes from China normally we see about 10,000 tonnes," the executive said.

"China local PVC demand has been depressed because of the weak construction market. China is now a net exporter," he noted.

Europe has been exporting PVC at a rate of 150,000 tonnes/year to India despite its high cost position, according to the source.

"An antidumping case [on European imports] was filed in late 2012 and this could take 3-4 months from now to sort out," said the executive.

India also imports around 300,000 tonnes/year of PVC from South Korea, 270,000 tonnes/year from Taiwan, 100,000 tonnes/year from China, less than 100,000 tonnes/year from the US, and about 60,000 tonnes from Mexico.

India will have an additional 200,000 tonnes/year of local capacity by 2014, the source noted.

India's PVC market is expected to grow by 10% in fiscal year 2013, driven by infrastructure and agriculture demand, said the senior executive. The fiscal year 2013 is from 1 April 2013 to 31 March 2014.

"[For fiscal year 2013] we see 10% growth in PVC consumption after 14.5% growth in [fiscal year 2012]," he said.

However, growth for fiscal year 2013 could be lower at 7-8% if the monsoon season in India is poor, meaning there is too much rain or not enough rain, said the source.

A poor monsoon season would negatively impact purchases of PVC agricultural pipes used for irrigation.

Typical consumption of suspension PVC averages 8-9% per year in India, said the executive.

"Construction - partially driven by government spending - and agriculture are the driving forces for PVC demand," he said.

Government spending on infrastructure projects typically accounts for about 15% of total India PVC demand, the executive noted.

However, government spending could be jeopardised by a current accounts deficit, partly fuelled by a weak rupee versus the US dollar.

"With the weak rupee, costs for imported materials such as crude oil rise, contributing to the deficit," the executive said.

Another concern is the use of fillers in PVC pipes sold in the retail market - a market that comprises 70% of India's PVC sector.

"International standards say fillers should not make up more than 8% but there is rampant product using 15-25% filler and some with 40% filler. The filler is calcium carbonate," said the executive.

By: Joseph Chang
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