19 August 2014 06:38 [Source: ICIS news]
Focus story by Muhamad Fadhil
MUMBAI (ICIS)--Polymer buyers in India are cautious about procuring cargoes in the absence of a clear price direction amid continued volatility of the rupee against the US dollar, industry sources said on Tuesday.
“We are concerned and taking only short-term positions. We are only buying on a need-to basis because of the rupee [volatility],” a Mumbai-based end-user said.
The Indian rupee (Rs) was trading at Rs60.70 to the US dollar on Tuesday, about 4% weaker from 23 May, when the rupee hit the highest for the year at Rs58.32 against the US dollar.
Optimism over the victory of Narendra Modi of the Bharatiya Janata Party as India’s new prime minister and a promise of economic revival for the country drove up the rupee value against the US dollar in May. India conducted its general elections from 7 April to 12 May.
“The rupee was very strong after the polls as everyone expected the economy to improve tremendously. But now, the buzz is over and the currency slumped again,” according to an Indian-based polymer buyer.
A weak rupee makes dollar-priced imports expensive for Indian buyers.
A polyethylene (PE) buyer based in Mumbai said it does not want to import more than necessary “and lose money because the rupee moved overnight”.
Some buyers have been opting to mix their purchases with local material, as the rupee’s depreciation in the exchange market made domestically produced PE cheaper.
“To protect themselves [from currency fluctuations], buyers buy both domestic and imported material. But, they are very cautious,” said a Middle-East PE distributor active in India.
India’s annual polymer demand could not be met by domestic production alone, requiring the country to import from the Middle East and Asia.
Polymer suppliers in India include Reliance Industries Limited, Indian Oil and Haldia Petrochemicals.
Middle East producers include SABIC, Muntajat, Orpic, Borouge and Tasnee, among others.
Notwithstanding concerns over India’s weakening demand for PE imports, Middle East producers are not willing to lower their PE offers amid scarcity of available spot material, market sources said.
“Supply is still an issue in India. Despite the rupee [volatility], we expect active buying to take place, said a source close at a Middle Eastern supplier.
Buyers in India are expected to stock up high density PE (HDPE) and linear low density PE (LLDPE) film amid near-term supply concerns, according to sources close to Middle Eastern producers.
HDPE and LLDPE remain in tight supply in India amid reduced plant output in the Middle East during the Muslim fasting month of Ramadan in July.
On 15 August, HDPE film prices were assessed at $1,610-1,640/tonne CFR (cost and freight) India, up by 7.6% from the start of the year, according to ICIS data.
LLDPE film prices, on the other hand, increased 8.2% over the same period to $1,630-1,660/tonne CFR India, the data showed.
“Both HDPE and LLDPE prices keep climbing up and supply issues are still not easing,” according to a Middle East producer selling into India.
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