By Malini Hariharan
I recently met a businessman at a dinner party. After exchanging the usual greetings he eagerly disclosed his plans for a new business venture - trading in polymers.
"There will be three of us in this business; we plan to import polymers in bulk from Taiwan and China; each consignment will not be less than 500 tonnes," explained this Mumbai-based businessman whose main activity was extending short-term finance to local companies.
He probably sensed my surprise and confessed: "I don't know anything about polymers. I will only be providing money."
And he was convinced that polymer trading was a great investment opportunity.
"I have studied it carefully; it's better than [investing in] gold," he said very enthusiastically.
Pic source: Empire State Ventures
I have not crunched any numbers but can polymers yield better returns than gold?
What about all the volatility in pricing? Has the great price crash of 2008 already been forgotten? And what is this about importing from China? Yes, there have been plenty re-export offers out of China in the last few weeks but surely that is only temporary.
There are many others in India who have been drawn to polymer trading. And the reason for this is the very healthy profits seen last year.
A veteran polymer trader told me recently that 2009 was a great year in which he had recovered all the losses that he had posted in 2008.
"Indian polymer demand has been fantastic but it has attracted a lot of new traders; even some processors are into trading as they see more money in this than in processing. It has become a very competitive market," he complained.
A second trader had a similar story to narrate. "Everybody sees this as a quick money making opportunity; they all want to trade.
"Many of the small traders operate on wafer thin margins, rotating product for a margin of only Rs 250-300/tonne ($5.50-6.50).
"This is putting pressure on us as my customer has other lower offers. We cannot entice him or tell him about our relationship; we cannot fight that," he said rather sadly.
He probably will have to wait for the next big price crash when polymers will look like fool's gold.