India PO demand set to decline

By Malini Hariharan

The last two weeks has seen a recovery in Indian polyolefins demand led by developments in China.

Prices of PE and PP have risen sharply and traders expect the uptrend to continue for the next couple of weeks as converters need to rebuild depleted inventories.

But unless buying can be sustained in the coming months producers face a year of zero or negative growth in consumption.

Take the case of polypropylene (PP). After two years of double-digit growth PP demand is projected to contract for the year ending 31 March 2012.

Estimates for 2011-12 are in the 2.3m to 2.4m tonnes range, well below the 2.6m tonnes demand recorded in 2010-11.

Demand from every major end-use segment has been affected, explains a local industry player. Raffia, the largest end-user, has been hit by a drop in cement production which is a result of a slowdown in construction industry.

Deceleration in the auto industry has hit PP copolymer sales. Car sales in October dropped 24%, the biggest fall since December 2000, with expensive loans and high fuel costs deterring buyers. Analysts are predicting that the situation is unlikely to change over the next few months.

Industrial growth is down to a two-year low and a recovery is likely to set in only when interest rates, which have been raised 13 times since March 2010, are brought down to reasonable levels.

When this will happen is still unclear as inflation is still a matter of concern.

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