India demand slides for PVC and PS

By Malini Hariharan

The last year has been rough for Indian polyvinyl chloride (PVC) and polystyrene (PS) producers with demand for their products showing almost no growth.

PVC consumption is likely to increase by only 1-2% year on year in the fiscal year ending on 31 March 2012, said S Gopal, managing director of Chemplast Sanmar at the PlastIndia exhibition and conference last week.

And if things don’t go well in February-March, growth could slip in the negative zone, he cautioned. He expects demand to settle at around 1.9m tonnes for 2011-12

In polystyrene (PS), one producer expects demand to shrink by 3.5% to around 250,000 tonnes in 2011-12.

The economic slowdown, rising interest rates and depressed buying sentiment are some of the factors responsible for the slide in fortunes of both PS and PVC.

But producers are also blaming the unseasonal rains experienced in 2011.

“The low demand growth is mostly the result of an unusually heavy monsoon season,” said Gopal.

The monsoon season in India is typically a time of low demand for PVC, as pipe-laying activity comes to a halt during this period. The pipes and fittings sector currently accounts for more than 70% of PVC demand in India, in contrast to the global situation, where this sector contributes only 40% to PVC consumption.

In PS, the rains affected the appliances segment, which accounts for about 40% of demand.

“It was a bad year for the industry. India had only 45 days of summer in 2011 as against the usual 145 days. Unseasonal rains affected demand for appliances such as coolers and refrigerators,” explains a source from the local producer.

Another crucial factor for PVC was the fluctuation in the value of the Indian rupee. The rupee depreciated steeply against the US dollar in the last quarter of 2011, dampening buying interest, as imports became very expensive. India imports nearly 600,000 tonnes of PVC annually.

The setback for PVC and PS comes after a robust 2010-11 when demand growth was over 10%.

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