India growth story – Part 3

Business, India, Olefins, Polyolefins

By Malini Hariharan

Some numbers today on Indian polyolefin and polyvinyl chloride (PVC) demand growth during April-December 2009.

The strong growth trend noticed in the early part of last year continued and belied earlier expectations of a slowdown because of a drought over parts of India.

PVC and polypropylene (PP) recorded the fastest growth rates driven by demand from the packaging and infrastructure sectors.

PVC demand was estimated to have risen by 30% to around 1.35m tonnes, compared with April-December 2008, on strong sales in the pipes segment, which accounts for 70% of consumption.

“This was a surprise as we were anticipating growth of 10-15%; the economy was not doing well at the end of 2008 and we were bogged down by this. We thought the numbers would not be good,” said one PVC producer.

But sales remained brisk for most of 2009. Local producers sold an estimated 775,000 tonnes while around 560,000 tonnes was imported into the country. The import volume has been steadily growing over the last few years as there has been very little capacity addition in the country. Chemplast started operations at a new 200,000 tonnes/year plant in September 2009 but the volumes were easily absorbed.

Producers pointed out to a slowdown in sales since December.

“Some destocking is happening. But 24-25% growth for the full year [2009-10] should be possible,” said a second PVC producer.

A third producer was more conservative projecting growth of around 20% for 2009-10.

PP demand rose by nearly 29% to 1.6m tonnes during April-December 2009, although growth rates were expected to moderate to around 20% for the full fiscal year.

Film, raffia injection moulding and non-woven sectors did well and PP also benefited from a revival in the auto sector.

Despite introduction of provisional anti-dumping duties on PP in February 2009, India imported about 300,000 tonnes during April-December 2008, up from about 100,000 tonnes in the same period in 2008.

With the commissioning of Reliance Industries Ltd’s new 900,000 tonnes/year plant at Jamnagar Indian exports also increased, rising from 200,000 tonnes to nearly 500,000 tonnes.

In polyethylene (PE), low-density polyethylene (ldPE) showed the strongest growth with demand rising by about 25% to 260,000 tonnes aided by easy availability and a favourable price differential with linear-low density polyethylene (lldPE).

LLdPE demand was up 16% at 690,000 tonnes while high-density polyethylene (hdPE) demand expanded by 13% to 980,000 tonnes.

Import volumes also rose. LdPE imports were at 120,000, up 71%. LldPE and hdPE imports doubled to around 225,000 tonnes and 340,000 tonnes respectively.

“The packaging sector has been doing exceedingly well. We are seeing good growth in pipes for water distribution and conduit pipes for telecommunication cables. Drip irrigation is also a promising sector. The only area that is a problem is PE bags where there is negative growth because of environmental concerns,” said a market source.

While market players were confident about long-term growth prospects they were cautious in their assessments for the January-March 2010 quarter.

Buying had slowed down in recent weeks as processors were apprehensive of a downward revision in polymer prices and a possible change in excise duties on finished plastic products in the Indian budget which will be announced on 26 February, they said.

Producers also stressed that the high growth numbers seen in 2009 were partly because of negligible growth recorded in the previous year due to the the financial crisis.

“There was some pent up demand at the beginning of the year; we should not set much store by this year’s growth numbers and think that India can grow at this level continuously,” cautioned the third PVC producer.

But he adds that 9-10% PVC growth in 2010-11 looked possible.

The market source concurred: “This year’s high growth is partly because of inventory correction. But an interesting fact is that unlike other markets [around the world] which showed negative growth in 2008, Indian polymer market grew by 4-5%. So even if you take the last two years the Indian performance is still good”.


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