The Indian growth story – part 2

Business, China, India, Markets, Middle East, Olefins, Polyolefins

By Malini Hariharan

A few weeks back I had written about robust demand growth figures emerging from the Indian polymer market. I will be posting some numbers over the next few days but ahead of that I would like to highlight what industry players have been saying on the major growth drivers and also developments in the BOPP sector where huge capacity additions are underway.

Polyethylene (PE), polyvinyl chloride (PVC) and polypropylene (PP) posted double-digit growth in 2009 and even polystyrene (PS), a laggard in the best of times, also reported a positive story.

Restocking has contributed to the numbers but producers also report a fundamental increase in demand. It must be remembered that India was one of the few countries to post growth during the meltdown of 2008.

Packaging and infrastructure continue to remain the key drivers with healthy contribution also from the automobile and electronics sectors.

A strike called by jute workers in December has helped increase sales of PP and hdPE in the raffia sector. India’s Jute Packaging Materials Act mandates that jute should be used for most foodgrain packaging. But the strike has curtailed jute supply and prompted government departments to issue orders for raffia bags.

Orders amounting to 20,000-25,000 tonnes of PP have already been issued, says one industry source. And as the strike is still on, a second source estimates that the figure is likely to hit 50,000 tonnes by 31 March 2010. This figure includes hdPE but PP will have a bigger share.

“If the strike continues there is going to be tremendous pressure on raffia grade,” says the first source.

And the second source adds that many processors who have received government orders for raffia bags are facing problems in securing material.

The raffia sector accounts for around 32% of PP demand and 16% of hdPE.
PP volumes in this segment are estimated to have grown by nearly 20% during April-December 2009.

Moving to BOPP, this segment continues to show good growth but processors expressed concern about the overcapacity that is building up in the country.

India’s installed capacity for BOPP film during fiscal 2009-10 is estimated at around 258,000 tonnes/year during 2009-10. This is projected to rise to 336,000 tonnes/year in 2010-11. Demand in 2009-10 was around 195,000 tonnes and is expected to reach 250,000 in 2010-11.

Indian manufacturers of BOPP film will have to export but face competition from China.

“There are three places in world where demand growth is growing – India, Middle East and China,” says Indrajit Ghosh, general manager business development, at Uflex.

But the problem is that capacity additions are taking place at all three locations.

He estimates that global BOPP capacity last year was around 5.7m tonnes last year as against demand of 5.3-5.4m. Global demand growth is expected to be in the 7-8%/year range.

“There are huge capacity increases taking place in the Middle East and Africa – Rowad International will add a 3000 tonnes/month line in Saudi Arabia; Gulf Packaging will start a 2500 tonnes/month line in Saudi Arabia; Flex will commission a 3000 tonnes/month line in Egypt and two plants with a total capacity of 6000 tonnes/month will start in Nigeria,” says Ghosh.

Uflex will also be starting a line in Egypt in the next three months.

“There are lots of plants in China and the country is continuing to expand. Every year 8-10 new lines are coming up,” he adds.

And the problem is that China too will be aggressively targeting the export market.


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