India PE in a tight spot

By Malini Hariharan

It is not just China where polyethylene (PE) producers face problems.

Indian producers have been struggling to place volumes as huge imports during the last couple of months have saturated the domestic market.

PE import volumes were said to have hit a record high of 104,000 tonnes in October. And my colleague Prema Viswanathan reported recently that imports during April-November were up by 10-12% to 600,000 tonnes.

And producers only have themselves to blame for the market impasse. Plant problems earlier this year tightened supply and this opportunity was used to raise local prices.

Meanwhile, unreliable domestic supply and a big gap between local and international prices prompted traders and end-users to turn to imports.

With stocks piling up, Indian producers have adopted two strategies to ease the pressure and balance markets.

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Prices have been dropped in recent weeks. This has yet to result in a significant improvement in sales but the gap between local and international prices has been bridged and fresh imports blocked.

Another option being pursued was exports which in the words of a source close to one producer ‘makes more sense’.

“Fundamentally, the Indian [market] condition is not bad; what’s happening is temporary as long as the China market is OK ,” he added.

But the health of the Chinese PE market remains uncertain given that producers have yet to push through December price hikes.

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