SINGAPORE (ICIS)--Petrochemical trades in India are being weighed down by a fresh wave of restrictions on businesses to stem the spike in coronavirus cases in the south Asian nation, accompanied by a plunging rupee that makes imports more expensive.
There are concerns that a demand crash is imminent, which will be aggravated by rising import costs caused by the rupee depreciation.
Maharashtra - which accounts for about a quarter of India’s more than 13.8m confirmed COVID-19 cases, and nearly 40% of the country’s death toll from the pandemic - is placed under a 15-day lockdown starting Wednesday.
The state, which is home to the financial hub of Mumbai, recorded more than 60,000 new daily cases on 13 April along with nearly 300 deaths.
Other states across the country have also started imposing restrictions of varying degrees since early March which are expected to hit India’s overall industrial production, and possibly derail its recovery process from last year’s pandemic-induced slump.
Operations at domestic polymers processing units are likely to be affected. Processors, particularly those in the labour-intensive raffia processing space, may be forced to cut operations on a possible shortage of workers.
Around the same time last year, a nationwide lockdown triggered a mass exodus of labourers that led to shutdowns of major processing facilities.
Production at injection moulding units will be affected as new lockdowns would lead to slumping demand for most household and consumer products since all retail outlets apart from those considered "essential" had to be shut.
In Maharashtra, assembly of more than five people will be prohibited and people are advised to stay home in the next two weeks.
Manufacturing plants which require a prolonged period to stop and restart operations can run at a maximum of 50% capacity at any given point, state chief minister Uddhav Thackeray had said.
India now ranks second to the US in having the highest number of coronavirus infections in the world.
Market momentum in the polyvinyl chloride (PVC) and purified terephthalic acid (PTA) markets have slowed down in the week.
In the case of PTA, imports are expected to slow down. Previously booked import cargoes for April lifting are expected to be carried out as per normal, while May-lifting cargoes onward are uncertain.
Voyage time for PTA imports from northeast Asia is estimated to be at least around 30 days via dry bulk container vessels.
In the ethylene vinyl acetate (EVA) market, suppliers to India which are due to finalise May offers are concerned that demand for the resins could come crashing down as in the same time in the previous year.
“In [the] case of [the lockdowns] in March 2020, demand decreased quickly so it’s very risky now,” said a South Korea-based EVA producer.
A distributor of the key foaming/footwear application grade EVA resin noted that demand has declined as downstream output will be affected when workers start going back to their hometowns amid the new lockdowns.
At the start of the week, fears over increased restrictions sent the stock market benchmark Bombay Stock Exchange Sensex plunging by more than 3% and the Indian rupee slumping to an eighth-month low on 12 April.
India’s domestic methanol distributors lamented noted that it will be impossible for them to pass the additional import cost caused by the rupee weakness over to the buyers.
Ex-tank methanol prices, however, were stable in India since the distributors said that they are already selling at a loss.
In the import market, buying indications and bids for US dollar-denominated cargoes were much softer compared to a few weeks ago.
Many sellers chose not to offer to India while even the lowest offer is deemed too high for the buyers.
Focus article by Nurluqman Suratman
Additional reporting by Veena Pathare, Samuel Wong, Kite Chong, Helen Lee, Priya Jestin and Pearl Bantillo
Photo: Indian people and migrant workers stand in queue waiting for trains outside the Lokmanya Tilak Terminus, in Mumbai, India on 12 April 2021. (By DIVYAKANT SOLANKI/EPA-EFE/Shutterstock)
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