Price and market trends: India polymer firms may hike prices

29 August 2014 09:55 Source:ICIS Chemical Business

India’s polymer producers may be prompted to hike their list prices in response to strong domestic demand amid a supply shortage, which is partly caused by reduced allocations from the Middle East, industry sources said on 20 August.

Polymers plants of two major Indian producers are currently not in operation, while supply from the Middle East is being constrained by production disruptions in Saudi Arabia, 
they said.

“The shutdowns in the Middle East and India unfortunately happened at the same time,” an Indian polymer end-user said.

Indian producers – including Reliance Industries, Indian Oil and Haldia Petrochemicals – last raised their offers on 1 August by rupee (Rs) 1-2/kg amid strong demand in the domestic market. Offers are typically revised at the start of the month or mid-month.

“We are not able to get full allocations from the Middle East. So, we turn to local producers who are indicating they will raise list prices in September,” a Mumbai-based trader said.

On 15 August, high density polyethylene (HDPE) film prices were assessed at Rs120.50-121.50/kg, while polypropylene (PP) raffia (flat yarn) were at Rs117.00-118.50/kg during the same period, according to ICIS data.

“Offers may be raised either on 21 August or 1 September because of supply shortages in India and elsewhere,” according to a Mumbai-based distributor.

Indian polymer producers are being forced to cut back on allocations to neighbouring south Asian countries such as Pakistan, Bangladesh and Sri Lanka, to cater to robust domestic demand, industry sources said.

“Our local market comes first, so we are offering fewer volumes to the rest of south Asia,” a source close to a major Indian energy supplier said.

Surging domestic demand for polymers in India can also be attributed to the continued volatility of the rupee against the US dollar, market sources said, since a weak currency makes US dollar-denominated imports costly.

On 20 August, the Indian rupee was trading at Rs60.81 to the US dollar, down by more than 4% from late May.

“We are steering clear of imports for now because of the rupee depreciation,” according to an Indian polymer buyer.

Polymer buyers in India are cautious about procuring cargoes in the absence of a clear price direction amid continued volatility of the rupee against the US dollar.

“We are concerned and taking only short-term positions. We are only buying on a need-to basis because of the rupee [volatility],” a Mumbai-based end-user said.

A weak rupee makes dollar-priced imports expensive for Indian buyers.

A polyethylene (PE) buyer based in Mumbai said it does not want to import more than necessary “and lose money because the rupee moved overnight”.

Some buyers have been opting to mix their purchases with local material, as the rupee’s depreciation in the exchange market made domestically produced PE cheaper.

“To protect themselves [from currency fluctuations], buyers buy both domestic and imported material. But, they are very cautious,” said a Middle-East PE distributor active in India.

Shortage of polymer supply from the Middle East started in late June, when the Muslim fasting month of Ramadan was about to start. Most Middle East countries implement shorter working hours during Ramadan.

Among Middle East producers selling polymers into India are SABIC, Muntajat, Orpic, Borouge, Tasnee, Al Waha Petrochemicals and Petro Rabigh.

Two major producers in Saudi Arabia had experienced disruption to production this month.

Al Waha Petrochemicals, which produces 450,000 tonnes/year of PP and 460,000 tonne/year of propylene in Jubail, halted operations because of a technical fault and is expected to resume production by the end of August, industry sources said. The company is a subsidiary of Sahara Petrochemicals.

Meanwhile, Rabigh Refining and Petrochemical (Petro Rabigh) was forced to shut down part of its operations at its complex in the coastal town of Rabigh in August month because of a technical problem.

Normal operations are expected to resume on 19 September, the company said, although it is not clear which units are currently affected.

Petro Rabigh has a 600,000 tonne/year linear low density PE (LLDPE) plant, a 300,000 tonne/year HDPE line, a 700,000 tonne/year PP unit and a 600,000 tonne/year monoethylene glycol (MEG) plant.

Meanwhile, India also had unexpected shutdowns at domestic polymer facilities, exacerbating the shortage of polymer supply in the country.

Haldia Petrochemicals’ polymer plants in eastern India have been shut since 7 July because of technical woes at its cracker. It is not known when the plants will resume normal operations, industry sources said.

The company operates a 370,000 tonne/year HDPE/ LLDPE swing plant, a stand-alone 330,000 tonne/year HDPE facility, and a 340,000 tonne/year PP plant in Haldia, according to ICIS data.

HPCL-Mittal Energy Ltd (HMEL), on the other hand, stopped production at its 440,000 tonne/year PP unit in Bathinda following a fire at its 180,000 bbl/day refinery at the site in late June, industry sources said. The unit is expected to resume production by end-August or early September, they said.

“The Haldia and HMEL plants are still not up. This is really causing a bit of panic among buyers,” an Indian-based trader said.

By Muhamad Fadhil