India LAB still under pressure as GST uncertainty persists

SINGAPORE (ICIS)–Spot import prices of linear alkylbenzene (LAB) in India are expected to remain under pressure as uncertainty persists over the implementation of a unified goods and service tax (GST) in the country, market sources said.

Chemicals and polymers will be subject to a GST rate of 18%, in accordance with the Indian government’s classification of 1,200 items under four tax brackets ranging from 5% to 28%.

But questions have been raised over the implementation plan – on how the new structure would be applied on existing inventories and when it will take effect.

Most market players expect the GST to take effect in July, but noted that this may not be the final schedule.

In the week ended 31 May, spot import prices of LAB to India marked their fourth straight week of decline, shedding $30-40/tonne week on week to $1,200-1,250/tonne CFR (cost and freight) India, their lowest level since early February, according to ICIS data.

“In India, the [sales] movement is very slow, [there’s] still uncertainty over GST. People say business is bad,” said one source in India.

Many buyers were showing little interest to purchase fresh inventories until they could gain greater clarity on the issue.

Buyers also seemed more interested in securing import material, which are available at competitive prices compared with domestically produced LAB, market sources said.

“I think there’s some uncertainty about GST and so the buyers prefer to book import cargoes instead of buying locally. I am hoping market will pick up in July,” said another market source.

In the domestic market, Indian producers were heard to have rolled over their prices for June cargoes at the equivalent of $1,260-1,280/tonne CFR India.

The prices were not reflective of the current weak demand, according to traders, adding that the producers were offering discounts to buyers to secure orders, but this information could not be verified.

LAB prices are likely to continue to be weighed down by weak demand amid the lingering lack of clarity on the GST plan, market sources said.

“I heard prices in India are already heading below $1,200/tonne CFR. I am not really interested to do any business there at these prices,” said another market source.

Despite the current lack of strong demand, India is still deemed an undersupplied market and requires around 200,000 tonnes/year of LAB imports.

The country implemented in April anti-dumping duties on LAB imports from Qatar, Iran and China, but the trade measure has not been sufficient or timely enough to stop a flood of lower-priced imported cargoes, which continued to weigh down on prices in the Indian market, according to industry sources.

Focus article by Izham Ahmad

Picture: Kochi port in India (Photographer: Olaf Kruger/imageBROKER/REX/Shutterstock)

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