India PE, PP markets on a seasonal lull ahead of Diwali

SINGAPORE (ICIS)–India’s polyolefin demand has been largely weak, with upside limited amid a seasonal market lull ahead of Diwali in November.

Fire crackers on Diwali festival. (Source: Hindustan Times/REX/Shutterstock)

On 28 September, spot linear low density PE (LLDPE) film prices were assessed at $,1,060-1,070/tonne CFR (cost & freight) India, down $10-20/tonne from the previous week; while PP raffia were unchanged at $1,225-1,240/tonne CFR India, ICIS data showed.

Businesses are expected to slow down in parts of India from 9 October due to  Navratri – a nine-night Hindu post-monsoon autumn festival; while on 6 November, India will celebrate Diwali or Festival of Lights, a major Hindu holiday.

Domestic companies typically cut down polymer purchases in the run-up to Diwali owing to restricted cash availability, as they set aside funds for payments of annual bonuses and salaries commonly paid ahead of Diwali.

Downstream demand for resins also slows down as several processors close their factories during the holidays.

Demand for October-lifting imports is thus likely to be restricted, as buyers would prefer to stock up before the holidays on a need-to basis.

“Market will become quiet from mid-October, so many buyers are not in the market for this month,” an Indian trader said.

With the Indian rupee setting new lows to the US dollar this year, polyethylene (PE) and polypropylene (PP) processors have opted to be more cautious in their spending, as many have already suffered hits to bottom lines owing to imports.

The Indian rupee, which has fallen by more than 12% this year against the US dollar, is currently the worst performing currency in Asia.

Demand for PP imports has remained generally limited through August and September, as imports were rendered expensive by rupee’s weakness.

With domestic material also available in sufficient quantities, buyers steered clear of seeking cargoes from the Middle East.

India’s demand for PE imports was additionally hampered by strong domestic availability of the material, which can be procured at lower prices than imports.

In September, local producers have announced special incentives and price discounts as they were clearing stocks toward the end of India’s fiscal second quarter.

India’s ban on disposable plastics enforced across several states since early this year, meanwhile, continues to cap its overall PE demand.

A lack of clarity in the near-term trend in domestic prices along with uncertainty on the impact of the ban on demand for specific plastic goods continued to deter majority of processors from seeking imports.

“Any uptrend in China’s PE uptake and prices after the Golden Week holidays is expected to have limited impact on the Indian market, as India no longer follows China for prices and direction,” an Indian importer said.

China is on holiday on 1-7 October for its National Day celebration, also termed as a Golden Week.

Focus article by Veena Pathare