Fall in international crude prices has failed to offer any respite to the plastic processors in the state. The industry says that while crude is down by almost 25 per cent from the peak period, in comparison, polymer prices have slipped by only 4-5 per cent. This, coupled with foreign exchange losses as well as plummeting demand, has, in turn, started affecting the profitability of the plastic players, forcing a few hundred small and tiny processors to shut shop.
Crude prices are at a nine-month low level, hovering around $92 for a barrel at the moment. "Crude is down by almost 25 per cent from the peak levels.
While this should be a boon for plastic manufacturers, the story, however, is otherwise. Polymer prices have remained relatively stable vis-a-vis crude prices, and are down by only 4-5 per cent", said Jigish Doshi, chairman and managing director of Ahmedabad based Vishakha Group, makers of plastic bins, drums, bottles and a variety of plastic items.
He further added that polymer prices are between Rs 85,000 to 95,000 per tonne now depending on grade, down marginally from Rs 90,000- 100,000 per tonne around three months back.
On top of this, overall demand is down by around 30 per cent during the April-June period this fiscal compared to same period last financial year, industry insiders claimed. Gujarat had processed close to one million tonne of polymer during 2011-12. This year hardly 20 lakh tonne of processing has been done so far thanks to sluggish demand. Mahavir Khatang, president of the Gujarat State Plastic Manufacturers' Association pointed out that companies are also facing a lot of foreign exchange losses. For a Rs 100 crore entity, forex losses are running into almost Rs 3-5 crore as the rupee devaluates against the US dollar, market sources claimed. "April to June has been a totally flat season for plastic processors in the state as plastic demand has slumped with the slowing industrial growth", Khatang said.
As orders have dried up, many tiny and small units in the state are facing issues of survival. Kiranbhai, owner of a plastic bag manufacturing unit in Ahmedabad, claimed that he has seen an almost 60 per cent dip in demand in his sector.
"Many of my fellow units are now thinking of closing down, at least temporarily. Whether or not there is demand, one has to bear the overhead costs of power, salaries etc. Some units are also thinking of changing their line of business", he explained. Gujarat has close to 4,000 small and tiny polymer processing units. At least a few hundred have closed down in the recent months, Doshi informed.
"Average fall in business volumes in around 30 per cent. Some units have been hit more, to the tune of 60 per cent business loss, depending on the product mix", he added.
Meanwhile, work on the upcoming GSPMA Polymer Park at Sanand is on. "Close to 100 units have been allotted plots so far. The park is coming up over 100 acres. We have re-opened online applications for plots at the park", Khatang said. As for the Dahej park, bookings have already been freezed, he added.