Polyester producers protest steep price hike in raw material

Association questions anti-dumping duty that led to price rise; RIL trashes allegations of bonanza from govt

The manufacturers and users of purified terephthalic acid (PTA), a key raw material for producing polyester fibre and yarn, have added yet another chapter to their long-drawn battle. The latest trigger is the decision of PTA producers like Reliance Industries Ltd (RIL) and Mitsubishi Chemical to increase prices by a steep Rs 2,100 a tonne from August 1 - just a week after the new government imposed anti-dumping duty on the product despite stiff opposition from the user lobby.

PTA Users Association said the anti-dumping duty meant a Rs 724 crore bonanza for the domestic manufacturers while putting a big question mark over the user-industry's future, an argument promptly dismissed by PTA manufacturers led by RIL on the grounds that except for an interim increase in August, the prices of PTA as well as polyester staple fibre had been coming down and had not been impacted at all by the anti-dumping duty.

The duty was imposed on July 25, just a month after the new government took charge. In its notification on July 25, the finance ministry imposed anti-dumping duty ranging from $19 to as much as $117 a tonne depending on the country of origin, which covered, amongst others, China, Thailand, South Korea and the European Union. The ministry said the decision was based on preliminary findings on imports of PTA. (PTA TROUBLE)

PTA users are obviously seeing red. R K Vij, advisor, polyester, at Indo Rama Synthetics, said PTA makers took advantage of the anti-dumping duty and raised prices within a week of that decision. "The move had a serious impact on the polyester industry and the hit on an annual basis is Rs 724 crore," he said.

To justify this claim, PTA users said the operating capacity of polyester yarn manufacturers fell from 69.34 per cent in July (before the anti-dumping duty was imposed) to around 63 per cent in September (after the PTA prices were raised). According to data available from PTA Users Association, production of some of the key players like Indo Rama Synthetics, the second largest producer, fell by over 8 per cent in the period.

PSF manufacturers have also seen their operating capacity fall from 94.67 per cent in July to 84.94 per cent in September.

In its submission to the government, the association also questioned the rationale for the anti-dumping duty by saying that the demand for domestic PTA was more than the supply, as a result of which manufacturers had to import. Also, Indian Oil Corporation, which also makes PTA, did not join RIL or Mitsubishi in demanding an anti-dumping duty.

DIRTY LINEN

2013
October 8: Govt initiates probe into alleged dumping of PTA (purified terephthalic acid, a key raw material for producing polyester fibre and yarn) from China, South Korea, the European Union and Thailand
December 10: Injury submission by PTA users
2014
June 19: The Directorate General of Anti-Dumping & Allied Duties in its preliminary findings recommends a provisional anti-dumping duty on PTA being imported from four countries

• Duty varies from $19.05 to $117.09  a tonne, depending on the company and the source country
• Lowest duty imposed on Korean Taekwang Group; the highest is on all other Korean manufacturers  
• Anti-dumping duty of $62.82 a tonne imposed on Chinese manufacturers and $23.75 a tonne on EU manufacturers    

July 25: The finance ministry notifies anti-dumping duty norms

August 24: PTA Users Association makes submission to the govt against its imposition
The PTA users also argued that both RIL and IOC were running their PTA operations at full capacity even before the duty was imposed. This showed that they were not losing money because of cheap imports. RIL, they said, was in fact planning to expand its PTA capacity starting from December 2014 - again something it would not have done if the business was losing money.

PTA manufacturers, however, see little logic in these arguments and said there was no question of any bonanza from the government and that PTA prices in August saw only a marginal increase owing to dollar appreciation. Defending the anti-dumping duty, an RIL spokesperson said, "PTA is a petrochemical product and follows the international price movement and US currency rates. Indian prices have moved in tandem with international prices. Though the producers would have taken full arbitrage of the anti-dumping duty, the fact that since the anti-dumping notification, the prices of PTA are going southwards is an indicator of no increase in PTA prices as a result of the duty."

"PTA price has come down from Rs 71,000 a metric tonne in mid-August, which was because of a certain sudden spike in the dollar, to around Rs 67,000 a metric tonne," the spokesperson said.

RIL contended downstream polyester prices had also been falling and, therefore, the anti-dumping duty had not impacted prices. Polyester filament yarn comprises three-fourths of the total polyester consumed in the country by the downstream yarn processing and weaving industry. POY prices (inclusive of excise and taxes) have fallen from Rs 115 a kg on July 1 to Rs 110.90 on September 16 and the increase in mid-August to Rs 118.30 was due to a spike in dollar prices. RIL said Indian producers were selling filament yarn at below the landed prices of China, with negative Ebitda.

Similarly in PSF, prices have been going southwards from Rs 114.60 a kg to Rs 108.90 a kg, going up only to Rs 116.80 in mid-August due to dollar appreciation. "Thus, it is wrong to say that the anti-dumping duty on PTA has affected the downstream yarn and fabric industry. The falling price since its imposition has helped the domestic downstream industry," the spokesperson added.

The RIL spokesperson also questioned the argument of PTA users that RIL had operated its plant at 100 per cent capacity and, therefore, there was no price injury. "To suffer a cash loss of Rs 5 crore a day is not an injury alone. Besides a loss in profit, there are other parameters of injury such as fall in return on investment, price suppression, price undercutting, increase in inventory, etc," the spokesperson said.