Synthetic yarn may get cheaper with anti-dumping duty removal on PTA

While it will improve cost efficiencies in the textile industry, manufacturers of this key raw material may see their margins getting squeezed

Polyester or synthetic yarn could get cheaper with the Union Budget ending the anti-dumping duty on Purified Terephthalic Acid (PTA), a key input. The petrochemical is imported from Iran, China, Indonesia, Malaysia, Korea, Taiwan and Thailand.
 
China has added huge capacity in recent quarters and there is  possibility of cheaper import from there after removal of this duty. The finance minister justified the move as in the public interest and to make it available at competitive prices, for unlocking the textile sector’s portential. India’s PTA demand for domestic purposes is estimated at seven million tonnes (mt) a year. Almost half of it is imported.

 
The duty was to protect domestic manufacturers Reliance, Indian Oil and Materials Chemicals & Performance Intermediaries. Says K Ravichandran, senior vice-president at ratings agency ICRA: “Removal of the Anti Dumping Duty (ADD) will put pressure on the realisation of domestic PTA manufacturers and lead to accelerated imports, at a time when the market is facing a glut emanating from large capacity additions in China recently. As a result, the spread between PTA and paraxylene should drop to below $100/tonne in the near term. This spread had already started correcting in the last few quarters to $110-$120/tonne, from levels of $180/tonne a year ago. This will be a credit-negative for standalone PTA manufacturers; integrated petrochemicals manufacturers should be able to withstand the squeeze.”

 

Polyester yarn prices in India were relatively high in a sluggish economy due to high input cost, including PTA prices.
 
Rakesh Biyani, president of the Clothing Manufacturers Association of India, said removal of the duty could open up the manmade fibre value chain, benefiting technical textiles, home furnishing, the sportswear industry, sarees and dress materials.
 
“The domestic sports gear industry was not getting proper support in 15-20 years, leading to lot of factories getting closed. There is a huge gap in terms of sports gear manufacturing capabilities between India and other countries. Removal of anti-dumping duty on PTA will boost the morale for domestic industry, which works on volume — every penny matters,” said Arun Pandey, founder of 'Seven by MS Dhoni' sports brand and chairman of the Rhiti Group.

 
O P Lohia, chairman at Indo Rama Synthetics, says this augurs well for the industry at a time when annual export are more or less stagnating at $36 billion. “Because of high input cost, the industry was facing cheaper competition from other destinations, like Bangladesh. The move will now help create jobs and push up exports. PTA availability has been an issue and the industry was running hand-to-mouth.”