Petrochemical makers cut prices on low demand

Contrary to the rising petrochemical prices globally, the Indian manufacturers have reduced prices following growing imports and low demand in the domestic market.

According to sources in petrochemical companies, major producers like Haldia, Gas Authority of India, Indian Oil Corporation (IOC) and Reliance Industries have cut prices by Rs 1-3 in all variants of polypropylene (PP) and polyethylene (PE).

Globally, polypropylene (PP) price has gone up by $30 to $1,360 a tonne this month while polyethylene (PE) prices are hovering around $1,230 a tonne, up by $50 compared to previous month’s price. The rise is primarily due to the rising crude oil prices and supply constraints since many of the units globally are shut.

Sources said the domestic petrochemical marketers usually hike prices or keep them unchanged when demand is low in India and when global prices change . Prior to October, prices were reduced in May.

A stockist of petrochemicals said since last week, prices of PP come down from Rs 84 a kg to Rs 82.75 a kg while in high density polyethylene (HDPE), prices have fallen from Rs 79 a kg to Rs 77 a kg. Similarly, in low density polyethylene (LDPE), prices fell from Rs 101 a kg to Rs 97 a kg.

They attribute various reasons for this. “Till Diwali, when the festive season gets over, the plants run below capacity since it is a holiday season and most workers go on leave. After Diwali, work starts in full swing since the plants will have to run overtime to finish the backlog. Therefore demand is a bit slack now. Secondly, imports are catering to 8-10 per cent of the domestic demand.”

While polypropylene (PP) is used in high tenacity bags and containers, main use of polyethylene (PE) is in packaging of milk and vegetables in the market.

A company official said prices would rise once the festive season is over and work in units start in full swing.

Another stockists said the reduction of prices cannot be compared with the global prices. This is because Indian manufacturers have kept prices very high even when the crude prices and global polymer prices have started going down. Even if these prices have been reduced now, it is still not at the level which could have resulted if the Indian companies would have cut prices in line with global prices earlier.

“From now on, pricing for polymers will be critical, since the market is slightly oversupplied, both due to upcoming capacities in the domestic market and dumping of imported polymers as overseas units are facing a squeeze in demand due to a slowdown,” an official with a petrochemical plant said.