Polymer makers cut prices to lift demand

In a month’s time, polymer manufacturers have again cut prices to cope with waning domestic demand and also extended a price protection scheme.

"After two rounds of price increases in November, manufacturers cut prices of polypropylene (PP) at the beginning of December by Rs 2 a kg and this week again by Rs 2.50 per kg,” said one. Also, polymer makers are again offering price protection in polyethylene (PE), a variant.

Company officials say there is a slump in the global and domestic markets. While domestic demand is weak due to a general slowing in industrial activity, the global demand is down to the holiday season, besides the world slowdown.

"Demand for exports from America and Europe are down. China, a major procurer of raw material and to which most Indian companies export, is not purchasing any more. This is adding to the woes from domestic demand,” explained a source.

While PE continues at Rs 80-85 a kg, PP is Rs 84-86 a kg. Under the price protection scheme, once a customer has bought a product, he will be compensated for any loss if the company decides to further bring down prices within that week or month. This scheme is available till January 1 and will be continued if need be, say companies. Haldia Petrochemicals, Indian Oil Corporation, GAIL and Reliance Industries are the four major polymer manufacturers.

At the beginning of November, the prices of PE and PP, the two most important basic varieties of polymer, were raised by Rs 2-4 a kg. For the more refined variants, it was more. This was primarily due to the sharp rupee depreciation, which stopped imports. Gradually, the inventory of domestic buyers went up.

“Most plastic and plastic processing facilities are running 40-60 per cent below their capacities due to declining demand from the industrial sector,” said a plastic bag manufacturer.

Exports are a bright spot due to the rupee’s fall. “The good margin more than compensates for the stickiness in demand in the domestic market,” said a source.