Polymer makers turn to exports on demand drop

Polymer manufacturers have turned to exports, even at a marginal loss, due to waning demand in the domestic market.

“Most plastic and plastic processing facilities are running 40-60 per cent below their capacities due to declining demand from the industrial sector. In the international market even if the overall demand is weak, there is always demand for specific grades which a country may not be manufacturing, as imports work out cheaper. This is similar to India, where we primarily import high grades of polyethylene like metalofin or some variants of polypropylene. So, companies are looking at such markets,” said a source.

“Right now, the focus is not on earning margins but to flow the output into the market and not shut down capacity. Among major exporters, Reliance Industries is primarily into exporting polypropylene, whereas Haldia Petrochemicals exports polyethylene,” said another source.

Some companies are exporting to China and other countries in Southeast Asia, even by undercutting price, since demand is not expected to pick up anytime soon in the domestic market. Since the crude oil and naphtha prices have been fluctuating, no one is interested in building   inventory. The crude price has been fluctuating in a range of $78-90 a barrel, is its derivative and main feedstock for petrochemicals and polymers, naphtha.

Imports, which used to play a prominent role by ruling on an average Rs 1-2 per kg cheaper than the price in  the domestic market, have virtually stopped. “Due to a sharp depreciation of the rupee against the dollar, from Rs 45-46 to Rs 49-50, some importers who had contracted two to three months back  are taking delivery at a loss. This is because even if the imports were contracted three months back, the only thing fixed at the time of the contract was the premium to be paid on the spot rupee-dollar rate. Thus, delivery will be at the prevailing spot rate, which is killing importers,” said one. Even after importing at higher rates, there was no scope for passing it to end- users, since the demand situation was already weak, he said.

Polypropylene prices in the domestic market have come down by Rs 1.50-2 to Rs 85 a kg, while polyethylene prices remain flat at Rs 75-80 per kg across variants.