Polymer prices likely to remain high

Polymer prices are likely to remain high due to increased naphtha and crude oil prices. From the lows of $760-770 per tonne a month earlier, naphtha prices have risen to $940 a tonne, following a jump in crude oil prices at $95 a barrel.

Naphtha is the feedstock for manufacturing polymer.

Companies may increase the prices of polypropylene (PP) and polyethylene (PE) next month. Currently, international PE prices stand at $1,250-1,260 a tonne, while those of PP are $1,350-1,360 a tonne. In August, polymer manufacturers raised prices of both PP and PE by Rs 1-2 per kg across variants. However, demand is declining and bulk users such as plastic processors are maintaining minimal inventory, against buying in bulk earlier.

Even when polymer prices were cut globally to cope with the slowdown, in India, manufacturers raised prices, due to depreciation in the rupee. The depreciation proved to be a boon for the polymer industry---polymer has not been imported for two months. This has led to the entire demand being catered to by domestic manufacturers. In the May-June period, manufacturers had cut prices and offered price-protection schemes to buyers to stimulate demand. By July-end, however, PP prices were raised by Rs 2 a kg (to Rs 94-96 a kg), at a time when international polymer manufacturers were reducing production capacities and maintaining flat prices Companies such as Haldia Petrochemicals, Reliance Industries and Indian Oil Corporation are the primary producers of PP.

Under the price-protection schemes companies had earlier offered, a buyer would be compensated for any loss if the company decided to reduce prices within that week or month. In the January-April period, polymer prices were raised each month. The rise in April was particularly stiff, with processors shifting to cheaper processed polymer.

While polypropylene is used in high tenacity bags and containers, polyethylene is primarily used in packaging milk and vegetables.