India's plastic pipe market to grow, but PVC prices may pose challenge

The report by Jefferies highlighted India's lag in pipe consumption compared to developed regions like the US, Europe, and China

India's plastic pipe industry has a potential of significant expansion because the country's per-capita pipe consumption remains much lower than the global average, according to a recent report by Jefferies, a global investment bank and financial service company. 

 

“India's per-capita-pipe-consumption is lower than the world average and significantly lower than the US, Europe, and China. This implies significant headroom for growth,” the report stated. 

 

Growth and market projections

 

The plastic pipe sector has demonstrated strong growth, with an 8 per cent compound annual growth rate (CAGR) in the last decade from FY15 to FY24. The report further outlined that the plastic pipe market is projected to reach a size of Rs 500 billion by FY25, driven by a resurgence in capital expenditure (capex) and a robust housing cycle.

 

In 2023, according to a report by market research platform Techsci Research, India’s plastic pipe market was valued at Rs 474. 47 billion. These pipes are widely utilised in a range of infrastructure projects, such as water supply, sewage systems, and gas distribution.

 

PVC prices a challenge

 

However, the report also underlined some concerns about the industry. For example, despite the optimistic outlook, the industry faces challenges from fluctuating polyvinyl chloride (PVC) prices. PVC is a key raw material for plastic pipes, and price volatility directly affects manufacturers’ margins.

 

The report noted, “PVC is the key raw material for plastic pipes, and its volatility is a pass-through. Any sharp fall in PVC price entails near-term inventory losses, impacting margins.”

 

PVC prices saw a rise from Rs 75 per kg in September 2024 to Rs 78 per kg in November 2024, followed by a 4 per cent decline in December. Such fluctuations can lead to inventory losses and destocking by distributors, affecting overall volumes.

 

Recovery expected

 

The first half of FY25 saw slower growth due to weak capex activity and high base effects from the previous year. However, Jefferies anticipates a recovery in volumes during the second half of 2025, supported by renewed capex and increased business-to-business (B2B) activity.

 

While demand in the housing sector remains strong, the plastic pipe segment has outpaced the tiles sector in volume growth over the past two years, a trend expected to continue.

 

Despite challenges posed by PVC price volatility, the long-term prospects for India’s plastic pipe industry remain strong. Favourable market dynamics, coupled with increasing infrastructure investments, position the sector for sustained growth in the years ahead, the report stated.