Linear alkyl benzene prices to remain stable

Stability expected with a softening bias after growing 17% year-on-year.

The price of linear alkyl benzene (LAB) is likely to remain stable with a softening bias after growing 17 per cent year-on-year. LAB is an essential ingredient for synthetic detergents (soaps and detergents).

According to Capital online data services, almost 95 per cent of LAB production is consumed in the manufacturing of synthetic detergents used by the household sector.

The remaining five per cent is used for other products like liquid detergents, pesticides and paint. Besides, LAB accounts for 45 per cent of costs of synthetic detergents. Top industry sources closely associated with manufacturing of LAB are of the view that the primary reason for the drop in prices is excess supply while the demand remains the same.

 

“Most of the units using LAB overseas are facing a slowdown in demand and are thus either running below capacity or are shutting down. This squeeze in demand overseas is resulting in dumping by global LAB manufacturers in the Indian market. The domestic manufacturers would have to jostle with the extra supply. Moreover the raw material for LAB, kerosene and benzene, are expected to witness a fall in prices,” the sources said.

The domestic industry had earlier appealed for a safeguard duty or anti-dumping duty on the overseas supply which however was rejected by the government.

Industry sources, however, clarified that the excess supply in the domestic market is however not affecting the operating capacity of domestic manufacturers since the industry adopts a dynamic and competitive pricing strategy.

Sources further clarified that prices may not fall further and would be range-bound since in the domestic market, unlike other products where substitutes are easily available especially in polymers, LAB does not have a viable substitute.

Industry insiders are of the view that prices may remain stable for sometime but may soften after a month by Rs 500-1,000 a tonne. LAB price was at Rs 89,200 a tonne in May after witnessing a year-on-year growth of 17 per cent from Rs 76,200 a tonne a tonne in the year-ago period.