Industry sources said the falling crude price has led to a drastic decline in naphtha prices around the globe. While crude prices have come down to $86-88 a barrel, naphtha prices are hovering around $860-870 a tonne. This is as against a high of $110-115 a barrel for crude, which had propelled naphtha to touch a peak of $1,000 a tonne few weeks before.
Consequently, Indian polymer manufacturers – Indian Oil Company (IOC), GAIL and Reliance Industries have slashed low density polyethylene (LLDPE) prices by Rs 1.50-2 a kg across variants. “This price decrease is only for low density polyethylene and not for either polypropylene or high density polyethylene (HDPE)”, said official sources. Haldia Petrochemicals which has once again resumed its operation after a month long maintenance shut down will follow soon, said sources.
LLDPE is one of the most popular variants of polyethylene, produced under low temperatures and used for plastic bags and sheets, plastic wraps, stretch wraps, pouches, toys, covers, lids, pipes, buckets, containers and the covering of cables.
Polypropylene is used in a variety of day-to-day products, from high-tenacity cement and fertiliser bags to tough fibres such as films and containers. HDPE is a high-tenacity polymer, used primarily in preparation of bottles, chairs, mugs, wood plastic composites, telecom ducts.
Besides, in India, there is anti-dumping duty for import of polypropylene which discourages imports.
On the other hand, sources added, the decision for downward price revision in LLDPE was taken to match imports when it is not even a month, which usually is the revision time for prices of polymers. While high crude prices earlier had literally stopped imports of polymers months back, it has once again started due to low prices of polymers globally. Globally, polymer prices have come down in both, the US and China by $60-70 a tonne and hence domestic manufacturers have to decided to match imports which otherwise is called maintaining parity.
Besides domestic demand is also slowing, since buyers of polymers are deferring purchase decisions anticipating further fall in crude prices which may trigger even lower polymer prices going forward, market sources said.
For the first time since May, polymer prices have seen an upswing following a rise in demand, wherein polymer manufacturers raised prices of polyethylene and polypropylene both by Rs 2 a kg. during end July. Besides upcoming demand, the closure of polymer production plant at Haldia Petrochemicals had created a artificial shortage in supply as well.
The demand for polymers was slack since May and inventory was unsold, following a global slowdown and a lean phase in the domestic market. The price protection scheme had helped buyers make a purchase decision and offered a sense of security towards a further price revision downward.