Polymer prices raised again; scope limited for more hike

Subramani Ra Mancombu Chennai | Updated on April 09, 2021

Polymer is a key element for the packaging industry since it is used in fast moving consumer goods and cement   -  Getty Images/iStockphoto

Record high rates draw plastic manufacturers ire

End users of polymer products, especially the packaging industry, are paying more for their raw material from April 1 this year, but the pace of the spike in their prices could slow down till June.

Reliance Industries Limited (RIL) raised High-density polyethylene (HDPE) prices by ₹3,000 a tonne, linear low-density polyethylene (LLDPE) rates by ₹2,000 a tonne and those of low-density polyethylene (LDPE) by ₹7,000 from April 1. In addition, the Mumbai-based firm raised the extrusion coating (EC) grade LDPE by ₹9,000 a tonne.

Public sector Oil and Natural Gas Corporation’s Petro Additions Ltd (OPAL) has raised the prices of HDPE grades by ₹4,000 a tonne and LLDPE by ₹2,000 from the same period.

Additional burden

The hike comes as an additional burden since the user industries have already been paying record high prices for polymers.

Polymer is a key element for the packaging industry since it is used in fast moving consumer goods and cement. It is also used to produce PVC pipes for irrigation and, thus, is key for the agriculture sector. The e-commerce industry also uses it for packing.

The plastic manufacturing industry, a major consumer of polymers, has been protesting against the increase in prices, saying it threatens “the survival of the processing industry”.

“Polymer prices are high since imports are still a problem. Imports of polymers have been affected due to various problems, including shipping woes,” said an industry source on condition of anonymity.

“Polymer prices have gone up by 40 per cent to 100 per cent depending on the grades in the last nine months,” said Jayesh Rambhia, Managing Director of Mumbai-based Premsons Plastics Ltd and former president of Indian Plastic Manufacturers Association (IPMA).

Hike periodicity slows

The industry source said the periodicity of the price increase has come down since the New Year to once or twice a month from nearly thrice earlier.

According to data from a RIL dealer, polymer prices have been raised twice within a month, the previous one on March 18. However, the Mumbai-based petroleum major had cut prices twice this year, first in January and then in February.

Besides RIL and OPAL, other domestic polymer producers are Indian Oil Corporation, Mangalore Refineries and Petrochemicals Ltd, Haldia Petrochemicals and Gas Authority of India Ltd (GAIL).

The industry source said despite prices ruling at record high, demand for polymer remained intact. “Demand has tapered this month but it was good in March since manufacturers had to meet target or fulfil orders,” he said.

“Imports of polymers were also affected since some units in places such as Texas in the US closed owing to snow storms. The second Covid wave has, however, not affected polymer production abroad,” he said.

Polymer prices could be maintained at current level or witness small hikes until June. “The headroom for further hikes is limited. After June, prices will probably decline,” the source said.

‘SMEs badly hit’

IPMA’s Rambhia said that the huge escalation in prices is affecting the small and medium enterprises. “The huge rise in prices has resulted in our working capital costs increasing,” he said.

Polymer industry sources agree that working capital costs for the user industry could increase by 40 per cent.

One of the major problems users face is that the rise in prices is making it tough for them to fulfil contracts and orders. “We cannot increase our prices in view of the hike in raw material prices, particularly in the case of Union and State governments,” Rambhia said.

‘Need Govt help’

Polymer users are irked over public sector companies joining private firms in raising the prices. “We have sought the Government’s intervention. Polymer is exported to China at a rate cheaper than what is offered in the domestic market,” the former IPMA chief said.

“As a result, we export raw material and import finished plastic items. We will have to emulate China in first promoting production of plastic products. We need to become Atma Nirbhar (self-sufficient),” Rambhia said.

Once the plastic manufacturing sector becomes self-sufficient, then the polymer sector would also become one in 10-12 years. “The plastic manufacturing industry is of short gestation period. So, it would not be a problem,” the former IPMA official said.

Demand for regulatory body

The industry source said that prices of polymer products dropped sharply during April-May last year when the Covid lockdown was in full force and industrial units shut down.

“After that, there has been a huge increase in demand. Despite the increase in prices, we had buyers,” the source said.

Upset over the sharp hike in prices, IPMA has urged the Centre to set up a Petrochemical Regulatory Authority to supervise the polymer market.

IPMA fears that the surge in prices of polymer products would lead to import of plastics intermediaries and finished goods from China and other countries. This, in turn, could be a setback to the Union Government’s “Atmanirbhar Bharat Abhiyan” programme to make India self-sufficient in the manufacture of various products.

Little scope

Polymer industry sources say there is little scope for the Union Government intervention as the polymer manufacturers suffered when global producers dumped their products in India.

Prices of polymer products crashed and the government did not offer any help then, the sources argue.

A Federation of Indian Chambers of Commerce and Industry study in 2013 said the plastics industry was one of the fastest growing sectors, registering an eight per cent compounded annual growth during 2018-2013.

However, the country faces an overall deficit of plastics supply compared with domestic production and the shortage is made good through imports.

Published on April 09, 2021

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