Rapid increases in polymer prices by petrochemical companies has forced plastic processors to resort to reprocessed plastic (RP) as a raw material, rather than fresh polymer. According to market sources, price of polymer have been rising almost every month since January.
Last week, manufacturers increased prices of polyethylene by Rs 2 a kg and polypropylene by Rs 3 a kg. Market dealers said while polymers were costing Rs 100-150 a kg, reprocessed material is available at Rs 40-50 a kg.
Official sources working with polymer manufacturers said even if the companies are not able to pass on the complete price rise to end-users, they are forced to raise prices to sustain the rising raw material prices. Globally, naphtha prices were at a high of $1,080 a tonne a week before and have now softened to $1,040-1,050 a tonne.
RP is generated by conversion of plastic items into granules. Market sources said rising polymer prices and an increase in excise duty are a double blow to the market.
The excise duty was raised in Budget 2012-13 from 10.3 per cent to 12.36 per cent. Prices of imported polymer have gone up by $50-60 a tonne.
Linear low-density polyethylene or LLDPE is one of the most popular variants of polyethylene, produced under low temperatures and used for making plastic bags and sheets, plastic wraps, stretch wraps, pouches, toys 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 and telecom ducts.
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PVC is used for construction and pipes. Previously when the prices were raised, polymer companies witnessed advanced sale orders for the commodity by users who bought more, anticipating further price rises and high international polymer prices. Now, they are using RP, as some of the processors can neither afford to buy fresh raw material nor run below 60-70 per cent of total capacity.
“High polymer prices have already resulted in many of the plastic processors run at 60-70 per cent of installed capacity. Even if they are buying raw polymer at higher prices, they cannot pass on the entire price hike to the customers,” said a market source.