Polymer prices are expected to continue their southward trend for some time, following a decline in crude oil and naphtha prices, along with lacklustre demand in the domestic market.
According to company officials, prices of both polyethylene and polypropylene have already been slashed by Rs 2-3 per kg across variants — for the first time since the start of the calendar year. Sources said most of the plastic processors and converters (those who convert polymer into plastic nodules or sheets for further downstream applications) have stopped buying for inventory. “They usually store for at least 10-15 days,” revealed an official. “But now the buying is based on order or need...if any end user or retailer places bulk order.”
The sources said the buyers were anticipating global prices to further come down, tracking the decline in crude or naphtha prices. “Thus, they would like to wait to weigh the prices of imports, and then buy from the domestic market,” a source added.
At present, the difference in dollar terms work out to $50-100 per million tonnes (mt), as imported polyethylene is available at $1,300-1,350 per mt. This, when the price in the domestic market is ruling $1,400-1,450 per mt. However, the depreciating rupee, they note, has now been acting as a major deterrent for the importers. While imports were booked heavily in March and April. Imports this month have become expensive taking into account the depreciating rupee.
The demand is weak and so there is no hurry to buy, according to sources.
In order to cope with the imports, falling demand and declining prices of naphtha and crude, polymer manufacturers are planning to reintroduce price protection schemes. This scheme is aimed at making potential buyers purchase the product and, at the same time, offer them a sense of security towards further downward price revision during the period. Under the scheme, once a customer has bought a product, he will be compensated for any loss if the company decides to further bring down prices within that week or month.
Currently, global naphtha prices are at $860-870 per mt, as against a high of $970-990 in the beginning of the calendar year. Basic domestic prices of polyethylene and polypropylene are around Rs 85-86 per kg and Rs 91-92 per kg.
Polymer prices have now started declining after repeated increases in almost every month since January. The increase was so stiff in April that processors shifted from buying fresh polymer to processed polymer, which cost less, according to market sources.
