Recently the finance ministry rejected the commerce ministry's proposal to levy anti-dumping duties on purified terephthallic acid (PTA). A key raw material input, the duty would have led to a rise in the input costs of the company.
The prices of PTA and dimethyl terephthallate (DMT) have not increased as expected in the current year and are still ruling in the Rs 28,000 to Rs 29,000 per tonne range.
The anti-dumping duty proposal by the commerce ministry would have encouraged domestic PTA and DMT manufacturers to raise prices by atleast Rs 1,000 per tonne.
The rejection of the proposal has considerably reduced chances of a price rise.
Indo Rama will miss out on the opportunity to cash in on the favourable raw material prices. Demand for synthetic fibre has been growing at the rate of 25 per cent per annum, largely due to the downtrend in prices. Thus, higher volume sales hold the key to increasing profits as margins will be lower due to lesser price realisations. Indo Rama has an installed capacity of 2.38 lakh tonne per annum of polyester staple fibre and filament yarn, and is the second largest player in this segment. The on-going strike has rendered inactive 60,000tpa of its capacity reducing its competitive advantage.
