Growing at its strongest pace in the last few years, polyolefin and polyvinyl chloride (PVC) demand expanded by 11-30% in April-Dec 2009, amid robust demand from packaging and infrastructure sectors with the trend expected to continue in 2010, as per ICIS. The strong growth in the first three quarters of 2009-10 also contradicts earlier expectations of a slowdown.
PVC and polypropylene (PP) recorded the fastest growth during April-December 2009, vs same period in 2008, driven by demand from the packaging and infrastructure sectors. PVC demand was estimated to have risen by 30% to around 1.35 mln tons on strong sales in the pipes segment, the biggest end-use sector for PVC. PVC sales remained brisk for most of 2009 despite a delay in monsoon and drought conditions over parts of India. Local producers sold an estimated 775,000 tonnes while around 560,000 tonnes was imported into the country. Annual growth is projected at 20-24% for 2009-10.
PP demand rose by nearly 29% to 1.6 mln tons during April-December 2009, although growth rates were expected to be moderate to around 20% for the full fiscal year. Film, raffia injection moulding and non-woven sectors did well and PP also benefited from a revival in the auto sector. Despite introduction of provisional anti-dumping duties on PP in February 2009, India imported about 300,000 tons during April-December 2009, up from about 100,000 tons in the same period in 2008. With the commissioning of Reliance Industries Ltd’s new 900,000 tpa plant at Jamnagar, Indian exports also increased, rising from 200,000 tons to nearly 500,000 tons.
In polyethylene (PE), low-density polyethylene (LDPE) showed the strongest growth with demand rising by about 25% to 260,000 tons aided by easy availability and a favourable price differential with linear-low density polyethylene (LLDPE). LLDPE demand was up 16% at 690,000 tons while high-density polyethylene (HDPE) demand expanded by 13% to 980,000 tons.
Growth has come in from the packaging sector, pipes for water distribution and conduit pipes for telecommunication cables as also the promising sector of drip irrigation. Polyolefin producers had benefited from a strike called by jute workers late last year, that had curtailed jute production and forced the government to place orders for raffia bags for packaging of food grains. This resulted in additional PP demand of 25,000 tons, expected to rise further if the strike continued.
Market players are confident about long-term growth prospects but cautious in their assessments for the January-March 2010 quarter as buying had slowed down in recent weeks. Processors are apprehensive of a downward revision in polymer prices and a possible change in excise duties on finished plastic products in the Indian budget due to be announced on 26 February. Producers also stressed that the high growth numbers see in 2009 were party because of negligible growth recorded in the previous year due to the financial crisis. This year’s high growth is partly attributed to inventory correction.