Rising naphtha prices likely to affect margins at HPL

05-Nov-07

Affected by a US$30-40 hike, naphtha prices are currently hovering at US$795 a ton. India's Haldia Petrochemicals imports 70% of its naphtha requirement. Naphtha prices are linked to international prices, and the pricing formula is such that there is no difference between overseas and domestic prices. The steep hike in naphtha prices is beginning to erode the margins of Haldia Petrochemicals (HPL). This will eventually lead to an increase in price of polymers so as to compensate for the rise in naphtha prices. It is still unclear whether falling margins will affect the company financial bottomline at the end of the year. The extent of financial implication will depend on the quantum of price rise, which may or may not be proportionate with the extent of the polymer price rise.