ETP base stymies India's growth

The plastics processing industry in India has grown at double-digit rates for much of the last 10 years, and some estimates say plastics demand there will trail only China and the U.S. by 2010. But without a solid base of domestic engineering thermoplastics compounders, Indian processors keen to use these materials will have to continue paying an import tariff of up to 20%, or stick to processing commodity polymers.

Bluntly stated, there are few independent engineering thermoplastics (ETP) compounders in India producing good quality compounds. Minosha blames the lack of suitable compounds on poor equipment, with many compounders unwilling to invest in twin-screw extruders. Competition is based solely on price, he argues, not added value; charges for compounding averages less then E .25/kg. Minosha's firm uses top-of-the-line twin-screw compound extruders from German and Japanese manufacturers, and often fields requests to supply not just masterbatches but also complete engineering thermoplastics compounds. But, he adds, processors want quality on the cheap and expect the company to match the prices of the smaller ompounders. For this reason, even firms such as his, with the necessary infrastructure, are reluctant to enter the ompounding market.

Someone has to, though, as India's processors are being pushed to move beyond simply processing plastics packaging for the domestic market toward parts production for the country's fast growing automotive industry. " I think the automotive industry will drive the Indian plastics industry forward," says Lalit Shah, Managing Director at Plastemart (Mumbai), an Internet-based platform for plastics information, consulting services, back office operations and sales.

Shah knows the market; he started and ran a cable extrusion plant selling into the automotive market, but sold that to found Plastemart. He sees a tremendous push in the country to increase the use of plastics in cars; currently it is about half the nearly 130 kg/vehicle of cars made elsewhere. And even as the amount of plastic per car is on the rise, so is total vehicle production, with 1 million cars/yr expected to leave Indian carmakers' plants by 2006.

Shah says the government recognizes the problem and is forming a council to promote the development
of downstream sectors in India. But ETP supply is also short; the country's leading suppliers, notably
Reliance Industries and IPCL, supply only commodity materials.

Still, Shah says the situation is not so dire. According to Plastemart , the compounding market is expected
to grow about 10% to 12% annually in the next five years. Participating domestically are some 200 compounders, though most are quite small; only a dozen or so produce more then 10,000 tonnes/yr .
Despite their optimism, Plastemart officials agree that there is a need for more joint ventures or cooperation
between domestic compounders and foreign-based ETP suppliers to ensure market growth.

Others note that without ETP suppliers setting up shop there, the ETP compounding market will never flourish.
" There will be a rising demand in India, but until the ETP suppliers are there, there won't be the compounding
market," notes Andrew Hopkins, GM of Owens Corning's automotive solutions business. OC runs a
manufacturing joint venture with Tata Motors, processing exterior parts of sheet molding compounds for the
OEM. Hopkin's point is well taken; the five leading suppliers of polyamide and polycarbonate are all in China, or soon will be, but none as yet make these materials in India.

(An interview of Lalit Shah ( MD, www.plastemart.com) with Mathew Defosse as featured in Modern Plastics International, December 2004 issue)