End-users of polymer products, especially the packaging industry, pay more for their raw material from April 1 this year, but the pace of their price spikes may slow until June.
Reliance Industries Limited (RIL) raised prices for high density polyethylene (HDPE) by â¹ 3,000 per tonne, prices for linear low density polyethylene (LLDPE) by â¹ 2,000 per tonne and those for low density polyethylene (LDPE) by â¹ 7,000 from April 1. In addition, the Mumbai-based company increased the extrusion coating grade (CE) LDPE by â¹ 9,000 per tonne.
Petro Additions Ltd (OPAL) of the Public Sector Oil and Gas Corporation (OPAL) increased the prices of HDPE grades by â¹ 4,000 per tonne and of LLDPE by â¹ 2,000 compared to the same period.
This increase constitutes an additional burden since user industries are already paying record prices for polymers.
Polymer is a key component for the packaging industry as it is used in fast moving consumer goods and cement. It is also used to produce PVC pipes for irrigation and, therefore, is essential for the agricultural sector. It is also used by the e-commerce industry for packaging.
The plastics manufacturing industry, which is a large consumer of polymers, protested the price increases, saying it threatened “the survival of the processing industry.”
âPolymer prices are high because imports are always a problem. Imports of polymers have been affected due to various issues, including shipping issues, âan industry source said on condition of anonymity.
âPolymer prices have increased 40 to 100% depending on grades over the past nine months,â said Jayesh Rambhia, managing director of Mumbai-based Premsons Plastics Ltd and former chairman of the Indian Plastic Manufacturers Association. (IPMA).
The periodicity of the hike slows down
The industry source said the periodicity of the price increase had declined since the New Year to once or twice a month, down from nearly three times earlier.
According to data from an RIL dealer, polymer prices were increased twice in one month, the previous one on March 18. However, the Mumbai-based oil major had cut prices twice this year, first in January and then in February.
Besides RIL and OPAL, other domestic producers of polymers are the Indian Oil Corporation, Mangalore Refineries and Petrochemicals Ltd, Haldia Petrochemicals and Gas Authority of India Ltd (GAIL).
The industry source said that despite record prices, demand for the polymer has remained intact. âDemand declined this month, but was good in March as manufacturers had to meet targets or fill orders,â he said.
âImports of polymers have also been affected as some units in places like Texas in the United States have closed due to snowstorms. The second Covid wave, however, did not affect the production of polymers abroad, âhe said.
Polymer prices could be held at current levels or see small increases until June. âThe margin for other hikes is limited. After June, prices are likely to drop, âthe source said.
“ SMEs hit hard ”
Rambhia of IPMA said the huge price escalation is affecting small and medium-sized businesses. âThe huge price hike has resulted in an increase in our working capital costs,â he said.
Polymer industry sources agree that working capital costs for the user industry could increase by 40 percent.
One of the main issues that users face is that rising prices prevent them from fulfilling contracts and orders. “We cannot increase our prices given the rise in commodity prices, especially in the case of Union and state governments,” Rambhia said.
‘Need government assistance’
Polymer users are irritated that public sector companies are joining with private companies to raise prices. âWe asked for government intervention. The polymer is exported to China at a cheaper rate than what is offered in the domestic market, âsaid the former head of IPMA.
âAs a result, we export raw materials and import finished plastic items. We will have to imitate China by promoting the production of plastic products first. We have to become Atma Nirbhar (self-sufficient), âsaid Rambhia.
Once the plastics manufacturing industry becomes self-sufficient, so will the polymer industry in 10 to 12 years. âThe plastics manufacturing industry has a short gestation period. So that wouldn’t be a problem, âsaid the former head of IPMA.
Regulatory body request
The industry source said prices for polymer products fell sharply in April-May of last year, when the Covid lockdown was in effect and industrial units closed.
âAfter that, there was a huge increase in demand. Despite the price increase, we have had buyers, âthe source said.
Upset by the sharp rise in prices, IPMA urged the Center to set up a petrochemical regulatory authority to oversee the polymer market.
IPMA is concerned that soaring prices for polymer products could lead to the importation of plastic intermediates and finished products from China and other countries. This in turn could be a setback for the Union government’s âAtmanirbhar Bharat Abhiyanâ program to make India self-sufficient in the manufacture of various products.
Sources in the polymer industry claim that there is little room for EU government intervention, as polymer manufacturers suffered when global producers dumped their products in India.
Prices for polymer products plummeted and the government offered no help at that time, the sources say.
A 2013 Federation of Indian Chambers of Commerce and Industry study declared the plastics industry to be one of the fastest growing sectors, registering a compound annual growth of 8% in 2018-2013.
However, the country faces an overall plastic supply deficit compared to domestic production and the shortage is filled by imports.