An overview of the current Indian polymer market conducted by the Instaprice team and market experts
The Indian polymer market has witnessed a sudden downfall in the last 10 days and has created chaos in manufacturers' minds, especially the small manufacturers who are more vulnerable to the impact of such changes. Everybody is confused about what will happen next or at what level the market will go. Whether they should take inventory or better to give rest to their machines till the market stabilize? Although, after all this chaos and under pressure, big polymer manufacturers like Reliance and other companies tried to give some confidence to the market by announcing no further declining trend till the 30th; still the final end manufacturers are very much afraid of the next step as they have already incurred huge losses and due to this sudden downfall, all the finish goods buying has been stopped.
Market expert, Mr. Naveen Bohra, (Director, Petrotech Group) has commented on this “Since a couple of months, we were assuming that the polymer market in India was on a hypothetical high level and it would go down but nobody expected that the polymer companies will back-to-back reduce the prices like this.” According to him, the chaos and extraordinary negative sentiments blocked the market sales. When within 3 days, companies reduce the price 2 times, it came as a shock to the manufacturers, and some sort of fear aroused in their minds about the sales of the material they have bought recently.
Market analyst, Dr. Nishant Choradia, who is also the CEO of polymer pricing app INSTAPRICE, which is the main polymer pricing provider to the Indian industry, has commented, “The industry was smelling of some big event, though this happened so late, it was all of a sudden. Since the last couple of months, if compared then the import parity the difference is huge. Indian companies also started to offer very less to international markets and everybody was confused why were the prices not reduced in India. The impact of such a sudden downfall on industries has created a sense of panic about the inventory purchased by them recently and they are not even sure if they can take up production. Although the statement of not further reducing the prices till the month-end brings a little relief to the market and provides them some time to come out of this dilemma; still we feel the difference from the international market is significant and the market requires further correction.”
There has been a downward trend in polymer prices since October-end. The prices of PP, PE, and PVC are witnessing a decline due to a lack of buying appetite in the Indian market.
If we look at the data of the last 3 price changes for PE grades, you can see that on 1st November 2022, the prices were reduced by Rs. 3000/MT. Then again there was a price change on 3rd November 2022 which further reduced the PE grade prices by Rs. 4000/MT. The latest change on 10th November 2022 also caused the price to decrease by Rs. 4000/MT.
There are various questions raised in the market by industry professionals regarding the causes of the sudden downfall in polymer prices. Many fear the onset of the recession in the global market and hence are hesitant to buy. This has created a vacuum where there is an adequate supply of polymeric materials but the demand for it is not picking up or reaching the required pace to match its supply.
There is a slew of factors that led to lower prices in the PP, PE, and PVC markets.
The fear of recession surrounding the global commodity market coupled with rising crude prices has slowed down the activity across world markets.
In both PE and PP cases, there has been the addition of substantial capacity by the major manufacturers due to rising demand and consumption in the market.
Overall global economic uncertainty is one of the major factors that contribute to this downward trajectory
Not to mention, on 10th November 2022, Reliance Industries Limited made a big, shocking announcement amid these circumstances. For its PE and PP grades, it has announced price stability till 30th November 2022 in order to end the current state of confusion created by falling polymer prices in the market.
All these circumstances have put traders into a hard-to-comprehend situation as with high inventories, falling prices, and price stability announcements, they are unsure about the price direction in the month ahead. Various sources state that customers are anticipating lower prices in the coming days and hence procuring a little extra as price level becomes advantageous. Still, the downstream consumer demand has slowed down amidst inflationary concerns and economic pressures. Many are expecting a price drop of this magnitude for a short period of time.
Also, the fact remains that there is a large import cargos arrival expected to berth in November but the landed cost for these cargos will be generally higher than the present domestic prices when the discounting schemes are taken into account, thanks to the sharp price reduction by local producers. So the importers will also remain in a dilemma of whether to book losses by keeping prices lower than domestic producers or carry on the inventories. Most likely they will try to keep a balanced delta and keep moving.
Our analysis suggests keeping a cautious buying as there is still a huge delta in the landed cost for South East Asia and local prices. Though it is hopeful, the customers fulfilling MoUs will get rewarded with ABC schemes at the month-end but it is suggested to keep an eye on the import offers and make a balance between purchases of domestic raw materials vis-a-vis imported materials.