Product Price Outlook
Prices of key
polymers like HDPE and PVC have fallen from Rs44 per kg and Rs37
per kg in April 1997 to Rs34 per kg and Rs26 per kg in March1999,
which was in line with the global fall in its prices.
Prices of polymers
have been on a downward trend. Prices have been falling due to lack
of demand in Asian countries. The sub-continent saw a downward
trend in demand mainly because of the recession prevailing in these
regions.
In Q3 FY99, prices
of polymers recovered technically on reports of shut down of some
crackers in SE Asia. However, the recovery could not sustain and
prices weakened again. The price rise in that period was mainly
because of increased demand from China. Later on with the fall in
demand from China, prices again tumbled down.
Not withstanding
slowdown in new capacity creation, recovery of prices critically
hinges upon demand recovery. SE Asian countries have been large
consumers of petrochemical products as well. As no major demand
recovery in the Asian region is in sight, we feel polymer and
petrochemical prices will remain soft in the next 6 to 12
months.
India is a price
taker in petrochemicals. Sector fortunes are linked to price
outlook, which is bearish for the next 6 months. Given this,
margins of all petrochemical companies will witness a
squeeze.
