Indian players: Demand sluggish amid slower economic growth

India’s economy grew by 5.3% in Q1, lagging well behind expectations of growth at 6.5% and the growth rate of 6.1% seen in Q4 2011. Rising inflation, reduced investment and the depreciation of the rupee were cited as the main factors weighing down on economic growth. Many Indian players in the polymer markets also concur that they are seeing the result of this slower economic growth as demand in the local market is considered to be quite limited.

In line with the global trend, polymer prices have been moving southwards in India since the beginning of May. Apart from the global downturn, persistent lack of demand is putting extra pressure on sellers while expectations about seeing additional price decreases are also keeping buyers away from the market. The continuous depreciation of the local currency is also undermining buying appetite for imports, which are being offered at lower levels on a weekly basis.

A distributor commented, “Demand for import PVC has considerably diminished as it is not favorable for buyers to buy in dollars while the rupee keeps depreciating. Our monthly sales volume has reduced from 1000 tons to a few hundred tons since early this year. I don’t think the activity will revive until mid July due to the downward trend in place, which has been bolstered by falling crude oil prices.” He also noted, “The monsoon season is expected to arrive by June 10 and last throughout July. For this reason, it will be harder to make sales as buyers will not want their cargoes to arrive by that time.”

For PVC prices in India, please see PVC Price List (For members only)

Regarding the slower economic growth, another distributor says the crisis in the EU has rendered the dollar stronger and caused the other currencies to weaken against the dollar. “The rupee has been depreciating because of this economic turmoil in Europe. I don’t think this will be over until Greece decides whether to stay in the EU or help itself by June 18,” he remarked.

A PVC calenderer, who has received lower offers this week, said, “We are not so sure about replenishing stocks this week either as the outlook remains uncertain amid falling crude oil prices. We think Indian markets are likely to remain sluggish until Greece exits the EU as our economy is pretty much affected by the worsening debt crisis in Europe.” He added, “Making business is tough in India these days due to the depreciating rupee. The government may cut excise duties in an attempt to combat slower economic growth.”

A packaging manufacturer said, “We are not considering stock replenishment at the moment. Our poor business is enabling us to wait until next month to see how low PE prices can fall.” Another packaging manufacturer commented, “No buying interest is seen as buyers are focusing only on destocking their end products. There is also a widespread expectation that there is room for further decreases in the PP and PE markets.”

Source : ChemOrbis