26/04/09
Ceasefire offers little relief to Indian plastic makers
Ceasefire offers little relief to Indian plastic makers
Mumbai, 9 April (Argus) — The fragile ceasefire between the US and Iran is
unlikely to offer an immediate respite to Indian plastic converters who are
grappling with rising feedstock prices that are eroding their production
margins. Since the Iran war began, prices have increased by nearly 50pc, with no
indication that they will decrease anytime soon. Indian PP raffia prices were
last assessed at $1,300-1,400/t cfr India on 2 April, up by $445/t or 49pc
compared with $890-920/t on February 27 before the war started. Indian
low-density polyethylene prices were assessed at $1,600-1,700/t cfr India on 2
April, up by $580/t or 54pc compared with $1,060-1,080/t on February 27. Lower
polymer imports from the Middle East and rising domestic prices are putting
pressure on plastic converters which manufacture packaging materials among other
products. And their customers, such as fast-moving consumer goods (FMCG) firms,
are reluctant to accept the hike in packaging material costs, leaving them in a
challenging situation. "A large percentage of plastic converters in India are
micro, small and medium enterprises, who have been hit the worst," Amit Kumar
Agarwal, the President of Indian Plastics Federation (IPF), told Argus . Even
for orders that were booked before the war, suppliers are demanding surcharges
amounting to hundreds of dollars per metric ton due to shipping constraints,
which are adding more pressure on converters. Middle East imports hit The Middle
East conflict has put at least of half of India's total polymer imports in
jeopardy, as the Gulf Co-operation Council (GCC) countries supply most of the
imports. For 2025, the Middle East supplied around 62pc of India's polyethylene
(PE) imports, or 1.41 mn t. The region also supplied 51pc of India's
polypropylene (PP) imports, or 930,000 t. The de facto closure of the strait of
Hormuz has led suppliers to use Oman's East Coast ports such as Salalah and
Sohar to send limited material. But overall exports from the region remain
significantly reduced since the war. The market is also sceptical about whether
the ceasefire will hold and for how long. Less than 24 hours after the
announcement on Tuesday, the two sides are offering conflicting accounts of key
terms of the ceasefire and of a potential peace agreement. Attacks on energy
infrastructure in Iran and in neighbouring Mideast Gulf states continued in the
hours after the ceasefire was announced. Even if the conflict ends, there's no
certainty on product availability as several petrochemicals production units
have been hit in missile and drone attacks, Dubai-based traders said.
Petrochemical producers in the Middle East, including UAE's Borouge and Kuwait's
Petrochemical Industries Company, faced drone and missile attacks on Sunday.
Iranian attacks also caused fires in Saudi Arabia's Jubail — a key hub for
petrochemicals. Supply crunch goes on In India, domestic producers have had to
cut production further tightening supply. State-controlled Indian Oil, Mangalore
Refinery and Petrochemicals (MRPL), HPCL-Mittal Energy, and Reliance Industries
(RIL) have all cut PP output , after the Indian government asked refiners to
divert propane, butene and propylene toward cooking gas production, limiting
feedstock availability for petrochemicals. "We have only passed down the higher
feedstock costs partially," an official with a state-owned producer said.
Several producers expect prices to stay elevated in the near-term unless the
feedstock prices come down. State-owned Opal and Gail also cut production,
squeezing PE supplies. To alleviate the pain of high feedstock prices, the
Indian government slashed import duties on petrochemicals products to zero until
the end of June. But this has had little effect on offers from China, which has
stepped in to fill the void left by Middle East producers, several traders said.
Following the ceasefire announcement on 9 April, some China-based traders cut
their offers. But others continue to offer at high levels citing market
uncertainty and high Indian domestic prices. The IPF has written to the
government to extend the import tax waiver for six months as the war could go on
for a long time, Agarwal told Argus . The outcome of that petition is awaited.
Sooner or later consumer product makers will need to pass the higher costs to
the end-users. The Indian consumers will likely feel the impact of rising
packaging material costs from this month with producers either hiking prices or
cutting volumes, Dhairyashil Patil, president of the All India Consumer Products
Distributors Federation, told Argus . By Sourasis Bose Send comments and request
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