Page 58 - Plastics News December 2016
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polymer converters and the traders who supply them, as he added. As per Platts, polyvinyl chloride demand has
per industry in Platts. been impacted by the cash crunch, especially in the
agricultural sector, which represents 74% of India's total
Prime Minister Narendra Modi announced on November 8 demand, sources said. "The agricultural sector [trades]
that notes of Rs 500 and 1,000 would not be recognized mostly on a cash basis, as it is exempt from tax. Buyers
of agricultural pipes -- farmers -- are in a fix now, [as]
as legal currency banks are allowing only Rs 10,000-24,000 to be drawn per
from midnight, week. This is barely enough for basic necessities, let alone
and would be need business needs," a trader said.
to exchanged
for new notes India-origin high density PE-film and LLDPE were heard
distributed by offered at US$1080-1100/mt to China Wednesday, while
banks. PP raffia was heard traded at US$1010/mt Monday, US$10-
$20/mt below market prices at the time, sources said.
"85% of notes in "We are exporting more PE volumes this week, partially
circulation were because of demonetization," said a major Indian producer,
affected by the estimating exports to be about double normal volumes.
rupee [note]
change, causing a "In the long term, the real economy will thrive as
severe cash crunch in the general economy," a Mumbai- transactions move away from the shadow economy; I feel
based polymer trader said. "The finished goods market very bullish about India's future," he added.
has come to a standstill as consumers focus on absolute
necessities," he added. The CFR Far East Asia HDPE film marker was assessed flat
week on week at US$1140/mt Wednesday, and LLDPE at
The slump in retail demand has hit India's polymer end- US$1160/mt, down US$10/mt. PP raffia was assessed at
users, along with the packaging, trucking and logistics US$1020/mt CFR Far East Asia, down US$10/mt week on
sectors and inevitably polymer producers directly, said week, according to S&P Global Platts data.
a senior manager at Vinmar International, a global
petrochemical marketing and distribution company. India's net PE deficit in calendar 2016 is estimated at
Small and medium-sized Indian domestic converters are 291,000 mt for HDPE, 357,000 mt for LDPE and 908,000
currently operating hand-to-mouth, with some factories mt for LLDPE, according to S&P Global Platts Analytics,
closing a few days a week to cut operating costs, and with overall demand growing at 11% year on year to more
credit is in short supply across the polymer supply chain, than 4.8 million in the year. Its net PP surplus is estimated
a trader said, adding the cash crunch may take until mid- at 180,000 mt in 2016 and demand estimated at 4 million
January to resolve. mt, up 10% year on year.
Demonetization has also directly impacted converter Experts also say that the growth in cash-intensive sectors
productivity. "As a [converter], I can't operate my plant such as real estate, construction and FMCG is likely to
at [full rates] due to manpower issues," a polypropylene take a hit in the short term as consumers are deferring
and linear low density polyethylene end-user said, adding purchases.
his workers had been standing in long queues to complete
banking transactions since the announcement. However, there is a positive side to the story: over the
medium term, there would be benefits through higher
Larger corporate polymer customers, who rely less on government spending and greater financial inclusion.
cash transactions, are less impacted. "[PP] raffia and bi- Also, the movement of household savings from physical to
axially oriented PP sales to the cement industry or the financial will help boost growth, according to Yes BankBSE
FMGC [fast-moving consumer goods] sector are not [as -0.04 % report. The near-term fall in growth on account
affected]," a major producer said Thursday. "However, of spending
textiles, where there is lots of cash sales, is impacted,"
• December 2016 • Plastics News 58
