Weakening demand drags India’s PP and PE markets down

Having seen a rally from August to around late September, PP and PE markets in India have totally lost their upward momentum in October, as the demand outlook kept looking south amid ample availability. The energy markets, which have been extremely volatile given a widening conflict in the Middle East, have also failed to stimulate any increased buying interest in India, at least for the moment.

Buyers stayed on the sidelines amid talk in the market of significant volumes of both PP and PE having arrived in the Indian ports during September, pointing to adequate availability. Meanwhile, a new 440,000 tons/year PP plant in northwestern India has been operating at full capacity since June-July this year, increasing supplies.

Festival season turns out to be a bit of a letdown

Players point out that demand for polyolefins has not picked up despite the ongoing October-December season of festivals.

“The sentiment has turned out to be too damp for the polyolefins markets. We should’ve seen buyers coming out in hordes around this time to procure material for the festive season, but it’s been quite disappointing,” said a Mumbai-based trader. For some of the larger traders, this has meant inventories piling up, with stagnant demand in the downstream.

Monsoon deficit takes rural demand down

Meanwhile, the Indian Meteorological Department (IMD), the country’s weather office, announced the withdrawal of the Southwest Monsoon from several regions across India in the first week of October. The season ended with rains that were ’below normal’, the first in four years. India saw a rainfall deficit of six percent in monsoon 2023 of the long-period average of 50 years.

Around 31 per cent of India received less than normal rainfall — 221 districts out of a total 718 — in the monsoon season of June to September. The deficit rainfall situation could adversely affect the purchasing power of rural population that contribute about 30% of India’s GDP. Any weak rural demand is a major concern for fast-moving consumer goods and other consumer durables in India, a typical source of strength for the polyolefins markets.

Slowdown in manufacturing activity

Meanwhile, the manufacturing sector growth in India has slowed down, probably not a good omen for the polymer markets, although the IMF raised its 2023-’24 GDP growth forecast for India from 6.1% to 6.3%.

The country’s manufacturing sector activity moderated to a five-month low in September with new orders slowing down, as per the S&P Global India Manufacturing Purchasing Managers’ Index (PMI) that eased to 57.5, from 58.6 in August.

Larger import volumes arrive in September

Market players pointed to a general lack of demand for polymers in India. New plants have come up or are in the process of being commissioned in Northeast Asia as well as in the US, which points to less polymer demand generally. “There are more import shipments arriving in India these days,” said a trader based in New Delhi. “The pressure to sell is too much as inventories pile up while demand is stagnant. Local companies are offering big discounts to woo customers.”

“There doesn’t seem to be a lot of appetite in the market to buy polyolefins currently. For one, we have seen more shipments of both PE and PP arriving last month. And there’s nothing in the market that suggests an improvement in the buying sentiment downstream,” he added.

Import prices trending mostly lower

As buyers stay on the sidelines, prices have mostly shown a decreasing trend despite the increasing upstream costs for producers.

In the PE markets, the import LDPE film grade was reported in a $1000-1030/ton CIF range currently, flat to slightly lower from about a month ago. Traders noted import LLDPE film prices mostly in a $980-1010/ton CIF India range, with trades reported at around $1000/ton CIF. Trading activity was more in HDPE film, compared to LLDPE and LDPE film, with prices of the grade currently noted about $10/ton lower from the previous month at $1030-1060/ton CIF India.

Meanwhile, market indications currently for homopolymer PP raffia are noted in a $980-1020/ton range, flat to slightly lower from a month ago. PP buyers faced a weak market for end-products, which meant a lack of interest in acquiring fresh volumes.