NEWS DESK

India’s paste polyvinyl chloride (PVC) consumption rose by 19 percent in the first half of the current financial year (April-September 2024), driven by a substantial increase in demand for manufacturing and processing applications. The surge in demand for paste PVC also reflects overall economic growth, as India continues to maintain its position as the world’s fastest-growing economy.

Speaking to analysts after announcing the July-September 2024 quarterly financial results, Ramkumar Shankar, Managing Director of Chemplast Sanmar Ltd (CSL), said: “The apparent consumption of paste PVC in India increased by 19 percent to 92,000 tonnes during April-September 2024, compared to 77,000 tonnes in the corresponding period of the previous year. The volume of paste PVC registered a 6 percent year-on-year growth. It is pertinent to note that when comparing H1 performance on a year-on-year basis, the company has performed much better than in the previous year.”

In June, the Government of India imposed a provisional anti-dumping duty (ADD) on imports of paste PVC from five to six countries. The impact of this ADD was immediately evident, with imports from these countries declining substantially. Imports from China and other nations affected by the ADD dropped significantly after June. However, end users did not face any material shortages, as increased imports from alternative sources adequately met demand.

Rising imports from European Union
Unfortunately, the European Union moved into that gap, and exported paste PVC to India at very low prices. As a country, imports at cheaper rates is okay because the market will need the material. However, that material needs to be imported at fair prices. Unfortunately, the prices at which the European Union has been exporting Paste PVC into India post June 2024 has been at very low levels. This has negated the impact of the antidumping duties that were imposed on the other countries.

“We have taken up this matter with authorities, and we are hopeful that we would get a good hearing on that. This is not likely to repeat in Suspension PVC. While there could be an increase from the countries that are not covered, the European Union is not as significant a player in Suspension PVC as it is in paste PVC. Their export to India over the last few years has been less than 1 percent so far of the total arrivals. And even if that increases to some extent, we do not believe that, that would be significant,” Shankar said.

CSL is the largest producer of speciality paste PVC resin with its cumulative production capacity standing at 41,000 tonnes per annum at Cuddalore. The company has been manufacturing paste PVC at the Mettur facility since 1968. It added 41,000 tonnes per annum one-step process capacity at Cuddalore in January-March 2024 quarter. Primary raw materials for manufacturing paste PVC include ethylene dichloride (EDC), ethylene, chlorine and vinyl chloride monomer (VCM). Chemplast Sanmar has in-house capacity to manufacture a significant portion of EDC and all of VCM requirements for the backward integrated capacity of 66,000 tonnes per annum. This provides flexibility in operations and reduces dependence on external suppliers.

H2 demand to remain soft
While this rate of growth may temper down a bit in the second half (October 2024 – March 2025), the market is expected to show good growth in the financial year 2024-25 over the previous year. The provisional anti-dumping duty on paste PVC, which was announced in June 2024 provided some initial respite and ensured zero imports from China and lower imports from Thailand and Taiwan.

However, the expected impact on prices from the provisional anti-dumping duty was negated due to a surge in dumping from the European Union. The inputs from the European Union had doubled during the April-September 2024 period as compared to the same period last year. This is being taken up with the concerned authorities.

Previous price trend
Prices of both Suspension PVC and Paste PVC were lower by 19 percent and 12 percent respectively in the financial year 2023-24 as compared to the previous year. Some signs of revival were however witnessed on a quarter-on-quarter (qoq) basis with a marginal increase in prices. Chloromethanes and Caustic Soda prices in the financial year 2023-24 have been the lowest over the last three years.

Feedstock (VCM and EDC) prices have tracked PVC prices directionally in the financial year 2023-24. Custom Manufactured Chemicals (CMC) business was adversely impacted during the year by the overall slowdown in the global agrochemicals industry. The impact was partly offset by the commencement of supplies of new products under the first two Letters of Intent (LoIs) signed in the last 12-15 months. As a result, CMC division’s revenues were lower by approximately 13 percent compared to the last fiscal. The positive impact of the new products will be seen in the upcoming quarters, the company believes. CMC division also signed the 4th LoI with an agrochemical innovator for an advanced intermediate for a new Active Ingredient (AI).

Trend across suspension PVC
Suspension PVC demand in the country showed an impressive growth of around 11 percent in the first half of the current financial year, compared to the same period last year, with apparent consumption of around 2.2 million tonnes. This increase in demand arises out of India's thrust on irrigation, infrastructure and drinking water supply.

However, the demand growth will sustain in the rest of the year, and the demand for the financial year 2024-25 will show a healthy increase over the previous year. Internationally, with most economies continuing to underperform, there is a slowdown in demand elsewhere. This has resulted in large scale dumping of suspension PVC into India. Specifically, China continues to supply PVC at very low prices due to continued weakness in their property sector. While some recent stimulus measures have been announced in China to revise the demand in the property sector, these are yet to see any significant impact on the PVC demand.

In the US, weak domestic demand driven by high interest rates and excess capacity have created surpluses which are targeted at the Indian market, further putting pressure on PVC prices in India. After a strong April-June 2024 quarter, prices dropped significantly in the July-September 2024 quarter as the increase in ocean freight rates corrected much sooner than expected. This, coupled with renewed dumping of Suspension PVC into India, led to sustained pressure on margins.

The feedstock VCM price is tracking the downward movement of PVC and trending down. However, the lag effect as well as the inventory of both finished goods and feedstock leads to a significant impact on profitability in this current falling market price scenario. In a very positive development earlier this week, provisional anti-dumping duties have been determined on imports of Suspension PVC from China, the United States, Indonesia, Thailand, Taiwan, Korea and Japan. This is expected to come into effect shortly and effectively address the serious issue of dumping of Suspension PVC into India.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com