Plastic manufacturers facing slowdown blues

KOCHI: The decline in demand for consumer goods, an offshoot of the slowdown in economy, has affected related industries. The plastic manufacturing industry is no exception. Food processing and textile industries need packaging material and carrybags made of plastic in large quantities. The cut in production of processed food and the decrease in sale of textile products have affected the prospects of the plastic manufacturing industry.

M.T. Thomas, president of the Kerala Plastic Manufacturers’ Association, told The Hindu that there was a drastic fall in the order placed by several food processing companies for plastic packaging material. The producers of curry powder had reduced orders by 30 to 40 per cent. There was a similar fall in the demand for bags used by textile shops, he said.

Low density polyethylene, high density polyethylene, linear low density polyethylene, polypropylene and PVC resin are among the main raw materials used by the industry. The industry is in a fix over their fluctuating prices. The market price during October-November last year hovered around Rs.110. Though the prices have come down courtesy the slowdown, the manufacturers are wary of placing orders for the main raw materials.

While there are a few domestic suppliers belonging to the public sector, a private sector supplier dominates the scene. When the manufacturers start importing the raw material, the domestic producer cuts prices drastically, creating an imbalance in the market. For instance, the prices were reduced to less than half the imported price by the prominent private player last year. This forced the other players too to reduce the prices. But the trend was short-lived, as the prices were increased by the main private supplier within a week. The phenomenon is repeated often, leading to confusion, the manufacturers said. “Every time we import, there is a fear that the prices will come down in the domestic market,” Mr. Thomas said.

The current price of the raw material in the international market is around Rs.60 per kg, while the local price is around Rs.70. But the manufacturers are cautious. They have not placed orders for import because production is at a low. The demand has decreased and most manufacturers have shelved the launch of new products, Mr. Thomas said.

There are nearly 1,000 units in the State manufacturing plastic materials, with around 400 in the organised sector. The sector will continue to be under strain if the demand fails to go up, Mr. Thomas said.

T.H. Badarudeen, owner of a small-scale plastic manufacturing unit, said the Union government had ignored the demand of the small units to ensure the supply of the raw material. The small players were unable to import the raw material as the requests were redirected to the main private supplier in the country.

For instance, the naphtha-based raw material was unreasonably priced, though the price of naphtha had decreased drastically. From Rs.120 a kg a year ago, it had come down to Rs.34 recently, he said.

The monopoly of the private player might be checked with the production of raw material by a new venture of Hindustan Petroleum Company Ltd. by the year-end. Till then, the manufacturers have to depend on the available source. Not even one-tenth of the demand was being met by the supplier even after the manufacturers agreed to pay more. The issue had been taken up with the Union government but to no avail, he said.

Source: http://www.hindu.com/