Uptrend in other polymer (ex-PVC) pricescontinue
After swift recovery in PVCprices, other polymer (ex-PVC) prices too have recouped most of the fallwitnessed inApr’20 with an uptick of 1.2-3.1% across polymers last week. This was largelydrivenby trade resumption and crude pricerecovery.Overall price increases are in the range of 1.3%-8.6% over the past month. It may be noted that prices of other polymers (ex-PVC) had fallen by 4.8%-7% since the start of FY21. We believe the recent price hikes mayhelp aid volume recovery in segments to which these polymers cater,and reduce inventory losses incurred in Apr’20. Plastic processing companies (e.g. Supreme Industries) dealing with these polymers arelikely to benefit fromthe same.
* Other polymer prices increase by 1.2%-3.1%led by trade resumption and crude price recovery. Afterwitnessing a price fall in the range of 4.8%-7% sincethe start of FY21,prices of other polymers (ex-PVC) have witnessed a decent recovery (by 1.3%-8.6%)over the past month. The rise is largely attributed tothe gradual resumption in trade globally and recovery in crude prices.
* HDPE recovery slowest while PP prices haverecovered fully. Polymer (ex-PVC) prices have seen adecentrecoveryover the last one monthfollowing highercrude pricesand resumptionof trade. The price increase has helped PP prices (1stApril: Rs78.9/kg, current: Rs82.4/kg)andLLDPE(1stApril: Rs83.6/kg, current: Rs84.6/kg)recover fully. LDPEprices (1stApril: Rs78.4/kg, current: Rs76.9/kg) and HDPE (1stApril: Rs82.3/kg, current: Rs80.3/kg)on the other hand have also recovered large part of their losses. HDPE pricerecovery has been the slowest(it may be noted thatits price fall was the leastat 4% inAprilwhereasmost other polymerprices fellin doubledigits). HDPE is mainly used to manufacture crates and palletswhileLDPE is used largely for making foam-based products. PP on the other hand is the main material for manufacturing injection-moulded products such as furniture and plastic parts for automobiles and consumer durables. We thus expect companies processing these polymers to seea recovery in realisation fromfinished products in the near term.
* Realisation in these finished products is likely to improvefrom June.The fall in polymer prices in Apriland the subsequentrecovery is likely to help improve realisations for plastic processors dealingin the aforementioned product segments startingJune. While prices in Q1FY21-TD have recovered in case of polymers like PPand LLDPE,itremains lower by 1.9% and 2.4% in case of LDPEand HDPE respectively.
* Supreme Industries (SI)is likely to witness improved realisations. SI –one of the largest plastic processors in India –is likely to witness a modicum of recovery in realisation in segments like packaging product, industrial productand consumer product,if prices ofother polymers continue to trend upward.Besides improvement in realisations, the company has already seen healthy demand in its packaging product segment (SILPAULINand performance film in particular).While consumer/packaging product volumesmayhave seen an uptickdue to higher pricesof other polymers, theCovid-19 impact on demand for these productsis likely to persist at least through the near term.
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