Indian PET film business has been under severe pressure since the last 2-3 years. The export segment, an important contributor to the Indian PET film business was reduced to almost half in 2000 from 1999. Exports in 2000 was barely 37 million US$, compared to almost 70 million US$ in 1999.

Exports were very badly affected mainly due to protection measures implemented by US as well as European regions from the end of 1999. In fact, the problems were compounded because the Indian film capacity increased from about 60 KT in 1995 to almost 137KT by 1999. The stupendous increase in the export business from 1995 onwards to almost 34-35KT by 1999 caused this increase in capacity, 1995 onwards. However, 50% drop in the export business in 2000 resulted in bringing the sickness in the PET film industry. The local demand was not able to absorb the surplus capacity. Further more, the increased cost of feed stocks (MEG/Phthalic Anhydride) also exerted tremendous pressure on the bottom lines of the most film producers. In fact, the share price of Garware Polyester, the largest film producers in India and which was considered to be a blue chip company on the Indian stock market went below its par value of Rs.10 from a level as high as Rs.400 some time in the early nineties. The stock price of Garware Polyester is slowly improving to about Rs.14-15 in the recent months. Is it because that PET film business is now improving?

The global PET film consumption is about 1.30 million tonnes compared to the capacity of about 1.60-1.65 million tonnes. The over all capacity utilization of about 80% is not too bad. However, the substantial over capacity in the Asian region due to lower demand in the region has put pressure on the Asian processors to export to the North American and European markets. India with just about 50-55KT local consumption in 2001 against the capacity of 135 KT had to look for exports to achieve better capacity utilization. The non-availability of North American and European markets forced the Indian producers to seek other regions like USSR and Africa/Middle East. While there is some definite improvement in the exports in 2001 compared to 2000, it certainly is much lower from the peak of 35KT. The local demand is also slowly improving. It is therefore expected that 2002 would possibly see significant improvement of capacity utilization. That certainly will improve the profitability of the Indian Polyester film industry.

However, the benefits will be seen with those converters who are more efficient and who are able to diversify in those sectors that provide higher value additions. Packaging, the largest and the most competitive sector would not be likely to yield better profitability. The other sectors like industrial and electrical, etc could provide an opportunity for Indian PET film producers to enhance the profitability compared to packaging.

What is most heartening to learn is that the worst is over and the Indian PET film business seems to be on a slow recovery path.