The year 2001, with strong turbulence and uncertainty has finally come to an end, but the uncertainty is not yet over. The global economy seems to be stagnant and does not indicate a wave of revival yet. Most of the pundits feel that the economy may turn better in the second half of 2002. Let us hope that it does revive faster and the polymer industry becomes healthier. We at Plastemart.com are quite optimistic that 2002 would certainly be better than 2001. We would like to wish you and your family A Very Happy And Prosperous 2002.

Global Scenario • Plastics, after a good run for the last 3 years or so, have finally run out of steam. The Asian crisis of 1997-98 had caused a sharp drop in the growth of plastics. The year 2001 with almost stagnant economies in the developed regions, notably of US, would certainly have an adverse impact on plastics. It would not be surprising that the overall growth of plastics may turn out to be almost 1-2% despite good growth in China and a some-what reasonable growth in India and the other developing regions. The weaker global economy has indeed taken its toll on the overall growth of plastics.   • Are there any significant developments that would help in enhancing the growth of plastics? The biggest plastics fair at Dusseldorf, Germany, in end October did show case the most prominent and rewarding new developments. A softer economy and weaker business environment however, did not allow quite many new entrepreneurs to avail the advantage of the newer developments. The US, China and some other strong players in the plastics business stayed away from active participation. Does it indicate that the investment in the plastics business has slowed down? • The merger and acquisition scene has certainly remained quite active indicating that the structural changes could help in enhancing the business dynamics. Some of the prominent mergers and acquisitions that could shape the plastics business in 2002 are: Polyolefins • BP-Solvay • Mitsui-Sumitomo Thermoplastics Compounds • Geon-MA Hana(Polyone)

 

The polymer industry is flooded with over capacity. Lower price realizations have been responsible for poorer profitability. Yet, the investments made in the last few years have brought some additional capacities of polymers particularly in the Middle East and Asian regions. The latest mega project of Exxon Mobil with almost 800Kt Polyolefins that was started in 2001 has further aggravated the problem on capacity utilization. No wonder that the prices of polymers have been quite soft and are likely to remain softer at least for most of 2002. Will this bring about an increased growth of polymers in 2002?

The optimists certainly believe that this will happen because plastics still have more applications that they can tap from other materials. In fact, the major players like BASF, Basell, Bayer, BP, Dow as well as others are still committed to investments in the fastest growing region of Asia. China with its entry into WTO would certainly continue to grow, perhaps at the cost of other countries. A classic example of this was seen when Basell decided to pull out of its commitment for investment in India.

Indian Scenario

Let us now turn to the Indian Plastics scene:

Plastics growth certainly is not likely to be as impressive as that of the last few years mainly due to weaker demand. The Indian economy has faltered and is not likely to grow beyond 4-5% over FY2000 (April-March). Market information in the first 3 quarters of 2001 indicates a somewhat lukewarm growth of plastics. In fact, commodity plastics (Polyolefins/PVC/PS) consumption is expected to reach between 3350-3400Kt from the level of 3150KT in 2000 indicating a growth of 7-8% over the last year. Only the outstanding fourth quarter could increase it to 9%. Supreme Petrochemical has increased its PS capacity to 205KT. No additional capacities are added in Polyolefins and PVC. In fact, the low pressured Polyolefins (LLLDPE/HDPE/PP) have an excess capacity and are therefore required to be exported to achieve decent capacity utilization. It is estimated that almost 250-300KT of Polyolefins and 50KT of PS would be exported from India.   BASF has acquired the 60KT PS plant of Pushpa Polymer but it is not yet well stabilised.   The shortage of LDPE and larger capacity of LLDPE has practically stagnated LDPE consumption. IPCL, the sole producer of LDPE in India is in an ideal position to develop additional capacity of LDPE, but the structural changes of divestment of Government from it has been hanging in air for the last two years. No further capital investment plans are likely to emerge from IPCL at least in 2002.   PVC capacity is in balance. Finolex has not yet started on its expansion project. No newer capacity is likely to emerge in 2002.   Reliance Industries seems to have slowed down its investment in polymer business. In fact, it decided against the investment in EDC plant (feedstock for PVC).   Basell pulled out of its interest in Nocil. The polyolefin expansion of Nocil is not likely to go ahead.   BOPP film sector has added some capacity in 2001. The sector has also seen the acquisition of Gujarat Propack by Cosmo Films, thereby making Cosmo Films the largest converter of BOPP in India with almost 35Kt processing capacity. Jindal Polyester has announced new investment for a 30KT BOPP capacity to be set up in the earthquake affected region of Gujarat to take the advantage of tax benefits provided by the Government.   There seems to be a revival of the PVC pipe business after a gap of 2 years. Some new capital investments have been seen in this sector. It is therefore expected that PVC consumption would grow in 2001.   PE pipe after an explosive growth in 2000 due to telecom ducting seems to have died down. It would not be very surprising that there could be a negative growth of PE pipe in 2002 compared to 2001.   LLDPE continues to be growing fastest due to easy availabilty and low prices.   PS may show some positive growth after stagnant 2000. Supreme Petrochemical has started compounding activity in the area of PS.

Plastemart.com is in its second year of operation. During this time we have been working very closely with the plastics industry. We wish to thank our patrons and the partners from the Indian plastics industry . We hope that we continue to provide service to the Indian plastics industry with co-operation and support from all of you.

Finally we sincerely hope that all of you have a very prosperous 2002.