The year 2002 is now coming to an end - the right time for us to stop for a while and reflect upon this year’s major events that have shaped the plastics business so far and assess how they would influence business in 2003.

The Global Scenario

After a dismal performance in 2001 and the first half of 2002, the global economy is showing some sign of revival in the last couple of months. The US recession of 2001, at one time, was thought to be over. But, the US economy, although recovering, is not strong enough to give us a smile. Countries in the South American continent showed signs of a faltering and very weak economy this year. The European region seems to have had a stagnant economy for the second year in a row. Japanese economy also continues to be sluggish for the last several years. China, India and the other Asian countries, despite their relatively good growth would not be able to bring the global GDP growth beyond 2.3%-2.5%. The fear of war and stoppage of oil from Venezuela has already caused an increase in oil prices. The spiralling effect of rising oil prices not only halt the growth of plastics, but also affect many sectors adversely, arresting economic recovery. Global economic growth could be adversely affected in early 2003 in the event of the war with Iraq. The economy would then start recovering only in the later half of 2003.

The weaker economic growth over 2002 has taken a toll on plastics consumption. The North American, the European, Japan and the South American regions are not likely to contribute positively to the growth of the plastics. The Asian region could bring about the overall global growth of plastics to approximately 3% compared to the earlier projection of 5%-6%.

The global demand of Polyolefins in 2002 could reach about 86-87 million tonnes.

	PE will account for about 53 million tonnes
	PP could reach almost 33-34 million tonnes
	PVC is likely to reach the demand level of 28 million tonnes
	Styrenics, including ABS could attain the demand level of about 17 million tonnes.

The prices of polymers, after an initial dip in the beginning 2002, started rising significantly March onwards and continued to rise until June. Lower prices in the third quarter helped to bring about some growth. However, polymer prices are again hardening in the last few weeks, mainly due to increase in oil prices. It is expected that prices would remain harder, until at least February 2003, if the war with Iraq remains short. Higher polymer prices definitely would have an adverse influence on growth in the first half of 2003.

The overall profitability of the plastics business during 2002 does not seem to be very healthy. In fact, many of the major players in North America, Europe and Japan are actively considering consolidating their businesses to remain healthy. Some of them like DSM Petrochemicals in The Netherlands have exited from the polymer business.

Sabic, a very strong petrochemical player from Saudi Arabia, on account of low feedstock prices has increased its presence in Europe by acquiring 2.8 million tonnes of polymer business of DSM Petrochemicals. This acquisition has made Sabic a very big player internationally with almost 7.5 million tonnes capacity in 2002, including over 4 million tonnes in Saudi Arabia. Sabic has now a very prominent global position in PE and PP.
Interestingly, Borealis has set up a joint venture petrochemical project in Abu Dhabi to take advantage of lower feedstock prices. This project, called Borouge with almost 450 KT of PE using latest “Borstar” technology was commissioned in 2002. These PE grades have broad molecular weight distribution or a possibility of bi-modal molecular weight distribution and provide excellent performance in pipes, large containers as well as in film. In fact, more projects are likely to generate more than 1-2 million tonnes of polymers in the Middle Eastern region in the coming 2 years.

After consolidation of Polyolefin capacities,Japanese producers are now working towards consolidation of PVC capacities to remain afloat in the present over-capacity situation in Japan. China after entering into WTO, still continues to grow well compared to any other major country in the World. In fact, China is expected to reach a consumption level of 25 million tonnes, latest by 2005. Most of the Middle Eastern capacities are aimed at the growing demand of the Asian region.

The Indian Scenario

The Indian economy, despite a weak rainfall, resulting in lower agriculture growth, is expected to show growth of about 5.5% during the financial year April 2002 - March 2003, mainly due to good growth in manufacturing and service sectors. The steel, cement and commercial automobiles, along with related sectors have shown an impressive growth. The (FMCG) fast moving consumer products sector, however has not kept pace with the other sectors. Consumer durable sectors like Television, etc have also done quite well.
All these favourable economic indicators have a positive influence on the growth of the plastics despite sluggishness in the first 3-4 months of this financial year, mainly due to higher polymer prices. The plastics industry, has picked up well, particularly, from July to the beginning of December. Rising polymer prices in December may again influence consumption adversely. It is quite possible that the last quarter of this financial year may not be very spectacular, but a growth of about 10-12% could still be achieved over the financial year 2002.

The production of polymers have seen better growth due to higher exports of polymers :
600KT achieved in the last financial year and an expected net exports of about 450-500KT in this financial year.

Reliance Industries, the major polymer supplier (almost 1.8 million tonnes capacity) has become much stronger after the acquisition of IPCL from the Government of India. Their combined polymer capacity is now almost over 3 million tonnes.
60 KT of HDPE and 15KT of EVA capacities have been eliminated due to the closure of Nocil Petrochemical plants.
No new capacity additions have been added in Polyolefins as well as PVC.

PS capacity has been increased by 30KT each at LG and BASF Styrenics. The total PS capacity has now reached a level of about 420KT compared to almost sluggish demand of just about 200KT in 2002. It is therefore expected that more than 70-80KT of PS would be exported during this year. In addition, the Indian arm of Moser Baer, one of the largest producer of floppy diskette, CD and DVD, exports 15 KT of PS jewel boxes along with the exports of their products.

Among the various application sectors, raffia/ film fiber has shown a good growth mainly due to the increased cement production. The synthetic woven bags are now being increasingly used for packaging of food grain products due to relaxation of jute sack reservation for this sector.

BOPP and BOPET films have also registered an impressive growth. In fact, more capacities are being developed in these two sectors. Jindal Polyester, the manufacturer of BOPET film is expected to commission 15 KT Bruckner BOPP film plant at Nasik in early 2003. It has also plans to add another BOPP line by the later half of 2003. Jindal Polyester has also plans to augment the existing capacity of 35 KT by setting up another 30KT BOPET plant possibly in 2004. Polyplex, after setting up a project in Indonesia recently, is expected to set up another project of BOPET in India, possibly by 2004. Cosmo, the largest BOPP producer in India is expected to achieve the total capacity of 47KT by addition of another line of 10 KT in 2003.

lpha Plastomers Pvt. Ltd., the largest TQ PP film manufacturer with about 20KT capacity, has modernized its plant with installation of 11 high output plants in 2002. These plants have 140kg/hour capacity and possibly are the largest TQ film plants available any where in the World. Rajoo Engineering has supplied these plants. Alpha Plastomers Pvt. Ltd. intends to add another 7-8 plants in 2003.
BOPP and TQPP films together could achieve the volume of 300KT while BOPET film is expected to achieve sales volume of about 80KT.

PET bottles continue to show an impressive growth and may attain the level of more than 75KT. Reliance is planning to set up 230KT PET chip plant using Dupont’s NG3 technology. The project is likely to be commissioned by 2003. India has a surplus capacity in PET bottle grade chips and will continue to have excess capacity in the next 5 years because of additional capacities that are being planned by Reliance and the South Asia Petrochemicals in the eastern part of India possibly by 2004.

PVC pipes had another good year. PVC cables are also recovering well after dismal 2001. Both these sectors accounting for almost 500KT, would contribute significantly in the growth of PVC in the financial year 2002. Finolex Industries, the largest pipe producer is increasing its pipe capacity to about 60KT. PVC resin capacity of 788 KT is not adequate to meet the demand. Finolex Industries is expected to increase the capacity by 130KT in the near future. Reliance may focus on IPCL’s Gandhar plant of PVC to increase the production in future due to availability of Chlorine.

The consumer durable and auto sectors have helped ABS to grow to almost 55 – 60 KT in 2002. In fact, both Bayer ABS and Bhansali Engineering, the producers of ABS are seriously considering expanding their capacities to meet the increasing demand of ABS.

PP moulded furniture industry is in the process of consolidation to improve profitability. The second half of the financial year has improved the markets of moulded PP furniture.

It is expected that the total demand of plastics in India would be more than 4 million tonnes in 2002.

	PE demand could reach about 1.6 million tonnes
	PP definitely would exceed 1.2 million tonnes
	PVC is expected to have a demand of 850KT
	Styrenics would account for another 250KT
	PET would attain the demand of 150KT between bottle and film.

During 2002, we had to bid farewell with sadness to the great visionary Mr. Dhirubhai Ambani who created $13 billion company - Reliance Industries, in the last three decades, from scratch. We, from www.plastemart.com, salute this most dynamic entrepreneur for his contribution to the Indian business and hope that his dreams; not only for the Reliance Group but for India, are carried forward by the Indian entrepreneurs to make India a strong economic player in the World.

Finally we sincerely wish all of you - our patrons, members, readers and well-wishers "A Very Prosperous 2003"