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Polymer price tracker - Other polymer (ex-PVC) prices too firm up - ICICI Securities

Posted On: 2020-09-21 04:59:23


After a sharp rally in PVC prices post May'20, other polymer (ex-PVC) prices too have followed suit with a price increase in the range of 1.2-9.9% in Q2FY21-TD. It may be noted that the sharp fall in other polymer prices witnessed during Feb-May'20 has recovered fully and is now higher by 7-14% YTD. Except PP, prices of other polymers (HDPE, LDPE and LLDPE) are also higher YoY. We believe the recent price hikes may help aid volume recovery in segments to which these polymers cater, and reduce inventory losses incurred over the last few quarters. Plastic processing companies (e.g. Supreme Industries) dealing with these polymers are likely to benefit from the same.

- Other polymer prices rise 1.2-9.9% led by trade resumption. After witnessing a price fall of 4.8-7% since the start of FY21, prices of other polymers (ex-PVC) have fully recovered and are now higher by 7-14% YTD. In Q2FY21-TD, price increases have been in the range of 1.2-9.9% largely led by trade resumption across globe amid partial recovery in crude prices.

- LDPE outperforms other polymers in the basket, while PP underperforms most. Polymer (ex-PVC) prices have seen a decent recovery over the last one month following the resumption of trade and firm crude prices. The price increase of individual polymers like PP prices (1st July: Rs84.5/kg, current: Rs85.5/kg), HDPE (1st July: Rs83.4/kg, current: Rs87.9/kg), LLDPE prices (1st July: Rs87.8/kg, current: Rs91.3/kg) and LDPE (1st July: Rs81/kg, current: Rs89/kg) are in the range of 1.2% to 9.9% QTD. Amongst these, PP have risen the lowest at 1.2% during this period while LDPE have risen the most at 9.9%. While LDPE is used largely for making foam-based products, PP is the key material for manufacturing injection-moulded products such as furniture and plastic parts for automobiles and consumer durables. HDPE on the other hand is mainly used to manufacture films, crates and pallets.

- Realisation in these finished products is likely to improve in Q2FY21. The rise in other polymer (ex-PVC) prices since the start of Q2FY21 is likely to help improve realisations for plastic processors dealing in the aforementioned product segments starting June on a QoQ basis. However, PP prices still remain lower on YoY basis as they have risen the lowest and hence, industrial products and furniture where PP is mainly used might not see any significant improvement in realisations unlike other polymer-based finished products such as films, foam and material handling products.

- Supreme Industries (SI) may witness improved realisations. SI - one of the largest plastic processors in India - is likely to witness a decent recovery in realisations in segments like cross-laminated films, protective packaging, performance films and material handling products with prices of other polymers continuing to trend upwards. Besides improvement in realisations, the company has already started witnessing healthy demand recovery in its packaging product segment - SILPAULIN and performance film in particular. While consumer/industrial product volumes may see improved realisations, the Covid-19 impact on demand of these products is likely to persist at least in the near term.


Source: Equity Bulls

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