India’s robust HDPE pipe demand to keep film, blow moulding supply tight

SINGAPORE (ICIS)–Buoyant demand for high density polyethylene (HDPE) pipes in India will likely keep supply of film and blow moulding tight, lending support to import prices in the near-term.

Indian PE makers have been cutting back production of the film and blow moulding grades while beefing up production of pipe grade materials, which generate better netbacks amid robust consumption.

Tight supply has been driving up the import prices of key HDPE grades in India since September last year, with film grade prices hitting a 33-month high in February 2018, according to ICIS data.

HDPE pipe, as well as film and blow moulding grades of desired specifications are produced at stand-alone units, while HDPE/linear low density PE (LLDPE) swing units produce other HDPE variety, according to producers.

In the fiscal year ending March 2017, India’s consumption of HDPE pipe grade accounted for 9% of its total PE demand of about 4.6m tonnes, according to estimates from industry sources.

Demand for HDPE pipes in India has been robust since last year amid a stronger uptake in the agricultural sector. Consequently, a major chunk of production time at stand-alone facilities across the country is presently being allocated to producing pipes, a source at an Indian producer said.

“The Indian government’s efforts to enhance the efficiency of usage of water in agriculture by encouraging farmers to make use of water saving and conservation technologies has really helped boost pipe demand,” the source said.

Under this initiative that has been classified as a national mission project, the government has been promoting the use of drip & sprinkler irrigation technologies, which require the use of HDPE pipes for transporting water for irrigation.

Additionally, projects led by state governments to provide piped water to households such as Project Bhagirathi in Telangana and Jeevan Amrit in Rajasthan have given a strong push to pipe demand in India, said the source at an Indian PE producer.

Domestic demand for pipes in India intensified in 2016 as these government-led projects started gathering momentum.

Meanwhile, strong export opportunities for HDPE pipes also exist for Indian producers, particularly in the Chinese market, where there is a government-mandated move to switch to gas from coal for power generation, requiring building of thousands of kilometres of gas pipelines.

“Indian producers have been able to realise strong netbacks in exporting HDPE pipe variety to China, limiting the attractiveness in producing film and blow moulding grades,” a separate Indian producer source said.

Meanwhile, HDPE film demand in India in recent years has been affected by the ban on the use of plastic bags.

“This leads us to believe that the profitability in producing HDPE film is likely to be short-lived, and prices may soon hit a ceiling whereas pipe prices may continue to go up,” a source at a another domestic PE producer.

An Indian PE major intends to produce all HDPE grades to cater to a wide customer base, but its plans would be reviewed in the new fiscal year that begins on 1 April 2018 to make room for increased pipe production amid strong demand, a company source said.

Focus article by Veena Pathare

Picture: Plastic pipes. (Photographer: Marion Fichter/imageBROKER/REX/Shutterstock)