India petrochemical prices rise as rupee tumbles to all-time low
Jonathan Yee
16-Jan-2025
SINGAPORE (ICIS)–India’s currency – the rupee – slumped to a record low in the week, pushing up both domestic and import prices of some petrochemicals in the south Asian country amid stable demand.
- Strong US dollar sends Indian rupee tumbling
- Acetone, EVA import prices jump
- India inflation within central bank target range
The Indian rupee (Rs) is currently trading at above Rs86 against the US dollar, having shed more than 3% since the early November, when Donald Trump won the US election.
At 07:10 GMT, the rupee was trading at Rs86.49.
A strong US dollar and heavy outflows of short-term investments sent the currency tumbled to a record low of Rs86.9964 on 14 January, according to foreign exchange platform xe.com.
India’s demand for overseas goods will likely be dented as a weaker currency makes imports more expensive.
PETROCHEMICAL BUYERS TURN
CAUTIOUS
With import prices of several products on
uptrend amid the rupee weakness, some buyers
have adopted a wait-and-see attitude on
markets.
India is a major importer of petrochemicals including polymers.
Rupee’s tumble has notably adversely affected PE Black 100 pipe import offers from Gulf Cooperation Council (GCC) and Asian sellers as buyers switch to domestic PE Natural.
PE Black 100 and PE Natural are specific grades of high-density polyethylene (HDPE) used primarily for high pressure water pipes.
In the recycled polyethylene (rPE) and recycled polypropylene (rPP) markets, downstream converters in India that import cargoes from northeast Asia are feeling the pinch.
Fewer India-bound rPE and rPP cargoes are expected in the coming weeks, compounded by high intra-Asia freight rates.
For exporters of recycled polyethylene terephthalate (rPET), meanwhile, there was no upsurge in shipments despite the rupee’s weakness.
India continues to position itself as net exporter of rPET cargoes, mainly bound to long-haul buyers in the Americas and in Europe. India’s aggressive expansion of rPET materials have posed competition to other Asian producers, particularly those in southeast Asia.
In the toluene di-isocyanate (TDI) and ethanolamines markets, market sentiment is mixed.
“Import and domestic prices for India TDI are unchanged from last week, but sentiment is mixed due to positive demand versus the weak rupee/US dollar rate,” a market player said.
TDI is primarily used in the production of flexible polyurethane foams, which are widely used in furniture, bedding, and automotive seating.
Meanwhile, after several months of decline, ethanolamines’ domestic prices moved higher, with players attributing the sudden rebound on the steep devaluation of the rupee, while demand was stable.
For ethylene vinyl acetate (EVA) and acetone, import and domestic prices have spiked while demand was stable.
EVA restocking momentum and discussions have been weighed down by the falling rupee due to higher cost of imports, market players said.
“I have not booked yet because of the currency depreciation; import costs have gone up so it has really impacted importers… we’ll wait for negotiations with suppliers,” said a distributor.
For acetone, fresh import demand is being hampered by the weak rupee amid a prevailing supply surplus in the Indian domestic market.
US DOLLAR TO REMAIN
STRONG
The US dollar remains strong on
better-than-expected job growth in the world’s
largest economy, while the unemployment rate
fell to 4.1%, reducing the chances of interest
rate cuts by the Federal Reserve in February.
A weaker currency fuels inflation as it raises the cost of imported goods.
“The RBI intervened extensively in the FX market last year but the appointment of a new central bank governor last month has raised market expectations of a less active intervention approach to smooth the rupee’s volatility,” Netherlands-based banking and financial service firm ING said in a note on 13 January.
“The recent equity market correction, foreign institutional investor (FII) outflows and overvaluation of the Indian rupee suggest that the rupee will continue to face downward pressure in the near term,” ING added.
DEC INFLATION EASES; NOV INDUSTRIAL
OUTPUT UP 5%
India’s inflation rate eased to a four-month
low of 5.22% in December from 5.48% in the
previous month, continuing its decline from
6.21% recorded in October, official data
showed.
The December figure was within the 2.0% to 6.0% tolerance band set by the Reserve Bank of India (RBI).
Easing food prices had some analysts predicting a possible cut in RBI’s repurchase rate as early as February, but the weakness of the rupee could delay adoption of a looser monetary policy.
“We maintain our base case for RBI to begin monetary policy easing via a 25 bps points reduction to the repo rate in the upcoming Feb 2025 … meeting,” Singapore-based UOB Global Economics & Markets Research analysts said in a 14 January macro note.
Meanwhile, India’s factory output in November, as measured through the Index of Industrial Production (IIP), rose 5.2% year on year driven by growth in manufacturing activity and power generation.
Manufacturing output growth in November accelerated to 5.8% year on year from 1.3% in the same period last year.
In April to November 2025, industrial output posted a slower year-on-year growth of 4.1% from 6.5% in the previous corresponding period.
India, which is a giant emerging market in Asia, is expected to post a slower GDP growth of 6.6% in the fiscal year ending March 2024, down from 7.2% in the previous year, based on RBI’s projections.
Nonetheless, India is still predicted to be the fastest-growing country in Asia, according to ING, which forecasts 6.8% growth for India for the current fiscal year.
Focus article by Jonathan Yee
Additional reporting by Helen Lee, Clive Ong, Shannen Ng, Veena Pathare, Nadim Salamoun and Arianne Perez
Thumbnail image: Indian rupee notes – 5 January 2025 (Firdous Nazir/NurPhoto/Shutterstock)
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