Why plumbing pipes industry buoyant?

Why plumbing pipes industry buoyant?

- in Industry Trends - Snapshot
0
Comments Off on Why plumbing pipes industry buoyant?
Till now, unplasticised polyvinyl chloride (UPVC) dominated the plastic piping industry with several unorganised players posing stiff competition to branded players. It is estimated that by 2021-22, the share of CPVC pipes in overall plastic pipes industry would increase from 12% in 2016-17 to around 20%, possibly registering the highest growth of 24-25%

Historically plumbing pipes industry’s fortunes are closely linked to that of real estate sector. However, now the things have changed for the industry for the better – plumbing industry is no longer dependent solely on private real estate sector for its survival and growth. This is the biggest transformation the industry has been able to achieve better growth and prosperity.

Plumbing industry in India is of the size of $ 5 billion and is growing annually at the rate of 15%. It provides employment to around eight lakh people.

Last year was an eventful year for the industry. Despite some hurdles, the industry was able to register double digit growth. Truckers strike for two weeks had impacted the business to some extent but the industry was able to recover the loss later on. Towards the end of the year polymer price had turned volatile which also affected business to some extent. But these were temporary hiccups which couldn’t alter the general trend.

Affordable housing keeps demand curve up

Though the real estate sector is facing slowdown, increased emphasis of the government on affordable housing and ‘housing for all programmes’ were the saving grace for the industry.  With an increase in government thrust on affordable housing, demand for building materials, including plumbing pipes has remained high. This factor will keep the demand healthy in the medium term also.

Renovation/replacement demand buoyant

Though the real estate sector is in bad shape, this has not affected renovation/replacement demand and in fact this segment is growing fast. While the ongoing replacement to traditionally used galvanised iron and cast iron pipes would continue to drive demand for the category, replacement of old and leaking pipes is another segment which adding to the industry’s growth. It should be noted that in recent years, especially during last decade, there has been a massive shift from metal- to polymer-based pipes in case of plumbing and piping applications in the construction industry.

Formalisation of the industry

The government is now giving greater emphasis to formalisation of the industry and has taken several steps in this direction. Steps like demonetisation, introduction of GST and RERA, are some of the steps which may even the playing field between organised and unorganised sector. Enhanced surveillance and increased compliance are likely to increase the cost of manufacturing of the unorganised and narrow the gap in the product pricing between the two. This is likely to help the branded pipes manufacturers in the industry as the demand shift will intensify in the coming days.

Trend

In recent years, use of chlorinated polyvinyl chloride (CPVC) pipes in plumbing industry is gaining ground. The CPVC segment, which poses technological barriers to enter, has also given branded players an opportunity to increase their market share. Till now, unplasticised polyvinyl chloride (UPVC) dominated the plastic piping industry with several unorganised players posing stiff competition to branded players. It is estimated that by 2021-22, the share of CPVC pipes in overall plastic pipes industry would increase from 12% in 2016-17 to around 20%, possibly registering the highest growth of 24-25%.

Government’s programmes to help industry

Apart from giving greater push to housing for homeless and affordable housing, several other programmes of the government too are likely to drive up demand for pipes, especially plastic pipes. Programmes like Swachh Bharat Mission, Smart city Mission and recently taken up Jal Aandolan  will drive up demand for plastic pipes. Further, growth in urbanisation will keep the growth momentum for the industry up in the coming years.

However, recent decision of the government to impose anti-dumping duty on CPVC resin/compound imported from China and Korea may keep CPVC prices at higher levels in the coming months which may act as a dampener for the users. This may impact the demand marginally and that too in the short term. But in the long run prospects still remain in tact.