Rising trend in PVC prices has been sustained in the new financial year too with a further hike of Rs 3/kg, or 2.2% in polymer prices last week. This is the first hike in the first quarter of the current financial year after an increase of Rs 19/kg, or 16.2%, in the previous quarter, that is, Q4 FY21. The longest rally in PVC prices thus continues to extend even in FY22. Now at Rs 139.3/kg, prices have more than doubled since 1st May 2020.
According to the petrochemical companies who manufacturer and supply polymers, the surge has been largely led by sustained supply-side issues globally amid sustained intermittent lockdowns post first phase of Covid. However, polymer users in the unorganised sector allege artificial shortage created by petrochemical companies including some of the public sector units. News reports suggest that almost 50,000 micro, small and medium enterprises, which were operating at 50 per cent capacity utilisation, are on the verge of closure if the current raw material crisis continues. The plastics processing industry has urged government intervention to allow duty-free imports of raw materials besides banning export of raw material for one year.
High PVC prices would provide a major fillip to organised PVC pipe manufacturers with consolidation gathering pace as regional/unorganised players continue to face issues. However, if the price rise continues for too long it may become increasingly difficult to pass on the same (especially in the agri pipe segment) to the consumers.
Further, sustained rise in the prices of PVC is also narrowing the price differential between PVC and CPVC which in turn may result in some demand shifting in favour of the latter.