Recent rupee depreciation has arrested the further slide in the PVC prices which had fallen sharply recently. Prices have been hiked by Rs1.5/kg or 2% largely due to sharp depreciation in the value of rupee. This has taken the market by surprise which was expecting further slide in the PVC prices. After the latest hike, PVC prices stand increased by 7.3% or Rs5.2/kg since May 2019.
After seeing a sharp fall in March and April, PVC prices had moved up by Rs5.8/kg or 8% since 1st May 2019. However, fear of economic slowdown had pulled down PVC prices by Rs2/kg or 2.5% in the first week of August.
Meanwhile strong growth seen in the sales of PVC pipe sales during the first quarter of the current Financial Year has been sustained in the July month also. According to the people in the industry there are many reasons for industry maintaining robust demand growth in recent months. One of the important reasons cited is the impetus given by the government to the affordable housing sector. Further, the competitive intensity among the large organised players is also declining. On the other hand, unorganised sector is facing sever cash crunch post NBFC crisis as a result of which it is facing PVC sourcing woes. Further, incremental growth contribution from niche piping products, like DWC pipes and underground drainage pipe systems have also contributed to the overall growth of the sector.
It’s believed that unorganised sector has become the most vulnerable segment due to volatility in the price of polymers. Increasing working capital woes also have added to the problems of the unorganised players and small time regional players. The liquidity woes alongside pricing issues in sourcing of PVC resin is likely to help accelerate shift from unbranded pipes to branded pipes in the near term.