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Polymers Round-up

A soft look at the Indian polymers sector.

Look around you. There's plastic almost everywhere. And polythene bags. And polyester shirts... and a lot of other, er, pollies. And now there's a new sort of polymer, a purportedly green polymer; Cadbury has just declared that its Australian unit will start using a water-soluble polymer to pack its chocolates -- to make it bio-degradable. Hmmm.

India, of course, is huge in polymers, thanks largely to Reliance Industries. It has ridden a recent surge in demand for polymers in the first half of 2003-2004, and is counting on a broader revival. This news couldn't have come any sooner, given the decline in global polymer margins in the aftermath of the Iraq war (this is held to blame for Reliance's poly-margin squeeze in the first quarter of 2003-04).

What happens next?

Going by the global petrochem cycle, margins hit their trough in 2001-2002, thanks to large capacity additions, and should be firming up again once the ill effects of the Iraq war play themselves out.

But then again, the concept of a 'normal times' cost structure in this business may need some redefining if oil prices don't behave as expected to. Oil, as you know, is the main raw material that yields naphtha -- the stuff that later gets turned into all these materials.

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