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The demonetisation of the high denomination currency notes in India is creating severe liquidity crunch and casting tremendous negative impact on local trading activities. Many traders here are seeing 60 to 70 per cent drop in sales revenue compared to the past months and this condition is expected to remain in place in the next few months.

To make the matter worse, the Indian rupee joins other regional currencies to fall to multi-years low against the US dollar. The general local demand condition not only for PP and PE, but in a whole get hurt by twin forces. The implication for domestic producers is that more export would save the day. This motor, in fact, has been taken into account very seriously.

A major Indian PP and PE producer commented, “Most of our local customers are holding critical high inventories on stagnant end product businesses. Our sales have dropped approximate 40 per cent. While it is depressing that we must exploit all possible export destinations before the financial closing; it is also an excellent opportunity for us to promote our PE cargoes to international market before the commercial run at the new PE complex.”    

Players in China reported seeing a sudden surge in the number of PE offers from several Indian producers, at surprisingly competitive levels. Most Indian PE cargoes are traded below the $1100/ton threshold in this market at the time this report is published. A Chinese trader purchased Indian HDPE and LLDPE film in the range $1070-1090/ton CFR China, LC 90 days term said, “This is a great time for us to replenish material. Cargoes arrive only after the Lunar New Year, yet prices are too attractive. We expect more material to come in the near term.” Others buyers are negotiating harder to achieve better deals.

A Malaysian converter reported to have received re-exported Indian LLDPE film offers from China at $1090/ton CIF, LC AS term. The source said, “We did not expect such prices and not only that, our supplier is inviting us to bid. Market is deteriorating too rapidly, and we prefer to stay conservative.” 

Regional buyers are also expecting more Indian material to come in the near term and couple on international traders have voiced plans to regularized this origin cargoes in Southeast Asia market.