This move would only mean that the price rise in case of sudden demand will not affect China, which, industry sources say, will in all probability be filled by Korean producers. However, the move is likely to increase prices in other markets, specially India, due to a more favourable supply-demand scenario.

In the past a lot of polymers produced in Korea used to be smuggled into China. But the crackdown by Chinese authorities on four of the big traders suddenly meant that there was a glut in supply with no offtake. Korean companies, industry sources say are the most cost efficient producers in the current scenario, mainly on account of depreciation of their currency. The main drawback due to depreciation of the currency is in the form of naphtha, which is the only dollar denominated component (prices of naphtha are at their decades low of $110 a tonne) in the manufacture of polymers.

Conversion costs are in `won', which has depreciated appreciably against the dollar. Sales, meant mainly for the international market, is in dollar terms. Thus there is a huge scope for margins as compared to other countries. It is this wide gap that the Korean manufacturers are exploiting and by which are literally controlling the international market prices.

Industry observers say that opening up of the Chinese market after a long time by the government for purchase of polyethylene, can be a sign of revival. The industry expects this order to be close to 2-3 lakh tonnes.

This is expected to be followed by other orders, which it is hoped will bring some balance in the polymer prices in the entire Asian region.

Both these incidents have resulted in the Koreans quoting PE in the range of $440- $480, in the Indian market. Correspondingly, the Indian manufacturers also had to reduce prices. The future is bleak because the Koreans had the capacity to reduce prices further. Marketmen believe that with the Koreans having a capacity to reduce prices further, it is quite possible that bidding for PE would be placed in the region of $400-$420 per tonne.

Considering that the freight charges to India would be in the range of $50-$60 per tonne, compared to $10 per tonne to China, we would be finding that landed cost for PE in India can drop down to $410- $430 per tonne.Gone are the days where market prices for polymers could be predicted. Today it is a buyers market. You demand a price, the supplier agrees, to sell at that price.

The only bargaining power with the supplier is that he tries to convince the customer to double his order size. One cannot blame the supplier for constantly falling into the trap of lower prices. He knows tomorrow the price would be even lower, so it is better to make the best of volume sales.Some have closed shop in Asia. But others are looking for something to happen that could revive their fortunes. The Chinese factor, has always been a dark spot in the fortunes of polymer players.

So far the drop in prices had had its toll. Malaysian TP closed down its operations, while plants including Indonesia's Chandrashri have shut down. However, the stronger companies with deep pockets and access to bigger markets have increased their capacities. Adnoc-Borroughs is setting up a plant with a capacity of 2,25,000 per annum, Philips is doubling its capacity and Equate (Kuwait) is setting up a 0.3-million tonne plant, the scenario is very bad. Even Gail's 0.4-million tonne plant for PE is coming in the next two months and the commissioning of a petrochemical plant at Haldia is expected next year, it is a simple guess as to where the price would go.

The PVC case is not much different. Prices are today ruling at $380 per tonne from $440 per tonne (a few months back) and $550 per tonne (a year back). EDC has dropped from $140 per tonne to range of $90- $98 pertonne.

The lower prices of these materials have necessitated the change of the companies to graduate to value added products. Dow has been trying to sell octane to end users of specialty polymers. But market sources say, that their strategy has misfired because of availability of hexene, which available at cheaper. This has resulted in margins for specialty products dropping to a very high extent. Sources say premium on octane has dropped to $60 from the earlier available premium of $100.

Partly this has been due to the fact that premiums on hexene is only in the range of $30-$40.