In 1998, polymer prices in India were determined by imported price. Hence the rise in international polymer prices in October and their fall in December saw domestic prices moving in tandem.

Now the scenario has changed. The domestic prices will, in fact, rule below the international levels as there will be no fresh demand inspite of new capacities being added.

Exports would not be a viable proposition as the demand is yet to pick up in south east asia and other parts of the world. Industry experts forecast an 18 per cent growth in polyproplene and polyethylene segments (HDPE, LLDPE, LDPE) and 10 percent in the PVC segment in 1999.

Ironically to cater to this demand additional domestic capacities are likely to go up by around 1.2 million tonnes (for both polypropylene and polyethylene) to around 2.8 milliontonnes. Overall the rise in total capacity is close to 75 percent in volumes.

The new capacities include 400,000 polyproplene (PP) by Reliance in Jamnagar (Gujarat); the 400,000 tonne polyethylene (PE) plant of Gail commenced trial runs.

In addition, Haldia Petrochemicals plans to commence production of all polymers (including refinery products) from April 1999. Besides, it has drawn plans to add another 4 lakh tonnes of PE.

Against this backdrop of new capacities and demand growth, the demand-supply gap would be different in all three polymer segments.

For instance, in the case of polyproplene (PP), the total domestic consumption in 1998 was 5.95lakh tonnes, of which around one lakh tonnes was met through imported products. With an optimistic demand growth rate of 25 per cent, India's total demand would be only 7.5 lakh tonnes.

On the other hand, the PP supply would rise to 10 lakh tonne (assuming the same level of imports). This would depress prices further from the current price of Rs 36.9 perkg.

Ditto in polyethylene (PE). The total PE demand last year was only 6.65 lakh tonnes. With a 25 per cent demand growth, the total demand of PE in 1999 would be only 8.25 lakh tonnes--lower than the total possible supplies with new capacities which is likely to rise by around 4 lakh tonnes to 9.3 lakh tonne in 1999. This demand-supply gap would force some producers to operate their plants at lower capacities.

Finally, even PVC prices will fall but it may not be that sharper. The total demand in 1998 was 5.54 lakh tonnes (current capacity 5.1 lakh tonnes). Taking an annual demand growth rate of 10 per cent, the total annual demand would be around 6 lakh tonnes. With no additional domestic capacity being added in the PVC segment during 1999 there are chances PVC prices may rise. However, the actual PVC prices would be determined by the affect of substitution of other polymers with PVC, as there are some applications which can interchange PVC with other polymers.