Polyester is an extensively used textile in the Indian subcontinent and stood next to Cotton in terms of cotton. India produced total 1,413380 MT of polyester Fiber in 2001-2002 against 2,380,000 MT of Cotton. Polyester staple fiber (PSF) accounts 39% of the total polyester production as of 2001-02 production figures and is largely used in suitings, shirtings and dress materials. Most of the Indian production of PSF largely consumed by spun yarn spinners, who produce blended yarn of polyester cotton or polyester viscose blends. The main raw materials used in the production of PSF are PTA, and MEG that are available locally to cater the demand.
In 2001-2002, India produced 550,671 MT of PSF, which was 2.78% below the previous years production of 566420 MT.
India has total installed capacity of 610,700 TPA and nine manufacturing units at the end of 2001-02. However, operating capacity is 583,700 TPA as two units (J K Synthetics and Swadeshi Polytex) were non-operative. India also has six 100 percent recycled PSF producer with a capacity of 44,100 TPA. Out of which 7900 TPA is completely non-operative. This recycling capacity is without inclusion of RIL and Indian Organic Chemicals recycling plants. Reliance Industries is the largest player with a consolidated capacity of 387,400 TPA, which accounts for 63.4 percent of the industry capacity for virgin PSF.
India s PSF industry is growing by double digit since last 10 years. During 1992-93 to 2001 - 02, PSF demand has increased at a CAGR of 15.4 percent.
|Indian PSF Industry summary ||Table 1|
| || Unit ||1995-96 ||1996-97 ||1997-98 ||1998-99 ||99-2000 ||2000-01 ||2001-02 |
|Capacity2 || MTA ||290,900 ||560,900 ||576,700 ||576,700 ||596,700 ||610,700 ||610,700 |
|Number of players || ||10 ||10 ||10 ||10 ||10 ||10 ||10 |
|Largest player || ||RIL ||RIL ||RIL ||RIL ||RIL ||RIL ||RIL |
|Demand ||Tons ||259,640 ||347,946 ||443,603 ||494,624 ||514,548 ||561,994 ||556,374 |
|Demand growth || Percent ||2.07 ||34.01 ||27.49 ||11.50 ||4.03 ||9.22 || -1.0 |
|Average price4 || Rs/kg ||84.5 ||59.1 ||46.3 ||43.0 ||51.6 ||53.5 ||46.7 |
|Price change || Percent ||1.83 ||-30.03 ||-21.71 ||-7.11 ||19.93 ||3.68 ||-1.27 |
|Excise duty || Percent ||23.0 ||23.0 ||20.7 ||20.7 ||18.4 ||18.4 ||18.4 |
|Turnover5 || Rs million ||21,940 ||20,572 ||20,535 ||21,269 ||26,536 ||30.06 ||25.98 |
|Margins6 || Rs/kg ||22.8 ||23.7 ||13.5 ||17.9 ||18.2 ||13.4 ||5.2 |
|RIL: Reliance Industries Ltd.|
1. Compounded annual growth rate for the 1990-91 to 1999-2000 period
2. Aggregate capacity, which also includes non-operative capacities
3. Capacity of the two largest player divided by aggregate capacity; Reliance Industries acquired capacities have not been considered
4. Ex-factory price for 1.2 d PSF
5. Demand multiplied by average ex-factory price
6. Ex-factory price less raw material cost
Source: Industry and YnFx
PSF consumption is showing gradual increase over the last 10 years and demand has grown substantially. During the 1992-93 to 2001 - 02, PSF demand has increased at a CAGR of 15.4 percent. During the 2000-01 to 2004-05 period, demand for PSF is expected to increase at a CAGR of 7 - 8 percent, to 722,000 tons.
On the price front, PSF prices become more dependent on the international prices and price in the last few years follow the trend of landed cost.
Consumption of PSF is expected to grow in the domestic market from current 556,374 Tones per annum to 777,569 Tons per annum by 2004-05 at a CAGR of 6.7 per cent.
The increase in PSF demand would be mainly form the Spun yarn industry. Especially from the blended yarn section. As of now 79% of the PSF goes to the blended yarn manufacturing and remaining portion is consumed in the 100 percent Polyester Spun Yarn. Expected tight supply of cotton could push the demand for PC yarn in the future and growing PC yarn production indicates the trend. Tropical climatic conditions in India provide opportunity for PC yarn as the yarn characteristics suits the comfortless of endures. Demand for 100 per cent polyester spun yarn is also expected to increase due to its increased usage in industrial fabric. Also the price advantage over cotton and other yarns would push the consumption of Polyester in the domestic market. Also Indian Per Capita consumption still at as low as 1.4 kg which provides good opportunity to the industry to enhance the share of PSF.
|Derived demand forecast of PSF||Table 2|
|(1000 tons) ||99-2000 E ||2000-01 ||2001-02 ||2002-03 ||2003-04 ||2004-05 ||CAGR1 |
|PSF demand || || || || || || || |
|From PV ||242 ||261 ||274 ||288 ||302 ||318 ||5.6 |
|From PC ||98 ||106 ||116 ||126 ||138 ||150 ||9.0 |
|From PVC ||3 ||4 ||4 ||4 ||4 ||5 ||8.0 |
|From other application ||23 ||25 ||27 ||29 ||31 ||34 ||8.0 |
|100 per cent polyester spun yarns ||99 ||107 ||115 ||125 ||135 ||145 ||8.0 |
|Total ||465 ||503 ||536 ||572 ||611 ||652 ||7.0 |
1. Compounded annual growth rate for the 1999-2000 to 2004-05 period
Source: Industry, YnFx, and CRISIL
In addition, increase in the exports of synthetic value added Textiles: With the growing export market (except for last financial year due to poor economic conditions around the globe) share of synthetic value added products would grow and hence the share of PSF would increase.
|Demand-supply forecast for Indian PSF Industry ||Table 3|
|Operational capacity ||583,700||583,700||743,700||743,700||893,700||8.9|
|Operating rate ||97||94||95||97||97||-|
|Closing Stock ||29,881||35,578||55,100||45,100||75,100||-|
|1. Compounded annual growth rate for the 2000 - 01 to 2004-05.|
Source: Industry and YnFx
Supply Existing PSF facilities are running above ninety percent of its capacity and there would not be additional supply unless additional capacities are added. Year 2001-02 production of PSF was 550,671 MT, which was down by 2.78 percent due to poor economic conditions world over.
Recently Indo Rama Synthetic has announced a tie up with Zimmer for capacity expansion. This new capacity of 175,000 TPA (of which, nearly 145,000 would be PSF capacity) is expected to come on steam in 2004-05.
With the expected growth in demand RIL is expected to add new capacity of 160,000 TPA, which could be operational by end of 2002-03.
Given the demand-supply imbalance, and governments imposition of Anti dumping duty on imports of PSF, imports of PSF is expected to decline in terms of percentage share and exports could see a upward movements after 2004-05 as supply would be little excess of demand.
|Producer wise PSF capacity & forecast ||Table 4|
|(Tons)||1999-2000 ||2000-01||2001-02||E 2002-03||2003-04||2004-05||CAGR1|
|India Polyfibres ||22,400||22,400||22,400||22,400||22,400||22,400||0|
|Indian Organic Chemicals ||34,000||34,000||34,000||34,000||34,000||34,000||0|
|Indo Rama Synthetics 4 ||132,300||132,300||132,300||132,300||132,300||282,300||16.4|
|JCT Ltd. ||60,000||60,000||60,000||60,000||60,000||60,000||0|
|Orissa Synthetics ||35,000||35,000||35,000||35,000||35,000||35,000||0|
|JK Synthetics2 ||13,000||13,000||13,000||13,000||13,000||13,000||0|
|Reliance Industries (RIL)3 ||270,000||270,000||270,000||430,000||430,000||430,000||9.8|
|Swadeshi Polytex2 ||14,000||14,000||14,000||14,000||14,000||14,000||0|
1. Compounded annual growth rate for the 1999-2000 to 2004-05 period 2. Non-operating capacities. Operating capacity has been estimated at 583,700 tons at the end of March 2000
3. Includes production of Terene Fiber, and an assumed capacity addition of 160,000 TPA by RIL, expected to be operational from 2002-03
4. Indo Rama to add a capacity of 150,000 TPA, which should come on stream in 2004
Source: Industry and YnFx
PSF prices are expected to remain strong till 2004-05, and margin would improve. Imposition of Anti dumping duty and increase in demand for fiber would keep the price firm and would be supported by improved demand of Indian textiles in the international market.
Till 2004 - 05, raw material cost is expected to remain more or less stable at the current level of costing. However, addition of further capacities of PTA and MEG in the Far East Asian countries which are expected to come on stream by 2002- 03, would increase the competition and may result in increase decrease in PTA and MEG prices. Also since Reliance Industries is the major producer with complete backward integration would be able to reduce cost to further extent.For complete 35 pages report Indian Polyester Staple Fiber Industry Review September 2002
Though margin for fiber producers have reduced gradually over the last 5 years, margins of PSF producers are likely to increase, as the increase in domestic prices of PSF is expected to be higher than the increase in raw material prices. Also both the major manufacturers have high capacity, cost of production would come down further after addition of capacity and result better margin.
Up to 2005, PSF prices are expected to remain stable to firm. However, addition of capacity in the Far East Asia would bring in competition and result in fall in prices towards 2003 end on wards. However, Smaller capacities in the Western Europe and North America would come under pressure and result in closure. That will balance the demand and supply. China would be the major force to decide the prices of PSF.
Demand for PSF is likely to increase due to the increased substitution of cotton, and an increase in the economic growth rate. Demand for polyester in Asia is likely to increase at a CAGR of 8- 9 percent till 2005, as compared with an expected CAGR of 6.7 per cent for world polyester demand. Polyester demand is expected to increase largely due to an increase in fabric and apparel exports from China and India.
Supply of PSF is expected to increase as China plans to add 3 million TPA of new polyester capacity. In 2000, China s polyester capacity was around 4.9 million TPA. With the increase in domestic polyester capacity, imports of polyester by China are expected to decline. Hence, operating rates of polyester manufacturers in South Korea and Taiwan are likely to decline. By 2005, world total production of PSF would be 10.29 million tons and capacity would be 12.06 Million tons, where Asia will account for more than 70 percent of the capacity.
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