WPC/PVC board prices have noted unexpected jump up to 20 percent within last 2 months due to gradual price hike of PVC resin and other raw materials happening due to several factors as discussed in the article by PLY REPORTER, since last six months. Prices have risen from Rs.75/- to Rs.120/- per kg. PVC resin is the significant raw material for making WPC/PVC boards, PVC Edge band Tape and PVC laminates, PVC Doors & Door Frames. How is the market facing this situation and what is the opinion of manufacturers? Here is a brief report.
THE RAW MATERIAL, PVC RESIN, AND ITS SHORT SUPPLY
As per various industry reports, PVC resin price is constantly rising and has seen even rise of 40% in the last 4 months, which has badly impacted the input cost of WPC/ PVC boards. The report says that the upward trend in PVC resin prices has been noted after second half of May. The increase was gradual; so the impact is quite significant that has reached upto Rs 45 per kg till 21st October.
Industry says that Reliance is a major domestic producer of PVC resins in India, along with other 3 manufacturers such as DCW, Phenolex and Sriram, besides imports from Taiwan, Japan, China, South Korea and Africa also. The disturbance of domestic as well as international supplies are said to be main reason of price increase of PVC resins.
Mr. B L Bengani, Managing Director of Indowud, who produces NFC boards, which are totally different than PVC Foam board or WPC products as available in the market said to The Ply Reporter, “India is a net importer of fitting grade PVC Resin required for manufacturing foam boards. Most Indian importers skip their purchase due to Covid-19, mean while, the major exporting companies have also undergone changes due to annual maintenance. Hence, there was huge shortage of PVC resin in India. This was the primary cause of increase in price for PVC resin.”
Mr Rakesh Agarwal, MD of Amulya Mica WPC blamed the domestic producers of PVC resin and said, “There is a scarcity of Raw material in international market, so Reliance is monopolizing the situation.”
Explaining the reason, Mr. Hardik Panchal of Hardy Smith said, “Prices of PVC in India has been increasing continuously since lockdown and till date overall increase is 55%. Resin has reached to a price level of Rs.115 from Rs 75/Kg. Formosa had to get two units to shut down after lockdown for an uncertain period. They have declared force majeure on 29 September for PVC supply. Because of this global supply of PVC is largely affected. It has impacted finished product costs like PVC- WPC boards, Doors and Door frames. Local manufacturers also are increasing prices and holding supplies.”
Mr. Naren Thakkar from Atlantic Polymers says that India imports more than 65 percent of its PVC consumption and internationally the prices are showing an uptrend. The raw material is in severe shortage currently as Indian importers had not booked the material due to covid-19. The ocean freight has also increased to double the current price affecting the cost of the raw material. In the current market scenario, even the Indian manufacturers who cater to 35 percent of the demand are taking advantage of the price rise.
India is a net importer of fitting grade PVC Resin required for manufacturing foam boards. Most Indian importers skip their purchase due to Covid-19, mean while, the major exporting companies have also undergone changes due to annual maintenance. Hence, there was huge shortage of PVC resin in India. This was the primary cause of increase in price for PVC resin.
WPC/PVC BOARDS THE HIGHEST JUMP EVER
Domestic WPC/PVC board producers are forced to increase the price two times in consecutive months. Mr. Deepankar Garg of Alstone WPC is of the view that WPC industry has experienced turbulent conditions due to COVID. Firstly, the lack of demand post lockdown and then as the situation started to improve it saw a sudden increase in raw material and equipment costs which is mainly due to the surge in freight cost because of COVID restrictions on international movements. Domestic increase of freight also contributed to its share in the price rise. The price rise in Quality Polymer price is the major factor for this increase. ALSTONE is committed to deliver the world class quality and service hence he was left with no option but to increase the price, he shared. The net impact on WPC price is 20% on finished product.
Mr. Rakesh Agarwal also backs the scenario and sees above 20 percent rise. Mr. Rajendra Shah of Century PVC opines that the primary reason behind price hike is sharp increase in cost of PVC granules, which makes big part of PVC board composition. It has run up by 40% in 3-4 months. He sees the impact is over 20%.
Mr. Vinay Agarwal, Director, Floresta says that the impact would be 100% on product cost due to the cost of main raw-material like PVC resin is increasing day by day due to shortage in the domestic market..
Mr. Ankur Hora, Director of Ecoste says that there are lots of reasons behind it, as importers have created a shortage in the market. So, there was deficit for two months. Now there is a shortage in local market so the price jumped to Rs.120/-. Secondly two months earlier, there was force majeure declared by the PVC companies internationally by way of declining the deal due to non-availability of goods. Also the logistic for inward raw material goods as well as FOR cost for sending to customers have observed variation of nearly 4% on an average. The third reason is over all the fixed cost is same and the production level is somehow less than the previous level. Fourth is other processing aids like fuming agents, lubricants have also observed the price rise of 8 to 10 percent. These are four reasons which have impacted the price of not only the PVC boards but also the PVC doors, door frames, wall panels etc in their aggregate difference in price. He has increased the price by 15 to 20%, as to this extent there is an overall impact for every manufacturers, provided they have not degraded the quality by adding calcium filler.
PVC RESIN - SCENARIO AHEAD
Seeing the international supply Scenario, the prices of PVC resin will not come down in another 3 months. Mr B L Bengani says that recent and sudden increase in price of PVC resin and other raw materials have created a panic among the producers. Dealers are not ready to accept increase in price, whereas - vendors of raw material are not ready to sell their product at a loss. Now the manufactures of PVC Foam Board are caught in between. It is a very tough time. Meanwhile, it’s all a passing cloud. However, he believes, the prices for PVC would come down for December/January shipment to some extent and stabilize with seasonal increase of little bit here and there. Mr Rakesh Agarwal says that there is no certainty about the normalcy in supply but it may be in the beginning of next year once the closed plants will start operation. Mr Shah views that the situation may improve by Q4. Current PVC cost is not sustainable. Similarly Mr Vinay Agarwal also expects to normalize the situation by end of January 2021.
Dealers and users is to stick to branded products that are committed to delivering standard quality especially during this challenging time as being price sensitive may result in inferior quality of product. Also, his advice is to plan their purchases well in advance and maintain sufficient safety stock as the demand is high due to heavy shortage. Continue supporting manufacturers with timely payments as this is the period where they will need it the most.
Mr Hardik Panchal is waiting for resuming back of Formosa shutdown facilities ASAP. But at the same time due to the declared force majeure, it looks little difficult to predict the time period for price situation to get normal. He expects it to get normal post Deepawali season or before December. Mr Ankur Hora says that he does not see the situation getting normal because the PVC price is not going to ease by January next year. He is hopeful that the price will be getting soft by February 2020. Mr Naren Thakkar also views that the situation is not expected to settle anytime before January 2021 as the new quantity allocations for November shipments are limited and the prices are also on the higher end.
INDUSTRY SEEKS MARKET SUPPORT
Boards’ manufacturers say that the PVC resin is the main raw material, the price of which has risen un-expectedly high, which are unfortunate for this sector. They are forced to increase the prices and have sought to accept this. Mr. Rakesh Agarwal says that the dealers should not go for panic buying. Now, they may be getting little advantage of transition period of rate increase implementation , but the burden of piled up stock will be more. Similarly Mr Shah’s message to dealers is not to do panic hoarding and don't sell without healthy margins. Few low quality local manufacturers may change composition to reduce cost. But that will have serious impact on quality. Don't get into low price trap for short terms gains.
Mr Hardik Panchal has sought for support to this situation by accepting price increase being requested from the manufacturers. He is sure that Indian dealers will co-operate for this sustainable products, as they only have created this huge market of PVC /WPC. Similarly, Mr Ankur Hora also appeals for supporting the manufacturers with cash, as the PVC, which was available on credit for one or two months is not available even on advance payment.
Mr Vinay Agarwal says that this is a turbulent time. He would request all dealers and users not to panic on price increases, the situation will be normalized very soon till that time he requests all dealers to cooperate.
Many new plants are under installation which will improve the supply side. Atma-Nirbhar initiative from Government has also led to end-users preference for Boards manufactured in India which has led to increase in market share of PVC/WPC Boards manufactured in India which earlier belonged to boards imported from China.
PVC based WPC is a recognized market in the country and there are thousands of users now in private and public sector. Product has its unique and unparalleled features like termite, borer, water and fire properties. Immediately we don't see any nearby alternatives so demand won't be a problem. But yes because of supply crunch from manufacturers and suppliers there can be some switch overs. It may give space to some products
THE FUTURE IMPACT ON WPC/ PVC BOARDS MARKET
Mr Hardik Panchal says that PVC based WPC is a recognized market in the country and there are thousands of users now in private and public sector. Product has its unique and unparalleled features like termite, borer, water and fire properties. Immediately we don't see any nearby alternatives so demand won't be a problem. But yes because of supply crunch from manufacturers and suppliers there can be some switch overs. It may give space to some products. Mr Rakesh Agarwal is confident that the product has matured in market. Everyone is anticipating that this situation is not going to last for long.
Hence, there are least chances of replacement by other products. However, the aspirant new users may defer the trial. Mr Vinay Agarwal opines that now, due to sudden increase in product cost, commercial customers like OEMs can opt for another alternative product, but there is no substitute product for actual WPC in the market if the end-user wants to go for quality product he/she will only go for actual WPC. Whereas, Mr Shah sees this price if sustains, may seriously impact on category growth.
Mr Naren Thakkar opines that it was a concern or thought he had that this would lead to space for alternative products however the reality is completely opposite. He has seen a surge in demand. The production of his company has been at a record high because there is a growing demand for this product. Many new plants are under installation which will improve the supply side. Atma-Nirbhar initiative from Government has also led to end-users preference for Boards manufactured in India which has led to increase in market share of PVC/WPC Boards manufactured in India which earlier belonged to boards imported from China. And besides, there are still no products that offer all features of termite, resistance, water-resistant, and fire-retardant properties at this price range. Due to all these reasons, he is quite optimistic about the future of PVC/WPC Boards in the market.
Sudden increase in price of PVC resin and other raw materials have created a panic among the producers. Dealers are not ready to accept increase in price, whereas - vendors of raw material are not ready to sell their product at a loss. Now the manufactures of PVC Foam Board are caught in between. It is a very tough time.
Mr Ankur Hora says that if any product price rises by 20% the alternate products definitely get advantage irrespective of the product category. The most important is quality and features liked by the customers as many of them ask termite/borer proof, or for exterior only the exterior friendly material should be there. In grills there is no substitute, so definitely there is no issue in these applications. In door frames also there is no issue with it compared to wooden frames which have lot of issues. So, if it observes the difference of 15%, people are still willing to pay, because the substitute, which is being offered, is not much reliable being wood, and that has lot of challenges that builders are realizing. The most important point in it is being government approved for many departments like CPWD, PWD, etc so there is no chance that they will use alternatives in place of it.