Production

Production of filament yarn was up 5.28% in March 2008 as against a 15.21% growth in March 2007. Production of filament yarn jumped 9.28% in April-March 2008 compared with 16.37% in April-March 2007. Output of nylon tyre cord increased 2.98% in March 2008 as against a 37.78% increase in March 2007. It gained 14.18% in April-March 2008 compared with 29.22% increased in April-March 2007.

According to Ministry of Chemicals and Petrochemicals, Indian synthetic fibre production zoomed by 17.7% to 22.44 lakh tonne in FY 2006-07, but the pace of growth decelerated therefrom to 10.6% at 24.81 lakh tonne in 2007-08.

WPI

The wholesale price index (WPI) of MMF fall 0.43% in April 2008 as against 4.28% growth in April 2007. Prices of polyster staple fiber fell 6.69% in April 2008 compared with a 0.10% negative growth in April 2007. The WPI of viscose filament yarn gained 1.75% in April 2008 as against a 4.89% fall in April 2007. The WPI of polyester yarn declined 3.91% in April 2008 as against a 6.27% gains in April 2007. The WPI of VSF was up 10.51% in April 2008 as against a 14.09% rise in April 2007.

SRF has entered into an agreement for acquisition of Thai Baroda Industries, which has about 12000 tonne of Dipped Nylon Tyre Cord Fabric (NTCF) capacity in Thailand. As a result, the total NTCF capacity of SRF will increase to 65000 tonne, making SRF the third largest tyre cord manufacturer in Asia and fifth largest in the World. The acquisition cost is estimated at Rs 100 crore, but in SRF has to inject working capital in addition.

Healthy growth in Polyester segment

India is witnessing healthy growth in demand for polyester. Meanwhile, the government has reduced the Central Sales Tax from 3% to 2% effective from 1^st June 2008. This should benefit frontline players, who have plant in a few locations, but sell across the country,

In the entire MMF space, only polyester segment is steering ahead, and improving competitiveness, despite spike in crude oil prices and their derivatives. Thanks to rise in cotton prices, and depreciation of Indian rupee, the global cotton yarn prices have gone up, which has facilitated improvement in the pricing power and demand growth of polyesters. However, the same is not true for most other man made fibres including Nylon filament yarn, acrylic yarn etc, which are reeling under sharp fall in margins on spike in input costs.

Outlook

With Crude oil prices flaring up past US$ 130 per barrel, the MMF sector is seriously impacted as it uses crude oil based derivatives. But within the MMF sector, the polyester sector has been racing ahead, and is able to pass on the rise in costs to customers, thanks to its improving competitiveness in the light of rise in cotton prices. Indian polyester and blended segments are likely to perform better, thanks to growing demand, increasing landed cost of imports due to depreciation of rupee and better overseas demand. India’s global competitiveness is improving, thanks to depreciation and Indian rupee and appreciation of Chinese Yuan against major currencies, especially since April 2008. Also, the cost of production is going up rapidly, including labour and power costs, in China, and this can also facilitate better pricing environment globally, which augurs well for the domestic MMF players in general and polyester producers in particular.