Packaging Firms Zoom Over High Demand, Raw Material Shortage Send Ripples to Film Prices

Shares of containers and packaging film manufacturing firms hit record-highs on Monday amidst strong market prospects due to increased consumption by the end-consumers. Stocks of India’s major packaging film producers-Jindal Polyfilms, Uflex and Cosmo Films rallied between 5.5 per cent-10 per cent in the intra-day trade on Monday.

As per the industry experts, the upsurge has been under the combined influence of robust demand from the food packaging sector and boom in the e-commerce amidst the Covid-19 pandemic. The packaging industry has shown phenomenal growth in the past 6 months due to an all-time rise in the demand for packed food, pharmaceutical products and other essential goods with a strong drift in the consumer sentiments towards health and hygiene. “Markets are keeping all eyes on the current stocks which have gained by double digits in the month of March itself”, stated a key respondent working in a film manufacturing firm.

Rising enquiries for packaged food deliveries and growing e-commerce requirements and organized retail plastic packaging have risen the per capita consumption of packaging films in the country. Complementing the soaring demand fundamentals and frenzied investment activity in the Indian packaging industry, players are eyeing on strong rise in margins on the back of better product mix and a double-digit revenue growth in FY21.

India’s leading packaging solution provider, Jindal Poly Films is engaged in the production of Biaxially-Oriented Polyethylene Terephthalate (BOPET) and Biaxially Oriented Poly Propylene (BOPP) Films, Cast Poly Propylene (CPP) Films, Thermal Lamination Films and Non-Woven Products such as Interlining, Disposable Fabrics and Industrial fabrics, etc. The company, in April-December period (9MFY21) of the financial year 2021, reported 60 per cent year on year (YoY) growth in its consolidated net profit which it reported at INR 5600 million.

As per ChemAnalyst Pricing Intelligence, due to strong margins and high profitability, prices of BOPP and BOPET in India have gone up by more than 17.5 percent and 5 percent, respectively within Q42021. Raw material shortages have exacerbated rising production costs. Almost all public sector units such as Indian Oil, RIL, GAIL, OPAL, Haldia Petrochemicals and MRPL have positively revised their PP offers for March. PTA and MEG are also running bullish on account of persistent tightness in the material at the global level. Therefore, the raw-material and product spreads have gained by a significant percentage.

As per the market forecast, the supply of raw materials is likely to remain tight for at least till May, therefore prices may take longer than anticipated to trace back to the desired levels.