A. POLYESTER & POLYPROPOLENE MULTI FILAMENT YARNS:

DEMAND OUTLOOK – POY/ PFY

International scenario

In 2001, demand for partially oriented yarn (POY) was affected due to a slow-down in growth in the world economy. (During the 1990 to 2000 period, demand for POY increased significantly, at a CAGR of 11.07 percent) However, in the long term, demand for POY is likely to increase due to an increase in usage in industrial applications and an increase in the economic growth rate. During the 2001 to 2005 period, world demand for POY is expected to increase at a CAGR of 6 per cent, to 13.9 million tonnes, due to higher growth rate in Asia.

In Asia, demand for POY is expected to increase due to an increase in the exports of apparel and value-added textiles from China, and an increase in demand from the industrial segment. (Source: CRIS Infac)

Domestic scenario

During the 2001-02 to 2006-08 period, demand for POY / PFY is expected to increase at a CAGR of 7.8 per cent. The increase in demand would be due to:

(i) Increase in demand from the industrial segment
Demand from the industrial segment is expected to increase at a CAGR of 20 per cent during the period (2001-02 to 2006-07). POY is most suitable for industrial fabrics due to its properties, such as high tenacity and strength. Demand is expected to increase from segments such as:

(a) Tyre cord and protective airbags in automobiles
Heavy denier industrial filament yarns of polyester, ranging from 400 deniers to 2,600 deniers, are increasingly replacing nylon yarns in tyre cord applications. Polyamide is preferred in applications that require greater flexibility and energy-absorbing capacity. However, it is priced higher, and is being replaced by high tenacity, high modulus polyester yarns that offer a comparable combination of properties for applications in tyre cord and protective airbags in modern passenger cars.

(b) Ropes and cordage
A new application of high tenacity and high modulus polyester filament yarn is the high-performance ropes for offshore oil-drilling platforms. In this application, polyester, in combination with other jacket fibres, is used as a core for imparting strength to very large diameter ropes used for anchoring offshore-drilling platforms to the ocean floor. Given the high strength to weight ratio, fatigue resistance, abrasion resistance, and low price-performance ratio of polyester, it is expected to eventually replace steel cables in this application.

(ii) Increase in demand from the specialty fabrics segment
Demand from the specialty fabrics segment is expected to increase at a CAGR of 20 percent. (Specialty fabrics offer better properties to POY and have a premium value). In spite of a significant increase in the industrial and specialty segments, demand for POY is expected to increase at a lower rate. The growth rate would be lower due to a low growth rate in the apparel segment, which accounts for around 62 per cent of the total POY market.

(iii) Expected improvement in the price competitiveness of POY / PFY
Prices of POY / PFY, cotton yarn and other blended yarns are expected to increase. However, the increase in POY / PFY prices is expected to be lower than that in the other competing yarns. The price competitiveness of POY / PFY could increase further if there is a reduction in the excise duty on raw material and POY. (The excise duty on POY is expected to decline from 28.60 per cent to 18.4 per cent by 2006-07. The reduction in the excise duty would result in an average decline of Rs.11 per kg in POY prices (and hence, PFY prices) in 2001-02). In 2001-02, the average price of PFY (80 denier) was around Rs.97 per kg, as compared with the ex-factory price of cotton yarn (60s count) at around Rs.127 per kg and nylon filament yarn (NFY) price of around Rs.169 per kg.

(iv) Low availability of domestic fibre/yarn:
According to CRIS INFAC, during the 2001-02 to 2006-07 period, the increase in the supply of cotton, viscose staple fibre (VSF) and polyester staple fibre (PSF) is expected to be restricted as compared with the increase in domestic demand. The existing capacities have been operating at a capacity utilisation of around 90-95 per cent. In addition, no significant capacity additions have been planned. Cotton availability would be restricted, as the increase in cotton crop would largely be due to an improvement in the yield, and not an increase in the area under cultivation, as in the past.

(v) Favourable changes in Government Policy
The POY / PFY industry started showing the first signs of an upturn towards the beginning of 2002. This recovery was on account of certain initiatives taken by the Government of India that resulted in the following amendments in the tax legislation:

• Reduction of custom duty on import of Polyester Chips from 38.50 % to 25 % and retention of custom duty on import of PFY/ POY at 20 % thereby correcting the anomaly in the custom duty structure to a large extent. (Budget 2001)
• Imposition of Anti-Dumping Duty by the Government of India (vide Notification No. 15/2002 – Customs dated 08/02/2002) on import of POY from Taiwan, Thailand, Indonesia, and Malaysia.

(vi) Lower per capita consumption
The average per capita consumption (PCC) of fabric in India is much lower than in its neighboring countries. India has a huge potential market, given that its PCC is as low as 1.4 kg as compared China (5 kgs), Pakistan (3 kgs) and Indonesia (5 kgs). India has the advantage of a large and growing domestic market, and a good GDP growth.

(vii) Rapid urbanization- higher spend on clothing
In India, out of the total population, about 70% is rural. Behavioral patterns suggest that most of the fabric demand in this segment is need-based. The urban demand, on the other hand, is also driven by fashion trends, and favours more sophisticated textiles, and variety in designs and colours. The average urban spend on apparel is higher than rural spend. However, over the years, the clothing pattern in India has shifted. Men’s clothing consumption has moved from the traditional cotton based wear to synthetic fabrics. Cotton dhotis are giving way to trousers (mostly made of polyester or polyester blends). Likewise, women are moving from cotton saris to synthetic saris/dresses.

(viii) Levy of Anti-dumping duty on imports
Levy of Anti dumping duty on imports of POY to lower threats of import leading to availability of better contribution to domestic manufacturers.