HPL Witnesses Lower Demand For Its Products - Sep 25, 2008

Haldia Petrochemicals Ltd (HPL) seems to have been trapped in the crossroads of short-term sacrifices for a longer-term gain. While a low naphtha price and weak rupee regime is welcome in the longer term perspective, in the short-run the company is facing a lower demand for its products leading to increasing inventory as purchasers are postponing purchases in expectation of slide in product prices. To add to the problem, the sharp decline in feedstock as well as polymer product prices is adding pressure on margins due to trade losses involved. The naphtha rates had declined from as high as $ 1100 a tonne to $ 750 in last two months. The company has revised its polymer product rates at least in 10 occasions between April and September 2008 as against about 11 revisions in the full year of 2007-08. As the company continues to function at 110 per cent capacity utilisation, HPL''s polymer product inventory has moved by nearly 25-30 per cent during the last one month as most of the downstream processors rationed their buys.