Why Is There Such A Drastic Price Rise In The Plastic Industry ?

Plastic Industry

Plastic Industry is a very vast and dynamic segment of business. In general we look at the plastic bottles or plastic waste that we throw into trash. This is not the plastic industry that’s present on this globe. Plastic industry comprises a whole lot of products used as direct material or raw material in the production, packaging and transportation industry. Plastic’s major usage is in the packaging industry but it is also used in production, manufacturing and every aspect of life. Surprisingly, some plastic raw materials are actually by product of Crude Oil. Hence any changes in crude Oil affect the plastic prices as well.

From toothpaste to footwear everywhere plastic is used. I.e toothpaste covers and footwear packaging or polythene in which they come to us. Hence plastic is present everywhere we look for. Lets understand the usage of plastic into various sectors.

Plastic Usage in various Industries

Plastic dana (granules) are used as raw material for production of various plastic commodities. The most commonly used material in the transport industry is Box starling (to cover the boxes and tighten them), plastic Twine (A thread like substance for packing small boxes), Packing clip carriers (clip used in tightening the box packaging and the container in which cars come are made from plastic).

For the textile industry plastic is like the backbone for their survival. Every cloth packed or every cloth made needs plastic packaging in form of PVC pouches or 51 micron plastic bags or HDPE roll for wrapping the Box in which clothes are transported, H.M roll which is used as an extra protection from Spoilage or water damage etc.

For Metal industry the major usage comes from Bubble rolls which are made from plastic raw material. These bubble rolls are wrapped around the machines to protect them from damage while their journey towards the end consumer. Also the metal industries use PVC sheets for ground protection while manufacturing the spare parts and the machinery.

In the construction industry as well plastic is used in the form of chicken mess or Cello tapes. Cello tapes are used as a bonding material at the end of the construction and cement appliance.

Hence plastic is used in majorly all the segments of business and work. From stationery to construction plastic is a very important material for meeting the daily work requirements.

Price Hike in Which Materials

The price hike that has been going on since the last month includes major price hikes in BOPP, PP, PVC, LDPE, HM etc. material. These materials are the major constituents for the end product formation like bags and other substances.

The price hike has been very wild in the last week. As per the reports from polymerbazaar.com and reliance price lists the prices have gone up by minimum of 5 Rs. per Kg every day in the previous week. This averages to approximately 25 Rs per Kg for one single material which is BOPP. Other prices have also shown upside momentum and hence the prices have increased from a range of 2 rs to 5 rs per raw material everyday in the previous week.

An interesting fact to know about the situation when there is a price hike is that the companies declare shut down and show lack of material for supply. This results in artificial scarcity and the prices that have hiked are somehow influenced by such moves as well. The hoarding or artificial scarcity is one of the major constituents in this price hike rally.

Price Hike and End Product Effect

In case of BOPP material the end product is directly affected as the bags are made directly after cutting the roll and folding it. Hence the prices per kg would show a direct impact on the prices of bags available in the market. Also due to the government’s ruling on 51 micron usage the bags have become heavy in weight causing less production per kg. This would directly impact the over-bag pricing of the product.

Now in LDPE and HM material the prices have gone up since the first week of February. As per the news and various articles the businessmen have not received their raw materials ever since the beginning of February. This means that the entire business cycle has came to a halt and the major sufferers of this is the Food and Textile industry. The reason is Food industry uses H.M. material in maximum capacity for packaging. The textile industry on other hand uses the material for wholesale selling of their readymade garments. Hence these two sectors have also witnessed price hike per piece due to increase in prices of raw materials.

Why Are Plastic Prices Rising So Drastically?

Plastic processes have been witnessing a continuous upstream in their pricing factor. There are 2 major reasons driving this rally. One is the government’s update in their export policy. The government has been constantly expiring the plastic raw material and has increased the exports to the U.S.A and other countries. This Means that there is a shortage in domestic availability of plastic. This directly affects the prices of plastic on the basis of the demand and supply theory.

Plastic industry has major production across Daman and Mumbai area. The reason is the sea-shore and the pure plastic production done over there. The plastic industry is set up in these places due to the excellent quality of product available on manufacturing. The weather and the atmosphere is very supportive for manufacturing in these locations. Hence these manufactures are working in full capacity yet they have shortage of material for fulfilling the needs of domestic users.

Another reason for such a price rise is Artificial scarcity created by the trades and local distributors. The Distributors always take the advantage of such a situation and a situation of artificial scarcity. This results into price hike due to shortage of supply and at the end of a rally the distributors offload the material in full capacity. This creates a drastic price drop as well in the raw material. The sufferers are none other than local shopkeepers and vendors who depend on daily selling of raw material for their bread.

Why Is Plastic Prices Rise So Much Important ?

Well if we look at a greater picture such a price rise does not affect the buyers. But in the long run and higher quantity selling such pricing is a risky factor. The reason is if the price rises today then the wholesalers who pickup plastic in bulk would pay higher price. This will affect their packaging costing and the rate of those finished products would increase at length. The retailers don’t face much problem with this price hike as their margins are pretty huge. The main problem is faced by the wholesaler and buyers in quantity. Hence such a price rise affects the pricing of every industry that is involved with the plastic and packaging material in one way or another.

Also one should note that at one point of time water was available at 5 Rs. per bottle. The pricing has changed to 10 Rs per bottle. The reason behind this was not only the shortage of water supply but also the rise in packaging material prices and labeling racing. Hence every small factors count into costing factor of products. Scholastic price rise is a very sensitive topic for the businessmen who deal into bulk buying and bulk selling. Hence such a price rise affect the businessmen and the consumed in different ways.

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