Rising Polymer Prices, Freight Costs Squeeze Margins of Plastic-Making MSMEs: Report

New Delhi, Oct 29 (KNN) A sharp rise in polymer prices and shipping costs since the outbreak of the West Asia conflict has squeezed margins and strained working capital for micro, small and medium enterprises (MSMEs) manufacturing plastic products, raising the risk of higher consumer prices.

MSME margins have nearly halved as manufacturers struggle to pass on higher input costs to customers, according to four industry and company executives cited by Mint. 

The pressure has intensified since the conflict began on February 28, with rising crude oil prices pushing up polymer costs.

Brent crude was trading around USD 114 a barrel, compared with USD 72 when the conflict began. Industry data showed that prices of different polymers rose 16-41 per cent year-on-year in September, leaving several MSMEs short of cash buffers.

“The rise in raw material prices has made margins disappear,” said Kunal Jain, Managing Director of Noida-based ARK Polychem Pvt Ltd, which manufactures hoses and metal fittings. He said the company's margins had fallen to 10 per cent from 20 per cent before the conflict, Mint reported.

Polymer Prices and Import Dependence Add to Pressure

Polypropylene, used in household plastics, furniture and packaging, rose 41 per cent year-on-year to Rs 140 per kg in September. Acrylonitrile butadiene styrene (ABS), used in appliances, helmets and car interiors, increased 20 per cent to Rs 172 per kg, while polycarbonate, used in water bottles, eyewear and LED covers, rose 16 per cent to Rs 259 per kg.

India imports around a fifth of its annual polypropylene requirement, half of its ABS demand and almost all its polycarbonate requirement, leaving manufacturers exposed to global price movements.

Higher Freight Costs Strain Working Capital

Rising shipping costs have further increased expenses for importing raw materials and exporting finished products. A Delhi-based polymer maker said container freight rates had climbed to USD 4,500-4,800 from USD 800-1,000 in February, with rates even higher on riskier West Asia routes.

The company said its raw material consumption had fallen to 650 tonnes from 1,000 tonnes before the conflict as MSMEs cut production to manage working capital constraints.

Exporters are also facing order cancellations due to the conflict, adding to the pressure on small manufacturers.

(KNN Bureau)