Polymer prices are likely to rise by 10 per cent in the wake of a sharp increase in crude oil prices. This is already prompting flexible packaging material manufacturers to shift to value added products.
“Polypropylene prices tend to move in the direction of crude prices with a lag of about a month. Thus, we estimate at least a 10 per cent spurt in polymer prices in the next four weeks,” said Neeraj Jain, finance head at Cosmo Films.
“Flexible packaging material manufacturers work on a cost-plus model. Hence, a volatility in crude oil prices is completely passed on to the client,” said a senior industry leader.
Operating earnings have dropped for most of the other companies in the flexible packaging segment, due to pressure in commodity films’ gross margins.
The industry had embarked on the next phase of expansion, with the end-user industry driving healthy demand growth; flexible packaging has been seeing a growth wave over recent years in India.
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Source: Business Standard