Jumbo plastic bag makers feel the pinch amid financial crisis

Jumbo plastic bag makers feel the pinch amid financial crisis

New Delhi: Manufacturers of bumper-sized plastic bags used for bulk transportation of grain, construction material and pharma products are facing the heat of the downturn with commodity trade sliding worldwide.

In the past three months, exports of these large bags with a capacity to hold between 100kg and 250kg—also known as “flexible intermediate bulk container" because they can be custom-tailored as per requirement—has seen a 25% decline in exports, according to Mumbai-based industry body Indian Flexible Intermediate Bulk Container Association.

About 90% of such bags are exported to the US, Australia and Europe, said Manoj Agarwal, the association’s president and managing director of Kanpur Plastipack Ltd, which makes three million bags a year. While demand for these bags has slowed in the short term, the long-term implications of the current financial troubles “is anybody’s guess", he said.

India is a small player in the segment with about 30 players in all, but companies such as Indore-based Neo Corp International Ltd and Chennai-based Jumbo Bag Ltd had lined up expansion plans to meet growing demand from abroad.

The global demand for these big-sized plastic bags has been growing between 5% and 7% a year for the past five years, Agarwal said. Domestic makers of pharmaceutical goods and carbon black, which is used in making rubber tyres, had also begun shipping out their supply in these bags.

“Logic tells us that it looks like the beginning of a slowdown but we will know in a couple of weeks," said Thiri Pasaw, secretary general of the Kolkata-based Association of Carbon Black Manufacturers.

About 51,700 tonnes of carbon black was exported during the six months ended September, a 2.7% increase over the previous six-month period, but lower than the 8,600 tonnes exported in September last year.

Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council (Chemexcil) located in Mumbai, said shipment of dyes and dye intermediates had already come down 6% to $510 million (Rs2,575 crore) between April and September. “Due to slowdown in the economy, prices have fallen. Therefore, market stocks are piling up," said Smita Samant, executive director of Chemexcil.

Prices of the raw material polymer have crashed from $2,500 to $900 a tonne since July. “While the price fall and a strengthening dollar are good for exports, sharp fluctuations are bad as customers want adjustments and slow down purchases," said Saurabh Kalani, managing director of Flexituff International Ltd, one of India’s largest producers—at 15 million bags—with customers in 40 countries.

Sunil Trivedi, managing director, Neo Corp, which produces 10 million bags a year, said the industry was also hit by declining construction activity world-wide. Demand for specialty bags used to pack food articles such as rice and cereals has, however, not been affected, he added.