Mumbai: Purified terephthalic acid (PTA) producers, including Reliance Industries Ltd (RIL) and Indian Oil Corp. Ltd (IOC), could see their margins narrow as the government has abolished anti-dumping duty on the chemical—a raw material used in the production of polyester staple fibre and filaments.
“PTA is a critical input for textile fibres and yarns, and its easy availability at competitive prices is desirable to unlock immense potential in the textile sector, which is a significant employment generator," finance minister Nirmala Sitharaman had said while announcing the budget.
The textile industry has been demanding the removal of the anti-dumping duty imposed on PTA to reduce the production cost and enhance global competitiveness.
“This announcement is a boost for PTA users and the entire man-made fibre textiles and clothing segment," said the Southern India Mills’ Association chairman Ashwin Chandran.
The removal of the anti-dumping duty, according to Chandran, would help India enhance its global competitiveness, boost exports and also enable the domestic producers to compete with cheaper imports.
The anti-dumping duty, imposed in July 2016 and July 2019, has now been revoked on PTA imported from China, Iran, Indonesia, Malaysia, Taiwan, Korea and Thailand. Depending on the country of origin, anti-dumping duty on PTA ranged between $27 and $160 per tonne.
“For PTA producers, the elimination of anti-dumping duty would cut the current margin of about $120 per tonne by about 20%," said K. Ravichandran, senior vice president and group head (corporate ratings) at Icra Ltd.
RIL and IOC did not respond to email queries till press time.
Owing to its properties such as weathering resistance, strength and flexibility, PTA’s usage is growing across various end-use industries such as food and beverages, electronics, apparel, home textiles, carpets, and industrial fibre.
According to industry officials, this move will help further the ministry of textiles’ vision to increase the textile business size from the current level of around $169 billion to $350 billion by 2025 and to $650 billion by 2030.
Over the past six months, new capacities of five-six million tonnes were added in China, which has pulled down the spread between paraxylene and PTA to $120-150 per tonne.
A spread is the difference between the price of a raw material and the price of a finished product created from it.
China is a very big player with huge upstream and downstream PTA capacities, which added to the pressure on PTA margins.
“With the anti-dumping duty abolished, we assume the effective spread earned by a company will be lower. Domestic capacity for PTA would be closer to about 6 million tonnes. And with RIL enhancing capacity in a big way, it could be impacted significantly," said an analyst tracking RIL, requesting anonymity.
RIL is the biggest PTA producer in the country, with a domestic capacity of 4.4 million tonnes per annum.
On Tuesday, RIL’s shares rose 2.89% to ₹1,425.85 on BSE, while IOC surged 5.37% to ₹113.85.