The price hikes announced are significantly lower than the corresponding rise in international prices. As domestic prices are largely determined by movements internationally, it leaves room for further price hikes in the short-term, analysts said.

Reliance's PVC prices have been raised by 23 per cent, while polyethylene and polypropelene prices have been hiked by 14 per cent and 21 per cent, respectively. Internationally, polymer prices have gone up by 25 per cent to 29 per cent.

In polyester products, the price revision has been lower. Prices of POY and PSF have gone up by 7 per cent and 6 per cent respectively. Prices of intermediaries PTA and MEG gone been revised upwards by 10 per cent and 16 per cent over September 15 prices.

Last month Reliance raised polymer prices twice, with effect fromSeptember 1 and 15. Analysts said the price increase was led by increasing demand from the domestic consumers. They added that the current spurt in domestic demand has a lot to do with the slowdown of imports and also because consumers have been buying up in excess quantities as a safeguard against possible price hikes in the future.

Internationally, polymer prices had been declining for almost the whole of last year and the present round of price hikes will be a shot in the arm for Reliance in the second half.

Analysts say that a further rise in international polymer prices is likely. As a result of the south-east Asian crisis, several of the aggressive petrochemicals companies,like Polysindo of Indonesia and Daelim of South Korea are busy restructuring their debt and setting their houses in order.

Insight

Room for appreciation

The several hikes in polymer prices for Reliance Industries comes at a time when the company has achieved complete integration. News reports qouting analystshave said that Reliance Industries gets its naphtha from Reliance Petroleum at $110 per tonne as compared to the international price of $220-$230 per tonne.

In such a case, profitability of the company is expected to increase considerably given the rise in product prices. With the difference in the domestic and international prices of polymer, there is still room for appreciation in domestic prices.

Shishir Asthana