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RIL polyester segment in grip of slowdown
Jan '14
Given the slowdown in global market and volatile feedstock prices, Mukesh Ambani-owned Reliance Industries saw its polyester segment taking a hit in the third quarter ended December 31, 2013.
The country’s largest private sector enterprise, which has surprised Dalal street by reporting better-than-expected third quarter earnings, has witnessed that the domestic demand for polyester products remained flat on Year-o-Year basis.
During the nine month ended December 31, 2013, domestic polyester demand grew by 4 percent on Y-o-Y basis, led by 5 per cent growth in Partially Oriented Yarn (POY), 1 per cent growth in Polyester Staple Fibre (PSF) and 2 per cent growth in Polyethylene terephthalate (PET).
The demand remained slow and cautious due to difficult market conditions owing to volatile feedstock prices, currency rate fluctuations and liquidity crunch. However, PET demand was strong in 3Q FY14 as players replenished inventories for the oncoming summer season. Adding to it, Fully Drawn Yarn (FDY) markets also witnessed good growth amidst growing applications.
The company, which has operations that span from the exploration and production of oil and gas to the manufacture of polyester products, reported a 0.2 per cent growth in its net profit for three months ended December 2013 at Rs 5,511 crore as compared to Rs 5,502 crore in the same period a year ago. 
Feedstock prices remained highly volatile during the quarter. Paraxylene (PX) contract prices remained unsettled during the last two months of the quarter, which further led to uncertainty. PX deltasin 3Q FY14 were at USD 532/MT, a decline of 5 per cent on Q-o-Q and 14 per cent on Y-o-Y basis.
Several PX capacity additions planned in 2013 have experienced delays and are now likely to come on stream in 2014. These delays are leading to uncertainty on supply and are keeping markets unsettled.
Similarly, uncertainties in the capacity growth in the Purified Terephthalic Acid Market (PTA) market have kept margins under pressure. PTA operating rates declined in 2013, and with further capacities expected in 2014, markets continue to be subdued.
Polyester prices witnessed smaller fluctuations compared to fibre intermediates. Weak intermediate prices during the quarter led to higher polyester margins. POY, PSF and PET deltas improved on Q-o-Q basis by 3 per cent, 26 per cent and 21 per cent respectively.
During 9M FY14, production of fibre intermediates (PX, PTA and MEG) was around 3.6 MMT, stable over last year. 9M FY14, polyester (PFY, PSF and PET) production volume was at 1.2 MMT, slightly down amidst planned shutdowns. 

Fibre2fashion News Desk - India

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