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PLASTIC WOVEN SACKS
Raffia
CONTENT
Highlights
Polymers
Polypropylene
Plastic woven sack market (RAFFIA)
Plastic woven sack Vs Jute sacks
End user consumption of Raffia
SWOT Analysis of Raffia market
Conclusion & Recommendations
HIGHLIGHTS Overall annual consumption of woven sacks 2008-09
Cement Sector: 430 Cr
Fertilizers Sector: 74 Cr
Food Grain Sector: Cement contributes about 37% of total Raffia demand of 674 KT (2008-09)
Bulk Packaging: Sector wise demand – 674 KT
HIGHLIGHTS
PP consumption might get affected due to increase usage of RMC in cement sector in near future.
While PE has shown a demand in Fertilizers and food grain sector Raffia manufacturers earn ample profit from unorganized sector. Export will show growth in future. Foreign manufacturers are targeting Indian market.
Raffia diversified applications: potential of 163k.tons (2008-09)growing at 9%
POLYMER
(in KT) India World India's share
Building Blocks
Ethylene 2816 117745 2.3%
Propylene 1999 71303 2.7%
Polymers
PE 1975 73596 2.4%
PP 1990 44668 4.4%
PVC 1002 37606 2.6%
PS 423 15525 2.4%
ABS 91 8616 0.9%
Polymer Capacities -2008 India Vs World
POLYPROPYLENE MARKET
Polypropylene market : applications (2008-09)
Cement 38FIBC 19Sack Exp 9Foodgrain 6Lamination 2Others 26
Expected polypropylene market trend
RAFFIA INDUSTRY
Some of the reasons for this shift are as follows: Change in market preference. PP has low density among all synthetic polymers. PP has direct softening point and thus a direct support for its use in
cement and where there is hot filling of certain products. PP has a higher coefficient of friction and hence higher stack ability
during storage.
0
100
200
300
400
500
600
700
800
900
1000
2004-05 2006-07 2006-07 2007-08 2008-09
PP
PE
Total
A) Growth trend in India
RAFFIA INDUSTRY
37.7 38.3
3.2 1.8
9.8
22
36.9
43.7
1.9
8.9
0
5
10
15
20
25
30
35
40
45
50
Ahmed
abad
Kolkat
a
Chand
igar
h
Daman
Delhi
Hyder
abad
Indo
re
Kanpu
r
Mad
ras
Mum
bai
B) Raffia capacity additions 2008-09
205 KTA capacities added in North-East, West & South.
C) Customer satisfaction level
The main factors guiding the source of raw material are:• Quality• Availability• Cost
RAFFIA INDUSTRY
Factors influencing prices
• Fluctuations in the crude oil and natural gas prices
• Economic growth of the major polypropylene consuming
countries like USA and China
• Domestic industrial growth and development
• Demand for consumption in the international market
• Government policies and regulation
PLASTIC WOVEN SACKS VS JUTE WOVEN SACKS
Sr. No Description Jute Bags PP Bags
1 Mass of bag 665gms 135gms
2 Moisture regain 22% Nil
3Max oil content on dry de-oiled material basis 3 per cent max by wt. Nil
4Basic price per bag (excluding sales tax)
Rs.17.05 (Average of last 5 months & incl. of excise duty)
Rs.10.44(incl. of 16% excise duty & freight)
5Cost of packing 1mil.Mt of wheat/rice
Rs.37.50crs @ Rs.18.75 per bag (ie.Rs17.05+ Rs.1.70)
Rs.20.88crs @ Rs.10.44 per bag
6
Packing cost of 20mil.Mts of wheat by FCI Rs.750.00cr Rs.417.60cr
7Packing cost of 20mil.Mts of rice by FCI Rs.750.00cr Rs.417.00cr
8 Aeration Good
PLASTIC WOVEN SACKS VS JUTE WOVEN SACKS
9 Problem/Quality complains
Supplies are generally not strictly as per delivery schedule and have been carried over to next months in the past in spite
of pre-inspection by Quality Assurance Wing of DGS&D
complaints about poor texture of bags leading to spillage of
grains and variations in length /width of bags are there.
Besides complaints about damage by water/ rains during transit are also very frequent.
Good, no mould, cake formation, condensation or
musty smell on rice, wheat Raw material available in plenty. No disturbance in supply schedule.
The quality checks may be easier to enforce on PP bags and the possibilities of bags
getting damage by water/ rain during transit will be lesser.
10Other advantages/
disadvantages
1. Not resistant to water, seepage and contamination
2. Contamination of food grains by jute batching oils.
3. Cost of transportation is much higher than of PP bags which are almost 1/5th in weight of jute bags
4.Rough handling may result in
burst/tear of bags
1. Resistant to water, seepage and contamination is very high
2. No J.B.O. Present and therefore no such possibility of contamination of grains with JBO
3. Cost of transportation are
much lesser than the jute bags
4. During trails no burst/tear of
bags so far noticed on rough handling of bags.
END USERS A. Cement industry
• No. of player – 54• Capacity-215 MMT• Large cement plants-136• Mini cement plant-382
Top 6 players constitute about 45% of the production capacity.
END USERS
Demand-supply scenario in cement industry projecting comparison between total pp consumed Vs RIL pp consumption
380
462513
627600
271
326
380
469505
0
50
100
150
200
250
2004-05 2005-06 2006-07 2007-08 2008-09
0
100
200
300
400
500
600
700
cement capacity(mn tonnes)
cement consumption(mntonnes)
pp consumption( kt)
Ril pp consumtion(kt)
KT
MMT
Threats to Polypropylene Consumption
• Increase in unpacked cement consumption by 11% compared to previous year
• RMC has already eaten into 2% market share of polypropylene consumption
• Increase in Freight costs by 5%
• Increased use of paper / AD star bags and Bulk Jumbo Bags
• Environmental challenges / Change in law / Emission norms.
• Lesser availability of Raw Materials for production of polymer bags.
• Expected fall in cement prices (15-20Rs. per bag) might effect polypropylene consumption.
END USERS
Opportunities
• Growing Infrastructure
• Government norms
• Opportunities in rural market
END USERS B. Fertilizer industry
Installed capacity – 184.2lakhs MT/AnnumOut of which 124.61lakhs MT is for nitrogen and 59.59lakhs MT is for phosphate.No. of fertilizer plants Large size: 57Small and medium size: 78
Manufacturing
units
Sr. No. Sector Capacity (lakh MT) Percentage share
Nitrogen
Phospha
te Nitrogen
Phospha
te
1 Public sector 35.98 4.21 28 7.74
2
Cooperative
sector 29.41 10.3 23.58 16.02
3 Private sector 59.19 45.09 48.42 76.25
Total 124.58 59.6 100 100
END USERS
The factors deciding the choice of the suitable packaging material:
• The hygroscopic nature of fertilizers
• The condition of usage such as dampness etc
• Prolonged storage of fertilizers due to seasonality
• Subsidy borne by government of India due to relative cost (applies to Urea)
HDPE bags are used for packing as compared to PP bags
• PP bags have low shelf life
• PP bags cannot be protected from harmful UV rays
END USERS Per bag cost analysis of PE/PP bags as on 1st June 2009.
cost analysis PE PPraw material cost/MT 69.4 61.3cash discount 0.6 0.6 68.8 60.7 excise duty+ E Cess 0.082 0.082 74.4 65.7trade discount 2.0 3.0 72.4 62.7 per kg cost 72.4 62.7
Bag costingraw material 0.88 0.88 63.7 55.2filler Rs26/kg 0.12 0.12 3.1 3.1conversion cost 13.0 13.0cost/kg 79.8 71.3 U.V. Stabilizer cost 0.0 1.5cost/kg 79.8 72.8 weight of bag 128.0 117.0
total cost/bag 10.2 8.5
Note:
• To a processor QD & AQD along with MOU discounts are also paid. If we want to calculate exact cost of production then the same also need to be deducted from resin price afterwards.
• Also we have not assumed price differential of LLD/LD or PP/L/LLD being used for lamination of between the 20-25g. This is virtually very low.
• While quoting price customer will not pass on the cash discount & TD to processor hence his quote will increase by that amount too.
C. Fertilizer industry
END USERS
• Current domestic food grain and pulses production is 470 million tones
• Rice and wheat contributes 77% of total food grain production.
• 30-40% food grains is procured and stored by Govt. agencies and rest by
private operators.
• Loss due to poor storage is as high as 5%.
Need for Storage of Food Grains:
• Storage is necessary for uniform supply
• To preserve them for future use.
• Storage starts immediately after procurements of food grains.
• To provide a reserve for contingencies such as droughts, floods, and war.
• To speculate on high prices either in domestic or in the export market.
END USERS
Procurement and losses while Storage:
• About 30-40% of the grain produced in the country is stored by Government and
private agencies.
• 60-70% is retained by farmers for household use and consumption.
• The loss of food grains stored by Govt. agencies is less than 1%. But at the
farmers end it can be as high as 5% as a national average.
(FCI) Maharashtra region storage capacity and monthly requirement
A shift in packaging pattern observed in private agenciesLarger pack to the medium sized packing(10-25kg pack size)
END USERS Factors that influence packaging in this industry are:
• Requirement to prevent contamination of packed material.
• Packaging material must be moisture, rot resistant.
• Good shelf life even under exposed and covered storage.
• Better cost economics, Easy availability
• Subsidy borne by government
Reasons for not using Plastic bags for packaging till date
• Fumigation of grains - compact nature of plastic bags
• Availability of Aluminium Phosphide tablets (insecticides)
• Sliding down and down gradation.
• Storage stack 18-22bags reduced to 13-14 bags.
SWOT : RAFFIA INDUSTRY
• Growing industrialization in India, leading to more demand of sophisticated packaging by end customer.
• The demand is directly related to demand of end product so till time a new better material does not come to replace the position is safe.
• New big player entering the market.
• Training required for handling.
• Reservation of jute packaging in food grains and other sectors which can be a rich market.
• Manufactures lack commercially viable units.
• Low resale value & resale only possible 2-3 times.
• High capacity production required in order to earn profit.
• Exports provide a sound market.
• Poor showing of jute industry.
• Increasing production of cement, fertilizers etc. Food grain sector can be a huge market
•Poor quality of product might affect good export potential
International fluctuation in petroleum products affects industry
High dependency on labors
STRENGHT
OPPORTUNITIES
WEAKNESS
THREATS
PORTER'S FIVE FORCES MODEL
Suppliers
Reliance Industries Limited
(76% of the market share)Haldia Petrochemicals(15% of the market share)Import(9% of the market share)
Potential Entrants
Indian Oil Corp. Limited
Foreign player (raw material)
Buyer’s views
Availability, Cost, Quality of the raw material.
Low profit margins due to high over head charges
.
Substitutes
cementoReady mix cement
oAD start bagsFood grains
oMulti layered polyethylene bags
FertilizeroPolypropylene bags
Polypropylene Industry
Fluctuations in the crude oil and natural gas prices
Economic growth of the major polypropylene consuming countries like USA and China
CONCLUSIONS
• Foreign Raw material manufactures are targeting Indian market, so the share of import is expected to increase.
• Domestic market is more price sensitive than quality sensitive.
• Overall, for most of manufacturers, quality of the raw material does not play an important part. Main factors they consider while choosing raw
material is cost and availability
• Cement serves as an important market for polypropylene plastic woven bags.
• Polyethylene demand is increasing as compared to Polypropylene in food grain and fertilizer sector.
• Demand for raffia grade for plastic woven sack application is expected to grow at a CAGR of 9.2 percent to over 721.842 tones
CONCLUSIONS
• Domestic market also offers a lot of opportunity from unorganized sectors.
• FIBC export has grown by 15 percent.
• Exports can be of a much more importance than they have now, as it is labor centric industry, which provides an edge to India.
• Multilayered polypropylene bags can be a good substitute of Polyprolyene bags in fertilizers and food grains sector because of• Low processing cost• High aesthetic values
• Raffia industry should now formulate a strategy to capitalize on the opportunities and tap the potential in diversified markets both in sacking and non sacking applications
RECOMMENDATIONS
• The availability of raw material should be made faster.
• Focus should now shift on bringing various applications of polypropylene raffia as Polyethylene is gaining strength in food grains and fertilizer sector
• The quality of the raw material should be increased as exports are opening up
• Indian raw material manufactures need to keep good check on their strategies as foreign raw material manufacturers are targeting Indian markets
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