Plastic Woven Sacks

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 Polymer Capacities -2008 India Vs World (in KT)

India

World

India's share

Building Blocks

Ethylene

2816

117745

2.3%

Propylene

1999

71303

2.7%

PE

1975

73596

2.4%

PP

1990

44668

4.4%

PVC

1002

37606

2.6%

423

15525

2.4%

91

8616

0.9%

Polymers

PS ABS

POLYPROPYLENE MARKET Polypropylene market : applications (2008-09)

Cement FIBC Sack Exp Foodgrain Lamination Others

Expected polypropylene market trend

38 19 9 6 2 26

RAFFIA INDUSTRY A) Growth trend in India

1000 900 800 700 600

PP

500

PE

400

Total

300 200 100 0 2004-05

2006-07

2006-07

2007-08

2008-09

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.

RAFFIA INDUSTRY B) Raffia capacity additions 2008-09 43.7 37.7

38.3

36.9

22 9.8

8.9

M um

r M ad ra s

np u Ka

or e In d

ab ad

el hi

yd er H

D

an

205 KTA capacities added in North-East, West & South.

ba i

1.9

1.8

am D

ga rh di

ha n

Ko

lka t

a

3.2

C

Ah

m ed

ab ad

50 45 40 35 30 25 20 15 10 5 0

RAFFIA INDUSTRY

C) Customer satisfaction level The main factors guiding the source of raw material are: • Quality • Availability • Cost

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

1Mass of bag 2Moisture regain 3Max oil content on dry de-oiled material basis

665gms 22%

135gms Nil

4Basic price per bag (excluding sales tax)

Rs.17.05 (Average of last 5 Rs.10.44(incl. of 16% excise months & incl. of excise duty) duty & freight)

5Cost of packing 1mil.Mt of wheat/rice

Rs.37.50crs @ Rs.18.75 per Rs.20.88crs @ Rs.10.44 per bag (ie.Rs17.05+ Rs.1.70) bag

3 per cent max by wt.

Nil

6Packing cost of 20mil.Mts Rs.750.00cr of wheat by FCI

Rs.417.60cr

7Packing cost of 20mil.Mts Rs.750.00cr of rice by FCI

Rs.417.00cr

8Aeration

Good

PLASTIC WOVEN SACKS VS JUTE WOVEN SACKS 9

10

Problem/Quality complains

Other advantages/ disadvantages

Supplies are generally not strictly Good, no mould, cake formation, as per delivery schedule and have condensation or musty smell on been carried over to next months rice, wheat Raw material available in the past in spite of prein plenty. No disturbance in supply inspection by Quality Assurance schedule. The quality checks may Wing of DGS&D complaints about be easier to enforce on PP bags poor texture of bags leading to and the possibilities of bags spillage of grains and variations in getting damage by water/ rain length /width of bags are there. during transit will be lesser. Besides complaints about damage by water/ rains during transit are also very frequent.

1. Not resistant to water, seepage and contamination

1. Resistant to water, seepage and contamination is very high

2. Contamination of food grains by jute batching oils. 2. No J.B.O. Present and therefore no such possibility of 3. Cost of transportation is much contamination of grains with higher than of PP bags which JBO are almost 1/5th in weight of jute bags 3. Cost of transportation are much lesser than the jute bags 4.Rough handling may result in burst/tear of 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 250

MMT

700 627

200 513 469

462 150

380

600 505

500 400

380 326

100

600

300

271

200 50

100

0

0 2004-05

2005-06

2006-07

2007-08

2008-09

KT cement capacity(mn tonnes) cement consumption(mn tonnes) pp consumption( kt) Ril pp consumtion(kt)

END USERS 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.

Opportunities • Growing Infrastructure • Government norms • Opportunities in rural market

END USERS B. Fertilizer industry Installed capacity – 184.2lakhs MT/Annum Out of which 124.61lakhs MT is for nitrogen and 59.59lakhs MT is for phosphate. No. of fertilizer plants Large size: 57 Small and medium size: 78 Manufacturing units Sr. No.

Sector

Capacity (lakh MT) Nitrogen

Percentage share

Phosphate Nitrogen

Phosphate

1Public sector

35.98

4.21

28

7.74

2Cooperative sector

29.41

10.3

23.58

16.02

3Private sector

59.19

45.09

48.42

76.25

124.58

59.6

100

100

Total

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 raw material cost/MT cash discount excise duty+ E Cess trade discount per kg cost Bag costing raw material filler Rs26/kg conversion cost cost/kg

PE 69.4 0.6 68.8

PP 61.3 0.6 60.7

0.082 74.4 2.0 72.4

0.082 65.7 3.0 62.7

72.4

62.7

0.88 63.7 0.12 3.1 13.0 79.8

0.88 55.2 0.12 3.1 13.0 71.3

• 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.

U.V. Stabilizer cost cost/kg

0.0 79.8

1.5 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.

END USERS C.

Fertilizer industry

• 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.

A shift in packaging pattern observed in private agencies Larger pack to the medium sized packing(10-25kg pack size)

(FCI) Maharashtra region storage capacity and monthly requirement

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 STRENGHT • 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.

OPPORTUNITIES • Exports provide a sound market. • Poor showing of jute industry. • Increasing production of cement, fertilizers etc. Food grain sector can be a huge market

WEAKNESS • 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.

THREATS •Poor quality of product might affect good export potential International fluctuation in petroleum products affects industry High dependency on labors

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)

Buyer’s views •Availability, Cost, Quality of the raw material. •Low profit margins due to high over head charges .

Potential Entrants •Indian Oil Corp. Limited

Polypropylene Industry

•Foreign player (raw material)

Fluctuations in the crude oil and natural gas prices Economic growth of the major polypropylene consuming countries like USA and China

Substitutes •cement oReady mix cement oAD start bags •Food grains oMulti layered polyethylene bags •Fertilizer oPolypropylene bags

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