Anti-dumping duty on Chinese high tenacity polyester fibre to improve competitiv

India Ratings and Research (Ind-Ra) expects the imposition of an anti-dumping duty (ADD) on high tenacity Chinese polyester fibres to benefit domestic manufactures, as it will remove any import price advantages and aid domestic manufactures improve their capacity utilisation rates.

Additionally, Ind-Ra does not expect a material impact of the ADD on end-users, since high tenacity polyester fibres constitute only a small proportion of total cost as an input material. High tenacity polyester fibre is commonly used for the manufacture of conveyor belts, ropes, geo-grids, lashings and slings, automotive seat belts, industrial fabrics etc. The Directorate General of Anti-Dumping & Allied Duties (DGAAD) has levied an ADD in range of $174-528 per tonne on high tenacity polyester fibres originating or imported from China, vide an order dated May 24, 2018.

Heavy losses

Domestic manufactures of the product are facing heavy losses due to cheap Chinese imports. According to DGAAD, the indexed loses (base year=FY14=100) of domestic producers increased by 246% from FY14-FY17.

Following the imposition of the ADD, Ind-Ra believes domestic companies will be favourably placed to cater to rising domestic demand (13% CAGR from FY14-FY17), given their low capacity utilisation rates. The ratings agency opines that volumes and realisations for some of the domestic manufacturers, especially Reliance Industries Ltd. and SRF Ltd. may improve.

India imports about 70% of its needs of high tenacity polyester fibres from China, which catered to more than half of the domestic consumption. Additionally, these imports accounted for 80% of the domestic production during FY17. This was primarily due to the lower price prevalent in Chinese markets.

Lower spreads

However, the spread between the prices of polyester filament yarn, which forms an important raw material to produce high tenacity fibres of India, in relation to Chinese import prices, have tightened recently. The spread over the Chinese import prices was 16% in FY17, declining to 3% in June 2018. An increase in the imported price of the raw material, leading to an increase in landed cost of high tenacity fibre, could be one of reasons for the fall in India’s imports from China (FY18: down 8% year-on-year; FY14-FY17: up at 16% CAGR).

Though total imports increased 2% year-on-year in FY18 (FY17: 27%), China’s share declined to 69% (76%).Imports from other countries may continue to provide competition to the domestic market. However, the collectively lower share (<30%) of other countries in total imports is unlikely to have any material impact in the domestic market.