The fall in India's rupee against the dollar is making the cost of polymer resins higher and has been a cause for concern amongst local buyers, sources told Platts this week.
"All traders are bleeding right now," said an Indian trader. "With the 7-9% depreciation in the currency, our cost has been increasing."
On Thursday morning, the rupee stood at 48.1258 against the dollar, down 9.7% from this year's high of Rupees 43.855 August 1.
This would mean that buyers who purchased imported cargoes with Letters of Credit earlier this year, would expect to pay more when the bank executes the payment at the end of the LC term.
"For example, if we bought a cargo at $1,400/mt CFR India with LC 90 days, that's a $126 increase for us [based on 9% depreciation]," an Indian trader said.
"Due to the currency situation, the market is very bad," said another trader.
TURNING TO LOCAL SUPPLY
As a result of the falling rupee, buyers said they preferred to buy domestic cargoes, which are not exposed to fluctuations in the currency. "We don't want to take the risk," said another trader. "We'd rather buy from domestic producers than import."
This switch in the buying pattern comes ahead of the high demand season. Demand for polymer resins typically increases ahead of the Indian Diwali festival, which falls in late October this year.
As a result, this may put downward pressure on the imports market, and lead to an uptrend for domestic prices.
Meanwhile, many market participants are taking wait-and-see approach as they await October offers from key producers. The fresh offers are expected to be announced starting next week.
