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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
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%

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%


POLYPROPYLENE MARKET
Polypropylene market : applications (2008-09)

Cement 38
FIBC 19
Sack Exp 9
Foodgrain 6
Lamination 2
Others 26

Expected polypropylene market trend


RAFFIA INDUSTRY
1000
A) Growth trend in India 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
50
43.7
45
40 37.7 38.3 36.9
35
30
25 22
20
15
9.8 8.9
10
5 3.2 1.8 1.9
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205 KTA capacities added in North-East, West & South.


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 665gms 135gms


2Moisture regain 22% Nil
3Max oil content on dry 3 per cent max by wt. Nil
de-oiled material basis

4Basic price per bag Rs.17.05 (Average of last 5 Rs.10.44(incl. of 16% excise
(excluding sales tax) months & incl. of excise duty) duty & freight)

5Cost of packing 1mil.Mt Rs.37.50crs @ Rs.18.75 per Rs.20.88crs @ Rs.10.44 per


of wheat/rice bag (ie.Rs17.05+ Rs.1.70) bag

6Packing cost of 20mil.Mts Rs.750.00cr Rs.417.60cr


of wheat by FCI

7Packing cost of 20mil.Mts Rs.750.00cr Rs.417.00cr


of rice by FCI

8Aeration Good
PLASTIC WOVEN SACKS VS JUTE WOVEN
SACKS

9 Problem/Quality Supplies are generally not strictly Good, no mould, cake formation,
complains 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 pre- in 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.

10 Other advantages/ 1. Not resistant to water, 1. Resistant to water, seepage


disadvantages seepage and contamination 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
600 600 KT
200
513 cement capacity(mn tonnes)
505 500
462 469
150 cement consumption(mn
400
380 380 tonnes)
326 pp consumption( kt)
300
100 271
200 Ril pp consumtion(kt)

50
100

0 0
2004-05 2005-06 2006-07 2007-08 2008-09
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) Percentage share

Nitrogen 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

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 PP
raw material cost/MT 69.4 61.3
cash discount 0.6 0.6
68.8 60.7 Note:
excise duty+ E Cess 0.082 0.082 • To a processor QD & AQD along
74.4 65.7 with MOU discounts are also paid. If
trade discount 2.0 3.0 we want to calculate exact cost of
72.4 62.7 production then the same also need
to be deducted from resin price
per kg cost 72.4 62.7
afterwards.
Bag costing
raw material 0.88 0.88
63.7 55.2 • Also we have not assumed price
filler Rs26/kg 0.12 0.12 differential of LLD/LD or PP/L/LLD
3.1 3.1 being used for lamination of between
conversion cost 13.0 13.0 the 20-25g. This is virtually very low.
cost/kg 79.8 71.3
• While quoting price customer will not
U.V. Stabilizer cost 0.0 1.5 pass on the cash discount & TD to
cost/kg 79.8 72.8 processor hence his quote will
increase by that amount too.
weight of bag 128.0 117.0

total cost/bag 10.2 8.5


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 WEAKNESS
• Growing industrialization in India, leading to • Training required for handling.
more demand of sophisticated packaging by
end customer. • Reservation of jute packaging in food grains and
other sectors which can be a rich market.
• The demand is directly related to demand of
end product so till time a new better material • Manufactures lack commercially viable units.
does not come to replace the position is safe.
• Low resale value & resale only possible 2-3 times.
• New big player entering the market.
• High capacity production required in order to earn
profit.

OPPORTUNITIES THREATS
• Exports provide a sound market. •Poor quality of product might affect good
export potential
• Poor showing of jute industry.
International fluctuation in petroleum products
• Increasing production of cement, fertilizers etc. affects industry
Food grain sector can be a huge market
High dependency on labors
PORTER'S FIVE FORCES MODEL

Suppliers Potential Entrants


•Reliance Industries •Indian Oil Corp. Limited
Limited
(76% of the market share)
•Haldia •Foreign player (raw
Polypropylene Industry material)
Petrochemicals
(15% of the market
Fluctuations in the crude
share)
oil and natural gas prices
•Import
(9% of the market Economic growth of the
share) major polypropylene
consuming countries like
USA and China Substitutes
Buyer’s views
•cement
•Availability, Cost, Quality oReady mix cement
of the raw material. oAD start bags
•Food grains
•Low profit margins due oMulti layered polyethylene
to high over head bags
•Fertilizer
charges
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