The imports of silicone is one of the few businesses that has been going strong over the last few years. Importers are currently pocketing anything between 3-15% as margin and industry experts believe that this is a business that will soon grow in leaps and bounds.
Andres M. Molier | December 2016 Issue | The Dollar Business
Silicone (not to be confused with Silicon, a naturally occurring chemical) is one of the most versatile synthetic materials on the planet. Until a few years ago, the word silicone was rarely used or heard! But, today, many of us can relate silicone with those colourful and fancy cookware and bakeware that have suddenly flooded most departmental stores across the country. Well, next time you go out shopping, visit the home and kitchen appliances sections to explore various silicone-made products. This attractive material, undoubtedly, is fast replacing many traditional materials across several industries. The demand for silicone has surged in industries, including dry cleaning, electronics, automotive lubricants, medicines, personal care, cookware, plumbing and construction, etc., in the last few years. And concurring to the continuous discovery of its multiple-usages and growing demand, India’s imports of silicone has also grown meteorically over the last decade.
For the record, the import volume of silicone (including rubber and liquid) has leaped from 21,470.49 metric tonne (MT) in FY2010 to 46,877.68 MT in FY2016 – that’s a whopping 118.33% growth. And in case you’re wondering, the total imports value of silicone in FY2016 was $140.49 million – the number speaks for itself.
Well, if these numbers are giving you a plethora of business ideas, hear out the colloquies of the industry experts. The growing and changing trends in Indian market is opening enough space to accommodate both old and new players in the business – say most importers The Dollar Business has spoken with. “Silicone rubber has a huge advantage over plastic and glass, even regular rubber, because of its flexibility, durability and heat resistant. If we consider the promising strength of the manufacturing sector in India, the jackpot isn’t far,” says Bhavik Kamani, Co-owner of Bhavik Enterprises Ltd., an importer of silicone.
If you mull over what Kamani has said, you will realise the role silicone rubber plays in manufacturing electrical items, electronics automobiles, airplane, office machines, etc., as insulation, coatings, gaskets, seals, keyboard pads and more. And we know, these are all big industries!
India’s imports of silicone have doubled over the last six years
Witnessing Changes
Aliasgar Shakeer, the owner of Acron Polymer Products, a Mumbai-based manufacturer of silicone products, says, “There is something very promising about this industry. We started the company in September 2014, and so far, we have had 25% growth year-on-year. My math says, the Indian silicone market is growing at 5%, which is not bad – there are many other sectors that have negative growth. In another two or three years, the silicone market will shoot up. All it needs is some education among consumers by way of spreading awareness.”
Naeem Bootwala, a partner in Fortius Marketing LLP, a Pune-based silicone rubber importer, clearly affirms, “Silicone has mostly been an industrial use item, but the trend is changing and many niche manufacturers are mushrooming across the country – there sure is a huge demand in the domestic market.” Tarak Gajjar, Business Partner of Polyrubb Industries, an Ahmedabad-based manufacturer of silicone rubber-based products, too holds similar views. “As far as silicone rubber products are concerned, the user-base is growing because of its heat and water resistant properties. In the last 20 years, the usage has grown exponentially. About 20 years ago, we used to source only 20 kg of silicone annually, which has now grown to 60-70 MT a year,” says Gajjar.
Just to ensure that the rosy picture being painted was true, The Dollar Business also spoke with Ashwin Pandya of Motiba Slicone Pvt. Ltd., another Mumbai-based manufacturer of compound and finished products based on silicone rubber, who asserts, “Import has been growing at 25% year-on-year as silicone is extensively used in various industries such as the automobile, electronics, medical, baby care, healthcare, etc. The importance of silicone will only grow and we are just getting started.”
Rajesh Sampat of Plastochem Fabrication Pvt. Ltd., a pioneer in the sector, too states, “We are one of the first companies in India to import silicone. A decade ago, the silicone industry was very small with only a handful of traders across the country. At one point of time, we used to meet 80% of the India’s HTV silicone rubber demand. Today, look at how manufacturing of electrical items has scaled up – the growth is unbelievable. The number of silicone-based-products we have in our kitchens today is also helping
demand grow.”
There is growth – hands down! But since there are many types of silicone, we may ask, what type or category of silicone dominates the Indian silicone imports business? Sampat answers, “India imports various types of silicone. However, HCR (High Consistency Rubber) and HTV (High Temperature Vulcanizing) are the two types of silicone rubbers that are being imported in huge volume, simply because there is demand in the domestic industries.”
There are also traders who importer FSR (Fluoro Silicone Rubber), LSR (Liquid Silicone Rubber) and RTV (Room Temperature Vulcanisation), but the volumes are smaller compared to HCR and HTV. Kamani says, “With the growth in real estate sector in India, imports of RTV silicone and sealant will definitely increase in the next few years. But, I think HTV has more potential in the market because we’re increasingly manufacturing kitchenware, bakeware, ice cream moulds, ice trays, coasters, gaskets, stamps, mats, sheets, etc., with HTV silicone. One thing is for certain, business will not go down, it will only grow up from here.”
In the words of Kamani, there are many grades of silicone. The bulk silicone, which is mostly imported from China can fetch around 2-10% margin, while importers of speciality grade silicone enjoy a margin of about 10-15%. “The imports volume of speciality grade is not huge, but whichever type you import, the margin evens out eventually. And when I say speciality silicone, I am talking about RTV silicone and sealant,” says Kamani.
Imports have been witnessing growth and industry insiders agree that the silicone industry will grow bigger. But why hasn’t the transformation happened any sooner? “Silicone is relatively a new material, so it’s quite expensive compared to other materials. About a decade ago, the market wasn’t very stable, so all the international manufacturers decided to setup plants in China – which is quite unfortunate for India. The price of silicone went down eventually, but China had already emerged as the hub for silicone and its products,” explains Kamani.
“India is a price conscious market. Thus, to meet our market demand, our importers bring only the cheapest products from China, which makes homemade products less competitive. In fact, most Indian retailers do not even want to talk about business with a manufacturer like us. Our pro ucts are significantly better in terms of quality, but they are more expensive. If you compare the prices of Indian and Chinese products, the price
difference is at least 15-20%,” clarifies Shakeer.
But as said, each situation has a positive and a negative side to it. Indian manufacturers are now targeting the western markets, and many have successfully got into the exports business. “India largely exports silicone products to US-based manufacturers, who use their brand to re-export to other countries, including India. And, of course, Indian retailers will sell them at a much higher price because they are imported,” adds Kamani.
Because silicones can withstand astonishing stress and temperature extremes, they are used in many aspects across industries.
The domestic market is also improving for silicone product manufacturers with the proliferation of online marketing platforms. Manufacturers are slowly reaching out to urban customers. But cheap imports from China has hindered growth. “You won’t believe the amount of imports from China and how cheap they are! The government must revise the duty structure. But, since the industry is quite small, it’ll take time for the government to even listen to us,” says Kamani.
What started as a niche product about 10 years ago in India has today grown to become a popular raw material across industries. A little more awareness is what is required to boost its consumption and demand in India. In fact, many importers believe that a surge in demand is around the corner. Kamani positively comments, “Considering the recent development in the domestic market, we are looking at 20% or more growth by 2020.” While
manufacturing in India could be an option, importing it from China and selling in India makes more sense. And as long as India remains a price conscious market and China keeps supplying at low costs, importers will continue to rule the roost.
Bhavik Kamani CO-OWNER, BHAVIK ENTERPRISES LTD.
TDB: We were told by some manufacturers and importers that the y-o-y growth of silicone industry in India is 5%. What’s your opinion?
Bhavik Kamani (BK): I beg to disagree with the growth rate of 5% per annum. Prior to 2011, the industry’s growth rate was about 15-20% because of several reasons. In India, silicone is mostly used in three sectors – automotive, electrical application and medical industry. About a decade ago, many foreign car companies migrated to India and started demanding silicones for manufacturing some components. In addition, the electrical manufacturers started using silicone for manufacturing insulators instead of rubber and plastic – they realised that silicone has many benefits, such as heat resistance, durability, flexibility, etc. Also, the pharma industry, especially those that manufacture baby feeding bottles, pacifiers, etc., started using silicone, replacing natural rubbers.
Having said that, the industry has suddenly come to a standstill. The manufacturing sector isn’t expanding as expected. So, neither the product’s imports nor manufacturing is going down, but they aren’t growing either. I would say, the current growth rate is about 3%.
TDB: What motivated you to get into the silicone business? How has your business grown over the years?
BK: Silicone was something very novel back then, in 1990s. There were only a handful of importers and manufacturers; and honestly, we did not expect the business to grow so big. We got into the business because we liked the novelty value – that way, people notice you and there is little or no competition. In 1998, we used to import around 6-7 metric tonne (MT) of silicone rubber once in three months, but now, we import around 100 MT per month.
The industry took a leap after 2005 and many traders started importing silicone – most of them got into the business because they wanted to have the first mover advantage. Now the business environment is very competitive. The price of silicone rubber has also dropped strikingly. The price of silicone rubber was about three times higher than syntactic rubber, which has now reduced to almost 50%.
TDB: Where do you source from? It looks like the international market has gone through some big changes and China has emerged as a prominent sourcing destination.
BK: Before 2011, Germany, Japan, Korea and China were known for silicone rubber – the Russians tried their hands on it, but it didn’t work out for them. There was a time, when the silicone industry almost came to a halt, making price the most important factor. People were chewing into each other’s profit! So, many big international companies, including Wacker, Dow Corning, KCC, etc., decided to start manufacturing in China because of the cheap raw material and labour there. This made China the most important sourcing destination for silicone in the world. This shift also brought down the price of silicone worldwide, but not without compromising on quality. Also, within a short span of time, many local players emerged in China. So, most of us import silicone rubber from China now.
TDB: Since there are different types of silicone, can you tell us what types are imported the most?
BK: As per my data, imports of HTV and LSR silicones should be around 8,000 MT; imports of RTV should be roughly 2,000 MT; and the rest would be silicone fluids. RTV silicone is the most expensive of them all, but that is also where one can make the maximum profits.
TDB: What is the profit margin that you work with?
BK: It depends on what type or quality you import. If you import HTV silicone from China, the margin you can work with is between 2-10%. But if you import, what we call specialty silicone, then your margin would be around 10-15%. Also, it depends on where you source the product from because the quality will differ.
TDB: There are many young people in the country, who would like to get into this business. What would be your advice to them?
BK: I think HTV and RTV silicones have a lot of growth potential. We can see that several glass, plastic, metals and rubber items are being continuously replaced by silicone, and I think many more materials will be replaced in the years to come. In the last couple of years, the real estate business in India has slowed down a bit, but it will catch up pretty quick, and demand for RTV silicone and sealant will increase. Also, if you look at a pressure cooker, the gasket is made of syntactic rubber, which is very dangerous for health. But because of price factor and a lack of awareness, only 2% of the gaskets in India are made of silicone. That itself is a huge opportunity for growth.There is also a huge scope for exports. There are many Indian companies that export silicone products to developed markets like US.
Copyright @2024 The Dollar Business. All rights reserved.
