Supreme Petrochem says Gulf disruption cut H1 sales volumes

Supreme Petrochem Limited, referred to here as Supreme Petrochem, said Gulf-region supply constraints, longer transit times and higher ocean freight costs reduced H1 FY27 sales volume by 3% year on year to 1,66,085 metric tonnes (MT), principally through lower exports. Management said styrene monomer rose from about US$900-US$1,000 to US$1,600-US$1,650.

How did Gulf disruption affect Supreme Petrochem's exports?

Gulf supply disruption affected Supreme Petrochem's exports by restricting raw-material availability, extending transit times and raising freight costs, contributing to a 3% year-on-year fall in H1 FY27 sales volume to 1,66,085 MT. Management did not disclose a separate export-volume figure, but identified lower exports as the primary cause of the first-half decline.

The weakness in first-half exports contrasted with a recovery in total second-quarter volume. Q2 FY27 sales reached 95,242 MT, up 24% year on year and 35% quarter on quarter, while management said domestic demand had remained good after the quarter closed, partly during the festival season. It said it was meeting the domestic market's full requirements, separating local availability from the more difficult economics of export shipments.

Export orders carry particular risk because raw-material and freight costs can change between acceptance and shipment. Management cited an instance in which ocean freight rose by US$2,000 during the three weeks between receiving an order and shipping it. It said exports may be more manageable on a free-on-board, or FOB, basis, under which the buyer bears freight costs, but regular export opportunities were difficult to capture amid current volatility.

Why did styrene prices rise to US$1,600-US$1,650?

Styrene prices rose because supply from West Asia, which management described as a major energy source for manufacturers, was unavailable, taking raw-material prices from roughly US$900-US$1,000 to US$1,600-US$1,650. Management also linked the disruption to short supply of Gulf building blocks and polymers, which affected both sourcing and import availability.

The price increase was reflected mainly in raw-material inventory rather than finished goods. Management said inventory also included cargo in transit and on the high seas under cost, insurance and freight, or CIF, terms, because Supreme Petrochem assumes risk once material is loaded onto a ship. Material arriving at the end of October was expected to be consumed in the next month, making the build part of an ongoing procurement cycle.

Management said higher input costs are passed on to customers, although with a time lag. That timing mattered as styrene and freight costs rose quickly, and management said the non-original equipment manufacturer, or non-OEM, market could feel pressure from higher prices. Yet it reported that both OEM and non-OEM demand were good in Q2 FY27, after the non-OEM market was subdued in Q1, with the customer mix roughly 50:50.

What happened to Supreme Petrochem's spreads and imports?

Supreme Petrochem said its product spreads narrowed and became unstable because higher liquid-bulk and container freight reduced the gap between styrene costs and finished-product landed prices in India. In Q2 FY27, management put general-purpose polystyrene spreads at US$200-US$250 after freight and other costs, versus US$300-US$350 for high-impact polystyrene, with both varying by week and month.

The company did not provide a margin forecast for the second half. Management said October demand had been good, but raw-material availability, freight rates and geopolitical conditions made projections difficult. It added that raw-material pass-through was better in acrylonitrile butadiene styrene, or ABS, compounds than in mass ABS, an important distinction as the company increases compounding activity.

Imports increased in May, June and July FY27 after the Indian government announced a duty exemption for polymers in the first week of April, according to management. Supreme Petrochem said the withdrawal of the exemption in July helped bring imports back towards normal levels, with August imports below the prior-year level. It also said temporary duty-free imports of polystyrene and ABS from ASEAN countries and China increased competitive pressure on domestic selling prices during the first two months of Q2 FY27.

Management nevertheless said regular monthly imports continued. It expects full-year ABS imports to be almost similar to the previous year, while polystyrene imports may be lower, although substantial quantities had already entered during May through July. For FY28, management estimated Indian polystyrene demand at more than 3,75,000 tonnes and said Supreme Petrochem's market share was around 60%.

How is Supreme Petrochem responding through sourcing and expansion?

Supreme Petrochem is diversifying imported raw-material sources to address Gulf supply uncertainty while maintaining its domestic supply commitments. Management said restarting exports would not be difficult once markets and material availability normalise because the company remains engaged with customers, but it gave no timetable for an export recovery.

The company also said internal transfers of polystyrene and ABS to its specialty polystyrene compounds and extruded polystyrene, or XPS, insulation-board operations reached 11,700 MT in H1 FY27, compared with 4,300 MT a year earlier. Management attributed the increase mainly to polystyrene and ABS compounding, and said the higher raw-material pass-through in compounds supported that mix.

Its wide-width XPS insulation-board line, with capacity of 1,50,000 cubic metres, is scheduled to start commercial production in Q1 FY28. Management expects the market to absorb its full capacity over 24 to 30 months. Compounding capacity is set to increase from 50,000 tonnes to 80,000 tonnes annually by Q3 FY28, while the second ABS line is planned for Q3 FY29.

Existing ABS operations were using about 85% of their reduced operating capacity after equipment issues limited the plant to 65% of rated capacity. Management expects the 80,000-tonne compounding facility to be fully utilised in FY29-30, using polymers beyond ABS as well as its own output. It said ABS was the most capital-intensive part of its expansion programme.

What financial effect did higher prices have in Q2 FY27?

Higher selling prices and volume growth lifted Supreme Petrochem's Q2 FY27 operating income to Rs 1,957 crore from Rs 1,100 crore in the corresponding quarter, while earnings before interest, tax, depreciation and amortisation (EBITDA) reached Rs 160 crore. Management said the turnover increase was partly volume-led, with the balance resulting from higher selling prices following raw-material inflation.

For H1 FY27, operating income was Rs 3,649 crore, EBITDA was Rs 508 crore and profit after tax was Rs 331 crore, with a 9.08% profit-after-tax margin. The company remained debt-free and reported an investable surplus of Rs 886 crore as of September 2026. Management said capital expenditure was being funded through internal cash accruals despite the disruption in imported raw-material supply.

Conclusion

Supreme Petrochem's H1 FY27 volume decline shows that stronger domestic demand and Q2 sales of 95,242 MT did not fully offset lower exports caused by Gulf supply constraints, longer transit times and elevated freight. Styrene's move to US$1,600-US$1,650 supported higher selling prices, but the lag in passing on costs and volatile export freight limited visibility on near-term spreads.

Next, management's alternative sourcing efforts and any normalisation in raw-material availability and freight will determine when exports can resume more regularly. The disclosed operating milestones are the Q1 FY28 start of the 1,50,000-cubic-metre XPS line, the Q3 FY28 expansion of compounding capacity to 80,000 tonnes, and the planned Q3 FY29 second ABS line.