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India Petrochemicals Report Q3 2010
Management Report
Published: June 2010
Pages: 72
Tables: For full details, please email keithw@cmsinfo.com
From: GBP 353.33 Buy Now!
Research from: Business Monitor International
Sector: Petroleum
The Indian petrochemicals industry will exhibit strong growth in 2010 and beyond as the domestic market flourishes and exports recover, which will prompt a revival of projects shelved during the economic downturn. But BMI’s latest ‘India Petrochemicals Report’ warns that without product diversification and differentiation the industry could suffer low margins and lack of added value.
The Indian petrochemicals industry will exhibit strong growth in 2010 and beyond as the domestic market flourishes and exports recover, which will prompt a revival of projects shelved during the economic downturn. But BMI’s latest ‘India Petrochemicals Report’ warns that without product diversification and differentiation the industry could suffer low margins and lack of added value.
The improvement in the economic scenario is prompting Indian petrochemicals producers to revive projects that we shelved during the economic downturn. India’s real economy has enjoyed a steady return to form in the latter half of 2009, and we are confident that this momentum will be sustained well into FY2010/11 in spite of official efforts to cool activity. The main engine of the economy - domestic demand - will be fuelled by rising private consumption and fixed investment levels, as well as the need to rebuild inventories. This has renewed confidence in the petrochemicals industry.
Hindustan Petroleum Corporation Ltd (HPCL) has revived a joint venture project with the Gas Authority of India (Gail) and Oil India Ltd (OIL) at Vishakhapatnam which will include a 15mn tpa refinery and attached olefins and aromatics units with combined capacity of 1mn tpa. Meanwhile, Reliance Industries Ltd (RIL) is moving ahead with a cracker project at Jamnagar with up to 1.6mn tpa ethylene production capacity as well as associated derivative aromatics, polymer and synthetic rubber units, which should see it become a significant producer of polyethylene terephthalate (PET) and secure a 15% share in the global paraxylene (PX) market. Indian Oil Corporation (IOC) has delayed a separate petrochemical complex at Paradip with capacities of 1.2mn tpa PX, 700,000tpa polystyrene (PS) and 600,000tpa styrene monomer (SM). It is also re-evaluating projects postponed in 2008, including new purified terephthalic acid (PTA), PX and linear alkylbenzene (LAB) capacities at its Panipat and Baroda sites and seeking joint venture partners for India’s first styrene butadiene rubber (SBR) plant. However, the delays in these projects mean that they are unlikely to come online before 2014, with BMI expecting further delays that should push completion back to 2015.
The short-term scenario is more complex. The Indian Chemicals Council (ICC) forecasts 14-16% growth in polymer sales, which BMI believes will be easily attainable as the economy returns to trend growth. Key to this is the strength of downstream segments such as packaging and the automotive industry, which are the main drivers of market growth. In India, demand for polyethylene (PE) and polypropylene (PP) is forecast to grow in double digits in 2010, with some grades, such as biaxiallyoriented PP (BOPP) film for packaging, non-woven PP and pipe grade PE expected to grow by more than 20%. In 2010, strong demand for low density PE (LDPE) and linear low density PE (LLDPE) film will suck in imports, while the country will remain self-sufficient in high density PE (HDPE) over the shortterm due to plentiful capacity and relatively poor demand. However, the PP sector in general is in danger of over-capacity. India was a significant PP exporter in 2009, but moderation in growth in global demand at a time of rising capacity will dampen prospects on external markets. Yet, domestic demand has yet to catch up with growing output volumes. As a result, the pressure to differentiate will increase, as competition in the Indian market heats up. R&D and the introduction of higher grades of polymer products are therefore essential to add value.
The improvement in the economic scenario is prompting Indian petrochemicals producers to revive projects that we shelved during the economic downturn. India’s real economy has enjoyed a steady return to form in the latter half of 2009, and we are confident that this momentum will be sustained well into FY2010/11 in spite of official efforts to cool activity. The main engine of the economy - domestic demand - will be fuelled by rising private consumption and fixed investment levels, as well as the need to rebuild inventories. This has renewed confidence in the petrochemicals industry.
Hindustan Petroleum Corporation Ltd (HPCL) has revived a joint venture project with the Gas Authority of India (Gail) and Oil India Ltd (OIL) at Vishakhapatnam which will include a 15mn tpa refinery and attached olefins and aromatics units with combined capacity of 1mn tpa. Meanwhile, Reliance Industries Ltd (RIL) is moving ahead with a cracker project at Jamnagar with up to 1.6mn tpa ethylene production capacity as well as associated derivative aromatics, polymer and synthetic rubber units, which should see it become a significant producer of polyethylene terephthalate (PET) and secure a 15% share in the global paraxylene (PX) market. Indian Oil Corporation (IOC) has delayed a separate petrochemical complex at Paradip with capacities of 1.2mn tpa PX, 700,000tpa polystyrene (PS) and 600,000tpa styrene monomer (SM). It is also re-evaluating projects postponed in 2008, including new purified terephthalic acid (PTA), PX and linear alkylbenzene (LAB) capacities at its Panipat and Baroda sites and seeking joint venture partners for India’s first styrene butadiene rubber (SBR) plant. However, the delays in these projects mean that they are unlikely to come online before 2014, with BMI expecting further delays that should push completion back to 2015.
The short-term scenario is more complex. The Indian Chemicals Council (ICC) forecasts 14-16% growth in polymer sales, which BMI believes will be easily attainable as the economy returns to trend growth. Key to this is the strength of downstream segments such as packaging and the automotive industry, which are the main drivers of market growth. In India, demand for polyethylene (PE) and polypropylene (PP) is forecast to grow in double digits in 2010, with some grades, such as biaxiallyoriented PP (BOPP) film for packaging, non-woven PP and pipe grade PE expected to grow by more than 20%. In 2010, strong demand for low density PE (LDPE) and linear low density PE (LLDPE) film will suck in imports, while the country will remain self-sufficient in high density PE (HDPE) over the shortterm due to plentiful capacity and relatively poor demand. However, the PP sector in general is in danger of over-capacity. India was a significant PP exporter in 2009, but moderation in growth in global demand at a time of rising capacity will dampen prospects on external markets. Yet, domestic demand has yet to catch up with growing output volumes. As a result, the pressure to differentiate will increase, as competition in the Indian market heats up. R&D and the introduction of higher grades of polymer products are therefore essential to add value.