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India Petrochemicals Report Q3 2011
Business Monitor International, June 2011
Business Monitor International's India Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on India's petrochemicals industry.
The Indian petrochemicals industry shows no sign of slowing down, although it could come up against capacity constraints over the medium-term, according to BMI’s latest India Petrochemicals Report. Indian demand for most petrochemicals products was strong in FY2010/11 (ending end-March 2011) with polymers up by 10% y-o-y. Within the polymer sector, demand for polypropylene (PP) increased by 18% due to strong growth in automobiles, packaging and industrial applications. Growth in construction and agriculture led to 6% growth in polyvinyl chloride (PVC) sales, while home furnishings and textiles helped boost demand for polyester by 13%. Strong growth in the bottled water and packaging sectors led to a 24% rise in polyethylene terephthalate (PET) consumption.
In the year ahead, demand for polyethylene (PE) and PP is forecast to grow in double digits in 2011, with some grades, such as biaxially-oriented polypropylene (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 polyethylene (LDPE) and linear low-density polyethylene (LLDPE) film sucked in imports, while the country remains self-sufficient in high-density polyethylene (HDPE) over the short term due to plentiful capacity and relatively poor demand.
The Indian petrochemicals industry has witnessed annual growth of around 14-15% over the 2005-2010 period and this double-digit growth is likely to be sustained over the medium term. India is on course to become the third largest consumer market for high-tech plastics after the US and China due to growth in the automotive industry, which is set to grow by more than 6% per annum. In the short term, 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, which should drive petrochemicals demand. Reliance Industries Ltd (RIL) has projected that India will need capacity of at least one new world-scale cracker every year to satisfy demand for polymers, which is forecast to exceed 20mn tonnes in 2020. While over the short-term there is a danger of over-capacity, there is a danger of shortages in intermediates such as styrenics, vinyl acetate monomer, acrylic acid and oxo-alcohols to supply the basic and speciality chemicals manufacturers.
The automotive sector will be a major force in driving engineering and high performance plastics and synthetic rubber in India and is fuelling the diversification of downstream industries. Producers are seeking to increase the value of production and raise margins by tapping into growth in the automotive industry, particularly in styrene butadiene rubber (SBR) which India does not currently produce but is used in tyre production. A JV agreement between IOC, Taiwan’s TSRC Corporation and Marubeni plans to establish an SBR unit at Panipat with capacity for 120,000tpa SBR due to come onstream by Q412. India imports up to 130,000tpa of SBR with demand rising by 10% per annum. Although the plan will use butadiene from the Panipat refinery, styrene will be imported. RIL is also focusing on synthetic rubber in its US$10-12bn investment programme and is already building several synthetic rubber manufacturing complexes. It has formed a joint venture with Russia’s Sibur to construct a 100,000tpa butyl rubber complex at Jamnagar and it is also planning to build a 75,000tpa styrene butadiene rubber facility at its Hazira site and a 40,000tpa polybutadiene rubber plant at Vadodara.
BMI estimates that Indian consumption of plastics will grow from 8mn tonnes in 2009 to 16mn tonnes by 2016 and 25mn tonnes by 2020, with a lower rate of growth than the 15-16% seen in recent years. Nevertheless, this should prompt growth in the industry of 9-10% per annum. Estimates for needed investment to cater for the increase in demand for plastics in 2010-16 have been put at US$10bn. Even when bearing in mind the delays and cancellations, India will host a rapidly expanding petrochemical industry.
In the Asia Petrochemicals Business Environment Ratings matrix, India has risen from ninth to joint eighth place with Australia as a result of a modest 0.1 point rise in its rating to 63.4 points as a result of a rise in its long-term external risk score. This puts it 0.2 points behind Malaysia and 16.7 points ahead of Indonesia.
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