Indian Petrochemical Industry 2017 Asia Petrochemical Industry Conference May 18 th – 19 th 2017, Japan 1 Indian Petrochemical Industry Review of 2016-17 & Outlook for 2017-18 APIC 2017 Country Paper from India Prepared by Chemicals & Petrochemicals Manufacturers’ Association 708, 7 th Floor, Kailash Building, 26, Kasturba Gandhi Marg, New Delhi – 110001, INDIA Phone: 91-11-43598337, Fax: 91-11-43598337 Email: [email protected]Website: www.cpmaindia.com
Transcript
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
1
Indian Petrochemical Industry
Review of 2016-17 & Outlook for 2017-18
APIC 2017
Country Paper from India
Prepared by Chemicals & Petrochemicals Manufacturers’ Association
708, 7th Floor, Kailash Building, 26, Kasturba Gandhi Marg, New Delhi – 110001, INDIA
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
5
Section 1
The Indian Economy
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
6
The Indian Economy: Review of 2016-17 & Outlook for 2017-18 The Indian Economy Review of 2016-17
India has become the sixth largest manufacturing country in the world, rising up from the previous ninth position, and thus retaining its bright spot in the world economic landscape. In the last few months, two far reaching changes happened in the Indian economy – demonetisation and passing of the GST Bill.
In order to weed out unaccounted money from the system, the Government demonetized high value currency notes in November 2016. As a result, there was a temporary shortage of cash, which also provided a major boost to digital transactions. However, after the initial period of hardship, things have rapidly normalized.
The other major economic event which happened in the Indian economy in the last few months was the passing of the GST Bill. The GST Bill paves the way for roll out of the GST regime in India which will transform India to a unified market with a single tax structure.
Post the demonetization announcement, the pace of remonetisation has picked up, and it is expected that the effects of demonetisation will not spill over into the next financial year.
India seems to have braved the effects of demonetisation with the economy growing at an unexpectedly robust 7% in what was deemed to be the worst hit October-December quarter. It's now forecast to achieve 7.1% growth in the year to March. Going by these projections, India will retain its tag of being the fastest-growing major global economy.
The IMF expects the Indian economy to grow by 6.6% in 2016–17, which is not only a significant one percentage point lower than the previous estimate, but also brings India back to the status of the second-fastest growing economy, especially as China is expected to outgrow by 6.7%.
Recognizing the strength of Indian economic fundamentals, the IMF expects the impact of demonetization to fade away gradually, as it pegs the 2017–18 growth at 7.2%, overtaking China again by a good 0.7 percentage points. The World Bank, however, is more optimistic and has projected a GDP growth of 7% in 2016–17, 7.6% in 2017–18 and 7.8% in 2018–19. Clearly, what makes India resilient to global flurries, to a great extent, is its rock-solid domestic demand, accounting for about 60% of the GDP. This figure is 37% for China, and this has led the Chinese economy’s restructuring and rebalancing to rely less on exports and investment and more on consumption demand.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
7
The broad macroeconomic indicators, based on latest data, are as follows:
Firmer food and fuel prices drove India’s overall inflation higher in February, further dimming any possibility of a cut in interest rate by the Reserve Bank of India amid worries of hardening global commodity prices and expectation of vegetables turning dearer as summer approaches.
India’s headline inflation rate based on the Consumer Price Index (combined) went up to was 3.65% in February compared with 3.17% in January and 5.26% a year ago. Wholesale inflation firmed up to a 39-month high of 6.55% in February from 5.25% in January. With likely GST rollout in July, analyst suggest, this could add to inflationary pressure. The fiscal deficit as a percentage of GDP was budgeted at 3.5% for 2016–17 in the previous year’s budget. This stands revised to 3.2% for 2017–18.
FDI in India grew 18% during 2016 to touch $46 billion. The country attracted FDI of $39.32 billion in 2015. India’s forex reserves increased by $1.2 billion to $364.01 billion for the week ended March 10th 2017 due to surge in currency assets to touch a high new. FIIs invested about $1.5 billion (Rs 9,902 crore) in equities during February 2017, the highest in the last five months.
India’s trade deficit narrowed by 25% in the cumulative period of April to December 2016 when it stood at $76.5 billion, as against $100.1 billion in the corresponding period of the previous year. This is on the back of a 7.4% decline in imports coupled with a meagre growth of 0.75% in exports during said period. Imports of both oil and non-oil products dropped during this period by 10.76% and 6.42%, respectively, reflecting the subdued gross capital formation.
The rupee on 14th March 2017 surged to touch 17 month high against the US dollar at 65.39 ahead of the key events in domestic as well as international markets. At the current level rupee is the third best performing Asian currency after South Korean Won and Taiwanese dollar since the start of the calendar year. In March last year, former RBI governor Raghuram Rajan had said that market forces bring the exchange rate to its Goldilocks level and the regulator only intervenes to smoothen the journey. Going by his words, the rupee seems to have found its Goldilocks level. India posted a current account deficit (CAD) of $3.4 billion, or 0.6% of gross domestic product (GDP), in the July-September quarter. The value of Indian equities has climbed to $1.82 trillion, a nine-year high, after the Nifty gauge rebounded from a low in December as data showed Asia’s third-largest economy is recovering from Modi’s decision late last year to junk high-value currency notes. That is about 87% of the nation’s GDP.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
8
As a result of very good rainfall during monsoon 2016 and various policy initiatives taken by the Government, the country has witnessed record foodgrain production in the current year. As per second advance estimates for 2016-17, total foodgrain production in the country is estimated at 271.98 million tonnes which is higher by 6.94 million tonnes than the previous record production of Foodgrain of 265.04 million tonnes.
Proactive policy reforms along with several campaigns and initiatives, such as Make in India, Digital India, Skill India, Start-up India and Swachh Bharat Abhiyan (Clean India Mission), are likely to transform the extent and the quality of rural and urban infrastructure. These steps are expected to bring forth a number of investment opportunities. Prime Minister Modi's 'Make in India' initiatives and push towards manufacturing remains in place, where by road building targets of 40 km per day and attracting foreign companies to establish factories, India will continue to boost oil demand. The government has set a target of constructing 15,000 km of highways in the next financial year, 50% more than that in the current fiscal. The government has approved an over Rs 110 billion project to construct all-weather roads and improve connectivity for security reasons.
The projects identified under Sagarmala Programme are expected to mobilize more than Rs. 7 trillion of infrastructure investment, double the share of domestic waterways (inland& coastal) in the modal mix, generate logistic cost savings of Rs. 350-400 billion per annum, boost merchandize exports by USD 110 Billion and enable creation of 10 million new jobs, including 4 million direct jobs, in the next 10 years.
Indian Railways has set a daily target of laying 9.5 km of tracks to complete its ambitious line doubling and capacity expansion projects earmarked for the next financial year. The railway ministry plans to spend Rs 1.31 trillion — the highest-ever for capacity expansion — in the next financial year. It has received Rs 550 billion from the finance ministry as gross budgetary support.
In FY17, government utilized the additional revenues from tax revenues to boost rural spending. Total spending in rural areas has exceeded the budget estimate by 12% to register a robust 27% growth. And now that India’s GDP growth forecast for 2016 is slated to be 7.1%, India is firmly on its way to catapult into a global growth engine. This growth rate also makes India one of the fastest growing large economy in the world, overtaking a slowing China, on the back of an improvement in the manufacturing and farm sectors.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
9
With the government ready to run the extra mile on key reforms including land acquisition and infrastructure, the economy is poised for growth in the coming months.
Snapshot of Key Indicators
The last year saw India enter a sweet spot as growth rebounded, inflation declined and the external accounts came under control. From then on there has been a lot of positivity built around the India growth story and India seems to be poised to enjoy another spurt in growth.
There is a real sense that a new set of reforms and the enthusiasm in the markets can lead India towards another prosperous era of high growth. India’s economy grew faster in 2015-16 than earlier estimated, which could result in slower growth in the current fiscal because of a higher base.
Figure 1: India’s GDP Growth (year-on-year in per cent)
The upward revision of the 2015-16 data was mostly due to a significant increase in growth estimates for the industrial and services sectors. While the industrial sector is now estimated to have grown at 8.2% against the earlier estimation of 7.4%, the services sector is estimated to have grown at 9.9% against 8.9% earlier. The farm sector growth rate was, however, cut to 0.76% from 1.2% estimated earlier.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
10
Gross fixed capital formation, the proxy for investment demand in the economy, was also underestimated earlier. It is now revised to 6.1% from the earlier estimate of 3.9% for 2015-16. Private consumption demand, however, has been marginally revised downward, from 7.4% to 7.3% for 2015-16.
As a start, growth rebounded in the crucial industrial sector as all the three major components namely the mining, manufacturing and electricity picked up pace from last year.
Figure 2: Quarterly Estimate of GDP Growth (in per cent)
Gross domestic product (GDP) for the third quarter (Q3) of financial year 2016-17 (FY17) grew at 7%, allaying fears of any major effect of demonetisation though it was the lowest expansion in four quarters.
Private final consumption expenditure, denoting demand, rose at double the rate (10%) in Q3, against five per cent in Q2. Government consumption continued to be the greatest support for the economy in the current year. In the third quarter, government consumption grew 19.6%
Gross fixed capital formation, an indicator of private investment, also rose after a three quarter decline.
The Q3 numbers not only made India the fastest-growing large economy in the world but also helped the Central Statistics Office (CSO) retain its earlier projection
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
11
(in first advance estimates) for full-year GDP growth at 7.1% in the second advance estimates.
CSO stuck to its projection despite the fact that GDP growth for 2015-16 was revised to 7.9% from earlier 7.6% after release of the first advance data. Investment continued to show weakness for the entire financial year even though it was shown to rise against contraction in earlier data. First advance estimates did not take into account the impact of demonetisation, while the second one factored it in terms of latest available data.
The higher-than-expected growth in the third quarter was driven primarily by manufacturing, agriculture and government-boosted expenditure. According to data released by CSO, Q3FY17 GDP growth was only slightly less than 7.4 per cent in the July-September period despite demonetisation. The growth of Q2 was revised upwards by 0.1% point.
Figure 3 : Quarterly Growth in Sectors till Q3 FY17
For the third quarter of fiscal year: The manufacturing sector grew at 8.3% compared to 7.1% in the previous quarter. The construction sector saw growth slip to 2.7% compared to 3.5% in the previous quarter. The trade, hotel, transport segment reported growth of 7.2% compared to 7.1% in the previous quarter. Growth in the financial services segment was at 3.1% compared to 8.2% in the previous quarter. The agriculture sector grew at 6% compared to 3.3% last quarter. The mining sector also rebounded, showing growth of 7.5% in the third quarter compared to -1.5% in the previous quarter
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
12
Overall, while the services segment saw growth slow to 6.8% in the third quarter compared to 8.2% in the second quarter, the industrial and agricultural segment surprised positively. Industry grew at 6.6% in the third quarter compared to 4.2% in the second quarter. This is contrary to other indicators such as the manufacturing purchasing managers’ index (PMI) which fell sharply in November and December but showed a rebound in January.
Private final consumption expenditure rose 10% compared to a year ago. Government consumption continued to be the greatest support for the economy in the current year. In the third quarter, government consumption grew 19.6%. Gross fixed capital formation, an indicator of private investment, also rose after a three quarter decline.
Analysts polled by Reuters expected Q3 GDP growth to be 6.4%; those polled by Bloomberg expected it to be 6.1%. Contrary to expectations, gross value added (GVA) grew at 6.6% for the quarter; it is expected to grow at 6.7% for the full year.
It appears like the negative impact of demonetisation was over-estimated. India still maintains a 7% growth rate and remains one of the brightest spots in the global economy. However, there was some impact of demonetisation. For instance, in the first advance estimates GVA was projected to be 7% for 2016-17. Due to higher indirect taxes, net of subsidies, GDP growth came at 7.1% in the second advance estimate as well.
The boost came from agriculture, which is forecast to grow 6% in the third quarter on the back of a good monsoon. The financial sector has taken a hit from the currency swap and is forecast to grow only 3.1% in GVA.
Manufacturing grew 8.8% when the expectation was that demand compression will hit factory output. Construction reported only 2.7% growth in line with the anecdotal evidence of a slump because of lack of cash.
i. IIP – Index of Industrial Production
Industrial production bounced back into expansion in January, kicking off the financial year’s last quarter on a positive note albeit amid expectations that it will bear the brunt of demonetisation.
IIP rose 2.7% in January from a year ago, the second fastest monthly growth this financial year behind 5.7% recorded in November. Industrial production had contracted 0.1% in December, the first full month after demonetisation, which was announced on November 8.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
13
Figure 4: Index of Industrial Production (IIP)
On cumulative basis, IIP during April-January 2016-17 showed an expansion of 0.6%, which was lower than 2.7% reported in the year-ago period. The indices of industrial production for mining, manufacturing and electricity sectors posted growth rates of 5.3%, 2.3% and 3.9% respectively in January 2017. The cumulative growth in these three sectors during April-January 2016-17 was 1.4%, (-) 0.2% and 5.0%, respectively. The resumption of growth in consumer durables output signals some normalization of production schedules, with the inventories that built up after the note ban likely to have moderated, as well as some improvement in consumer sentiment.
Table 1: Use based Classification of (IIP)
Data released last month by the statistics office showed the economy is likely to expand 7.1% in FY17, confounding independent experts who had mostly penciled
Trend in IIP Growth
IIP Mining Manufacturing Electricity Basic Capital Intermediate Durables Non-Durables
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
14
in 6.5-7% growth because of demonetisation. The consensus view is that the worst of the demonetisation effect may manifest itself in the March quarter. The typically volatile rubber insulated cables pulled up the capital goods and overall growth substantially. The segment reported a 283% rise in output in January. Excluding capital goods, growth in January would be lower at 1.9%. Except for the consumer nondurables sector, all other subsectors of the index of industrial production reported growth, capital goods leading with a 10.7% rise in January. Mining was up 5.3%, manufacturing 2.3% and electricity generation 3.9%, all contributing to the IIP surge. Production of consumer goods was down 1% in January from a year ago because of a 3.2% fall in the output of consumer non-durables. Consumer durables rose 2.9% in January. In terms of industries, nine of the 22 groups registered growth, led by electrical machinery and apparatus followed by radio, TV and communication equipment and basic metals.
ii. Core Industries Performance
The output of India's eight infrastructure industries last month increased by 3.4% from a growth of 5.6% reported in December 2016. The Eight Core Industries (ECI) index had reported a rise of 5.7% in January 2016. The cumulative growth during April to January stood by 4.8%. The data which represents the output of major industrial sectors was released by the Ministry of Commerce and Industry. The ECI index comprises of nearly 38% weightage of the items included in the Index of Industrial Production (IIP). The index includes sectors like coal, crude oil, natural gas, refinery products, fertilizers, steel (alloy and non-alloy), cement and electricity. Electricity generation, which has the highest weightage of 10.32% in the IIP, edged up by 4.8% in January, as compared with the corresponding month of 2016. Steel production, the second most important component with weightage of 6.68%, increased by 11.4% in the month under review. However, distilling of refinery products, the third most important component as per weightage, inched down by 1.5% in January, as compared with the corresponding month of last year. Conversely, extraction of crude oil, which has a 5.22% weightage in IIP, was slightly higher by 1.3% during the month in consideration. Coal mining, with a 4.38% weightage, increased by 4.8% in January. In contrast, cement production, which has the weightage of 2.41%, decreased by 13.3% in January 2017 over the same month of 2016.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
15
On the other hand, the sub-index for natural gas output, with a weightage of 1.71% edged higher by 11.9% during the month under consideration. Fertilizer manufacturing, which the least weightage of only 1.25% has declined by 1.6% in January.
Table 2: Core Industries Growth Rate (in percent)
iii. Balance of Payments
The balance of payments was at a surplus of $8.5 billion compared with a deficit of $900 million a year ago. Portfolio investment recorded a net inflow of $8.2 billion during the first half (April-September) as against a net outflow of $3.5 billion a year ago. Net services receipts moderated on y-o-y basis, primarily owing to the fall in earnings from software, financial services and charges for intellectual property rights. Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to US$ 15.2 billion, having declined by 10.7% from their level a year ago. In the financial account, net inflows of both foreign direct investment and portfolio investment were significantly higher in Q2 on a y-o-y basis. Non-resident Indian (NRI) deposits declined to US$ 2.1 billion in Q2 of 2016-17 from US$ 4.2 billion in Q2 of 2015-16. Net loans availed by banks witnessed a net repayment of US$ 9.0 billion in Q2 of 2016-17 as against net borrowing of US$ 3.1 billion in Q2 of 2015-16.
Source: Index of Eight Core Industries, Central Statistics Office (CSO)
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
16
Analysts expect the balance of payments to be in surplus in 2017/18 but with downside risks.
iv. FDI Overseas investment in India is likely to surge to a record in the year ending March despite temporary growth hiccups ascribed to the currency swap programme. This underscores India’s status as an island of economic stability, especially as foreign direct investment (FDI) flows worldwide slumped 13% last year amid uncertainty thanks in part to a backlash against globalization. India’s FDI in the April-December period rose 22% to $35.8 billion from the year earlier. With three months to go for the fiscal year end, the government expects fresh inflows into equity to top the $40 billion India got in FY16. Invest India, the government’s official investment promotion and facilitation agency, is shepherding proposals worth $62 billion spanning 295 deals, of which $3 billion has already come in. Services sector continued to attract highest investment of $7.5 billion followed by telecommunications sector which attracted $5.5 billion inflows during the first nine months of the financial year 2016-17.
Figure 5: FDI Inflows
Over 90% of FDI is coming in through the automatic route, which has expanded in its scope over the last two years. The surge comes even as the government expects growth to slip to 6.5-6.75% in the current fiscal year from 7.9% in FY16 due to global factors and demonetization. In the February 1 Budget, the Centre
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
17
announced its decision to abolish Foreign Investment Promotion Board (FIPB) and promised more reforms to make things easier for overseas investors. FDI in India grew 18% during 2016 to touch $46 billion. The country attracted FDI of $39.32 billion in 2015. The main sectors which attracted the highest foreign inflows include services, telecom, trading, computer hardware and software and automobile. Bulk of the FDI came in from Singapore, Mauritius, the Netherlands and Japan. The government has announced several steps to attract foreign inflows. The measures includes liberalization of FDI policy and improvement in business climate. The government is also considering a proposal to increase FDI limit in print media to 49% from 26%. Besides, a proposal to allow 100% FDI through the automatic route in single brand retail is also under consideration with a view to attracting more global players in the sector. FDI inflows into India firmed up by 22% to $35.85 billion during April-December 2016.
v. Forex reserves
India’s forex reserves increased by $1.2 billion to $364.01 billion for the week ended March 10 due to surge in currency assets. Total reserves had declined by $56.8 million to $362.73 billion in the previous reporting week. Foreign currency assets (FCAs), a major component of the overall reserves, increased by $63.4 million to $339.783 billion in the previous week, as per RBI.
Figure 6: Forex Reserves jumped $1.2 billion
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
18
India has also been receiving a strong intake of investments from foreign investors throughout the New Year. According to data from NSDL, Rs 22654 crore has been pumped into the Indian markets by foreign investors. Expressed in US dollar terms, they include the effects of appreciation/depreciation of non-US currencies, such as the euro, pound and the yen held in the reserves. Gold reserves remained unchanged during the week at $19.248 billion. The special drawing rights with the International Monetary Fund rose by a marginal $100,000 to $1.444 billion; while India’s reserve position with the Fund, too, increased by $0.2 million to $2.318 billion, as per RBI.
vi. FII Flow and Stock Market After pulling out massively from the Indian stock markets during the last quarter (October-December) of 2016, foreign institutional investors (FIIs) have turned active buyers again on the bourses. FIIs have invested about $1.5 billion in equities during February, the highest in the last five months. With growth outlook turning uncertain following the demonetisation exercise, FIIs exited Indian markets in a big way in late 2016.
Figure 7: Foreign Institutional Investors
They net sold stocks to the tune of about $4.7 billion between October and December. They offloaded shares to the tune of a whopping $2.76 billion in November alone when demonetisation brought earnings of corporates under a cloud. Due to the heavy pull-out, FIIs, who own about 25% on an average in BSE-
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
19
200 companies, made net investments of just $3.1 billion in the stock markets in 2016. The trend continued in January with overseas investors remaining sellers on a net basis during the month. But February has brought good tidings with a host of factors including better than expected earnings and ample global liquidity bringing FIIs back in the market. There were no negative announcements in the union budget for the markets and overseas investors. This also helped. The weakness in the US dollar amid positive flows into emerging markets (EMs) led to a revival in interest in Indian markets, say experts. The sharp increase in metals and commodities prices in the last few months has resulted in greater inflows into markets such as Russia. The 12-month forward PE (price-earnings) of the Sensex is at around 17 times, which shows that it is not really cheap. The benchmark Sensex and broader Nifty have gained 3.9% and 3.7% respectively in February. Both indices are trading very close to their all-time high hit during March 2015. The heavy selling in November and December last year resulted in FIIs turning sellers on an aggregate basis (debt and equities) for the first time since 2008 when the stock markets crashed following the global financial crisis. Their net sales in India stood at Rs. 18739 crore or $3.5 billion on an aggregate basis in 2016 -NSDL data. Nifty closed at all-time high of 9,160 on 17th March 2016 and Sensex reclaimed 29000-mark after September 2016 on sustained buying by domestic institutions amid robust foreign fund inflows and expiry of derivative contracts and closed at a high of 29,648-mark. Secondly, there has been a growing optimism over corporate tax cuts and other policy proposals reiterated by US President Donald Trump during his speech before the Congress. Markets in last few months have remained steady despite FPI selling, showing the increasing importance of the Domestic investors. Going ahead, analysts believe that India will continue to attract FII flows over the long term, as economic fundamentals remain stronger than other emerging market economies. That apart, clarity on the path that the US Fed is likely to follow should keep the current momentum in the equity markets strong, they say.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
20
Figure 8: Stock Market Performance
Historically, Indian market used to follow the Foreign Portfolio Investors (FPI) activity. After demonetization, Indian markets saw emergence of Domestic Institutional Investors (DII) as the FPI selling during the demonetization moves was adequately absorbed by the DIIs. As a result the loss in domestic markets during the period of November-December 2016 was recovered in the month of January 2017 due to sustained buying from DIIs. Given the expected rise in movement of Indian household saving into financial savings post demonetization, the incremental financial savings would further increase importance of DII in Indian markets going ahead.
vii. Current Account Deficit India posted a current account deficit (CAD) of $3.4 billion, or 0.6% of gross domestic product (GDP), in the July-September quarter, data released by the Reserve Bank of India (RBI) showed. The CAD in the second quarter was higher than the first quarter (April-June) CAD of 0.1% of GDP but lower than the same quarter (July-September) a year ago at 1.7% of GDP. The contraction on a year-on-year (y-o-y) basis was primarily on account of a lower trade deficit ($25.6 billion) brought about by a larger decline in merchandise imports relative to exports. India’s merchandise exports and imports turned positive in September and October after consistently declining since December 2014—barring in June—because of sluggish global demand and low commodity prices.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
21
Figure 9: Q2 CAD at 0.6% of GDP
Net services receipts moderated on a y-o-y basis, primarily because of a fall in earnings from software, financial services and charges for intellectual property rights. Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $15.2 billion, having declined by 10.7% from their level a year ago. RBI in its monetary policy review in Dec’16 suggested, CAD is likely to remain muted, notwithstanding some loss of remittances and software exports under the “so-called invisibles category,” which refers to the trade that is not tangible. However, rising crude oil prices may put some pressure on trade deficit. On a cumulative basis, CAD narrowed to 0.3% of GDP in the first half (April-September) of 2016-17 from 1.5% during the same period a year ago as trade deficit narrowed to $49.5 billion from $71.3 billion during the comparable period. Portfolio investment recorded a net inflow of $8.2 billion during the first half (April-September) as against a net outflow of $3.5 billion a year ago. A widely anticipated Fed interest rate hike in the US may lead to further outflow of portfolio investments from India though analysts say it is unlikely to match the taper tantrum of 2013 which roiled Indian markets. India's exports revived for the sixth straight month, as the country's merchandise shipments overseas reported a double-digit growth during February. According to data released by the Ministry of Commerce and Industry, the exports grew by 17.48% to $24.49 billion from $20.84 billion worth of merchandise shipped out during February 2016.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
22
However, the country's imports during the month under review increased by 21.76% to $33.38 billion from $27.41 billion worth of merchandise which were shipped out in during the corresponding month of last year. Consequently, the trade deficit during February reduced to $8.89 billion from $9.84 billion reported for the month before. On a year-on-year (Y-o-Y) basis, the trade deficit stood at $6.57 billion during same month of 2016. The growth in exports is positive for USA (5.61%), EU (1.68%) and Japan (10.87%) but China has exhibited negative growth of (-6.20%) for December 2016 over the corresponding period of previous year as per latest WTO statistics. Cumulatively for the April-February period, exports rose marginally by 2.52% in dollar terms at $245.4 billion, as against exports of $239.3 billion over the same period last year.
Figure 10: Trade Deficit at $8.89 billion
Non-petroleum and non-Gems and Jewellery exports in February 2017 were valued at $18.01 billion against $14.99 billion in February 2016, an increase of 20.15%. Cumulative imports for April-February were worth at $340.7 billion, which was a 3.67% fall from $353.7 billion worth imports recorded for the same period of
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
23
the previous fiscal. India's oil imports during February were valued at $7.68 billion, which was a massive 60.02% jump over oil imports valued at $4.8 billion in the corresponding month of 2016. Non-oil imports in February were up by 13.65%, to $25.70 billion, from $22.61 billion in the same month of last year. The merchandise trade deficit cumulatively for April-February, however, declined by 16.65% to $95.28 billion, as against $114.3 billion in the same period of 2015-16. As per RBI data, services exports during January 2017 were valued at $13.57 billion, while imports stood at $8.4 billion, resulting in a positive trade balance of $5.16 billion. Taking merchandise and services together, overall trade deficit for April-February is estimated at $41.8 billion, which is 24% fall from the level of $55.02 billion during the same period last year. The trade data suggest that exports have finally started to recover, but much of the recovery in imports has been largely driven by higher prices and not as much by volumes. In particular, low core import volumes are a clear sign of still-subdued domestic demand.
viii. Inflation
Retail price inflation, measured by the Consumer Price Index (CPI), rose to 3.7% in February 2017 from 3.2% in January 2017. Retail price inflation rose for the first time after recording a fall in past six months. Inflation in both rural and urban India witnessed an increase. Food inflation increased to 2.01% in February 2017 from 0.5% a month ago. The fuel & light group recorded a rise in inflation to 3.9% from 3.4% in the previous month.
Figure 11: Rate of Inflation (in percent)
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
24
Inflation at the wholesale level, measured by the WPI, rose to a 39-month high of 6.55% in February 2017 from 5.3% in January 2017. With that, the difference between WPI and CPI inflation, which was merely 25 basis points in November last year, has increased to 290 basis points in February this year, thus widening the gap between the two (refer chart). Inflation in the fuel group shot up to 21.02% in February 2017 from 18.1% in the preceding month. The primary articles group also saw a 370 basis points increase in inflation. On the other hand, inflation in the wholesale prices of manufactured products declined to 3.7% from 4% in January.
ix. Rupee (₹)
The Indian rupee ₹ has been one of the best performing emerging market currencies in the last few years resulting in significant outperformance of around 15% against emerging market basket and about 12% in REER terms in the last three years. Indian Rupee emerged as the best performer amongst all the Asian currencies in Asia in 2016. This, analysts suggest was, on the back of fortuitous circumstances of decline in commodity prices resulting in lower imports and healthy capital inflows post Modi (PM) victory amidst benign global liquidity. In fact for all the forecasts of a sharp depreciation to 70 per dollar and beyond, the Indian rupee barely budged in 2016, weakening by just 2.6%. In the first half of March 2017 (until March 14 2017), FIIs had invested US$2.4billion in the Indian equity (US$2.1 billion) and debt (US$0.3 billion) markets, marginally higher than the total inflows garnered during the entire month of February 2017 (US$2.4 billion). Moreover, this is in contrast to the outflows of over US$10.3 billion recorded in November 2016-Janaury 2017, after the announcement of the demonetization of high denomination currency notes. Furthermore, the recent drop in global crude oil prices on concerns that supplies will outweigh demand, has also benefited the INR, as this would dampen India’s import bill. The price of the Indian basket of crude oil has eased from over US$55 a barrel in late February to around US$50 a barrel on March 15, 2017. That such a stable performance came in a year marked with unprecedented volatility in emerging market currencies amidst unexpected shocks is surprising. The Indian rupee on 14th March 2017 surged to touch 17 month high against the US dollar at 65.39 ahead of the key events in domestic as well as international markets Gains in the rupee was also due to continued buying from FIIs in both local equity and bond markets.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
25
At the current level rupee is the third best performing Asian currency after South Korean Won and Taiwanese dollar since the start of the calendar year. Foreign investors pumped in over Rs 10,000 crore in the Indian capital markets in March 2017 so far.
Figure 12 : Rupee Movement in last one year
The chart shows two things: one, the sharp fall in the value of rupee last December—that is as it should be, because the strength of the broad Dollar Index should mean a weaker rupee. But then there was a sharp recovery in rupee on the basis of a slightly weaker dollar. And very recently, rupee has strengthened in spite of a stronger broad Dollar Index. That means the rupee’s strength is based on domestic factors, with large portfolio inflows attracted by India’s political stability, low current account deficit, lower inflation and growth prospects. Rupee also got an added fillip from bullish macro data, which showed that the country's industrial production bounced back in January, expanding by 2.7% year-on-year. The momentum is likely to sustain unless there is global surprise emanating from the US Federal Reserve. Custodian banks were seen selling the dollar on behalf of their overseas clients but some state-owned banks were seen buying dollars that initially helped check the rupee’s sharp rise. The dollar index had gained 3.6% during the year and most emerging market currencies weakened by a greater margin than the Indian currency.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
26
The fact that the exchange rate moved in a narrow band in 2016 largely because of deft intervention by RBI shows that perhaps the central bank too feels that 67-68 to a dollar is the right level for the rupee. RBI, on an average, had bought or sold around $6 billion every month in 2016 and intervened to a larger extent in the forward market. Forecasts for the rupee to weaken to 70/$ and beyond are back for 2017-18 as well however going by the current surge in rupee to dollar rate rupee might just keep growing stronger in 2017-18. If the rise in foreign exchange reserves is to be relied upon, the central bank has been a net buyer of dollars so far in 2017. Foreign currency assets rose by $2.6 billion in January and another $915 million in the first week of February. It is clear that the RBI doesn’t want an appreciating rupee as well. If the tide turns, RBI could swiftly become a dollar seller too as it sits on a huge pile of forex reserves. Additionally, the copious rupee liquidity makes it even easier for the RBI to sell dollars. Currency analysts believe, rising commodity prices, drying up of dollar inflows and an expected rise in inflation to work against the rupee and forecasts it to fall to 72-73 this year. However another analysis suggests that India’s strong macroeconomic fundamentals, the rupee’s attractiveness as a carry-trade currency and the fact that the nation’s exports to the U.S. account for only 2% of its GDP, augur well for the exchange rate. As per the latest FOMC’s commentary which signaled more than two rate hikes this year, analyst believe the dollar is likely to strengthen. Outlook for 2017-18: India Economic growth in India is expected to stay high in Fiscal Year 2017-18 on the strength of robust consumer demand from a general increase in wages that offsets a slowdown in investment. The enactment of legislation to allow a national value-added tax was a milestone reform that will create a much more integrated and productive economy. Ongoing efforts to restructure bank balance sheets to revive lending and reduce excessive leverage at large corporations is setting the stage for a recovery in investment spending likely to drive growth higher in FY2017-18. Given the recent turbulence in the domestic economic environment and fast changing global economy, the macroeconomic fundamentals of the economy remain robust and augur well for the future.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
27
Latest data points suggest that demand is recovering in the economy and the Reserve Bank of India has also started to increase withdrawal limits. Growth is expected to move up over the course of the next year and is likely to cross the 7% mark again. The government on its part has shown confidence in its existing approach and schemes and increased allocations in a number of programs. The next step would clearly be the effective implementation of these schemes, which can potentially help the economy from a structural perspective. Schemes to alleviate skill shortages are likely to also lead to a healthier job market that is in tune with the changing times while increased rural spend is likely to bring about changes at the supply side of the economy. While there remain challenges on domestic front such as inflation and on the international front due to geo-political concerns, the stage seems to be set for a more sustainable growth process to take hold. Agencies that have revised India’s growth projection downward after the note ban may be forced to further scale down their projections for 2016-17 based on the new information. IMF has cut its growth projection for India to 6.6% for 2016-17 and 7.2% in 2017-18, taking into account the impact of the note ban, however predicts strong growth would persist despite new challenges and maintains that India still remains a bright spot in the global landscape.
In addition, continued fiscal consolidation, by reducing government deficits and debt accumulation, and an anti-inflationary monetary policy stance have helped cement macroeconomic stability.
Table 3: India’s GDP Growth Projection – 2017 - 18
Agencies 2017-18
CSO 7.4%
ADB 7.4%
Fitch Ratings 7.7%*
RBI 7.4%
Moody’s 7.1%*
Morgan Stanley
7.7%*
IMF 7.2%*
OECD 7.3%*
UN 7.7%*
World Bank 7.6%* *figures represent calendar year 2017
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
28
While other International agencies also continue to remain positive on India though have lowered their forecast for the year 2016-17 many still believe in the fact that growth would accelerate in FY 2017-18 pegged at and around 7.4-7.6% as economic activity is likely to bounce back on the back of strong fundamentals still in place, implementation of reforms, easing monetary policy and credit conditions and infrastructure spending. More importantly, it is believed in the long run India may benefit immensely from the increased digitalization of the economy and expansion of the formal banking sector. India is likely to gain momentum in the year to come as the results of earlier measures are visible. The key factors which are likely to aid growth during the year are the impact of the executive action addressing systemic issues in key sectors like mining, railways, defense, banking, roads and power. Further, the pay commission suggestion for hikes in payouts for government employees coupled with continued accommodative stance and look out for emerging room for more rates easing by the Apex bank is likely to bring in positive sentiments and scope for expansion of the economy. The prime minister’s strong leadership, the recent reforms and initiatives, and the Reserve Bank’s prudent monetary policies are building up confidence among investors. While credit conditions are expected to remain tight for some time, improved business sentiment likely to drive up investment, which will likely be the growth engine in coming quarters. Nevertheless, expanding the formal economic grid and building a digital cashless economy can go a long way in redefining India’s path to prosperity.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
29
Section 2
Indian Petrochemical Industry
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
30
Petrochemical Industry in India Petrochemicals play a vital role in the functioning of virtually all key sectors of economy which includes agriculture, infrastructure, healthcare, textiles and consumer durables. Polymers provide critical inputs which enable other sector to grow. Petrochemical products cover the entire spectrum of daily use items ranging from clothing, housing, construction, furniture, automobiles, household items, toys, agriculture, horticulture, irrigation, and packaging to medical appliances. Per capita consumption of polymer has reached saturation level in US. India has the advantage of high population and expected to maintain high economic growth. This should propel India’s polymer consumption to new levels in coming year.
Figure 13: Per capita Polymer Consumption Vs per capita GDP ~ 2016
Petrochemical Industry Review of 2016 & Outlook for 2017 The global economic outlook continues to brighten a little, notwithstanding still-elevated levels of policy and political uncertainties. It is expected United States and commodity-exporting regions to drive a modest acceleration in world economic growth. World real GDP growth is projected to pick up from 2.5% in 2016 to 2.9% in 2017 and 3.1% in 2018. The responsiveness of short-cycle US tight oil production to prices—and, in turn, of prices to US production—is a core dynamic in the world oil market. It is expected
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
31
that US crude production will rise by more than 500,000 b/d over the course of this year—a rise that the pledge of production restraint from OPEC, Russia, and others is helping bring about. In addition to prices, the pace of service cost inflation and extent of further productivity improvements are key factors that will influence US tight oil output. Less appreciated is the significant production growth slated this year and next from elsewhere in non-OPEC. Outlook for Dated Brent steady at $58/bbl in 2017 and $57/bbl in 2018, based on IHSMarkits’s view that world liquids demand and production will be closely matched, on average, this year and next. Yet the softening of prices in recent days highlights downside risks to IHS price outlook—not the least of which is the continued resilience of US supply. It is expected that regions such as Northeast Asia, Southeast Asia, the Middle East, and Indian Subcontinent will start investing in new ethylene capacity. Ethylene demand is expected to grow for the forecast period even in a lower near-term global GDP scenario. Steam cracker nameplate operating rates will be around 89–92% with a peak in 2019 as supply is forecast to come on stream too slowly to meet demand growth. In 2016, the global demand for 30+ commodity chemicals and plastics totaled 1,128 million metric tons. This demand is forecast to grow over 200 million metric tons at an average pace of about 3.5% over the coming five years, a rate that is very close to the 3.4% level seen for the historical period 2011-2016. About half of this growth will be focused on the broader Asia Pacific region, with the lion’s share (35%) concentrated in China. Thus despite forecasts for a slowing economy China remains the dominant driver of global demand. As a result, by 2021, 37% of global demand will be in China. This aligns with a forecast average growth rate of domestic demand of just under 5%, 3% below the 2011-2016 average pace. The remaining 50% demand growth is split roughly evenly between the Middle East, N. America and other. West Europe is forecast to grow only mildly as the structural issues impacting the broader economic outlook translate into tepid chemical demand growth. For most of 2016, Asian polyethylene (PE) markets were generally on a stable to firm price trend with a couple of fluctuations at certain periods. A growing concern among market participants in Asia now is whether a similar price trend can be replicated in 2017 amid mounting pressure from additional global capacities. The OPEC and non-OPEC oil-producing nations’ decision to cut oil production boosted crude prices in late 2016 and led PE suppliers to increase their offers in the Asian markets.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
32
However, while producers raised prices based on feedstock costs, converters lamented that plastics demand in key sectors such as packaging, consumer goods and construction had been subdued throughout 2016 amid dull macroeconomic conditions. Subdued demand is expected to last through 2017. Supply tightness amid resumed restocking activities in China after the Golden Week holiday in October 2016 had pushed prices up substantially, particularly for low density polyethylene (LDPE). Producers from Saudi Arabia, Iran and across the Middle East, from Southeast Asia and India allocated more cargoes to China for better netbacks. True enough, Chinese prices softened nearer to the Lunar New Year holiday, which falls at the end of January 2017, amid falling LLDPE futures prices and a slowdown in trading activity. Although some suppliers expected the drop in PE prices in Asia to be minimized by firm regional naphtha and ethylene costs, some were worried that ample additional global polymer capacities would create supply pressure and weigh down prices in 2017. India-origin export PE cargoes are expected to be available in China, and potentially Southeast Asia, on a regular basis in 2017. The region’s approximately 2m tonnes/year of PE expansion plans would prompt Indian producers to export PE cargoes to other Asian regions, mainly to China and Southeast Asia, as domestic demand alone will not be able to absorb the additional supply. In the meantime, India’s import demand has been subdued following the demonetisation exercise in November which halted trade in the region as a majority of trade is typically done on a cash basis. On the supply side, India’s ONGC Petro additions Limited (OPaL) started its two HDPE/LLDPE swing units with nameplate capacities of 360,000 tonnes/year each and a 340,000 tonnes/year stand-alone HDPE facility in the February of 2017. India’s Reliance Industries is also expected to start-up its LDPE and LLDPE/HDPE units with a combined capacity of 1.1m tonnes/year in the first half of 2017. Overall demand-wise, a slow-moving consumer goods sector, and persistent weak downstream demand for finished goods in the first half of 2017 is expected to exert downward pressure on polymer prices in the region. In the meantime, generally weak Southeast Asian currencies are likely to continue to hamper imports in 2017. India may turn into a net exporter of polyethylene (PE) in the second half of 2017, as the country will welcome hefty new capacities in the western state of Gujarat.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
33
The possible target export markets are China, Turkey, Africa and Southeast Asia as India’s domestic PE capacity will increase by 2.01m tonnes by mid-year. The expected increase in India’s overall PE capacity is higher than its recorded total PE imports in the fiscal year ending March 2016. The country, which has a current PE capacity of more than 3m tonnes/year has always been an importer of the polymer until late last year, when a domestic cash crunch prompted PE producers to tap the export market to offload inventory. By the second half of the year, however, India’s PE capacity will have outpaced domestic demand, making exports necessary for its local producers. PE products would most likely be marketed into Asia, particularly China, which has a strong demand for the material. In December 2016, major Indian producer RIL spearheaded the PE exports due to a severely weakened domestic demand after the government’s surprise demonetisation of the rupee (Rs) 500 and Rs1000 notes, which accounted for more than 80% of the money in circulation at that time. In fact, weak local demand in December 2016 presented a good opportunity to venture into global markets to establish a customer base for PE when new facilities start commercial production in 2017. GAIL India Ltd (GAIL), had also forayed into exports for the first time late last year, with a few consignments sent to Southeast Asia, where netbacks are better. The company’s 400,000 tonne/year LLDPE/HDPE swing facility resumed operations in January 2017, after more than a month of shutdown following technical issues at the unit’s reactor. The plant was commissioned in March last year. Meanwhile, new PE producer OPaL is also keen to export to China and Southeast Asia when it is able to establish distribution channels sometime in the second half of 2017. There is a strong likelihood that imports of these polymers will substantially fall when the new domestic capacities start up. In fact, Indian economy has turned the cornerstone and it’s once again on the growth path. Globally India is being looked at as the bright spot in the global economy. Consumer sentiments are high and growth expectations are reasonable well, which augers well with the petrochemical industry whose growth has a direct relation with the economic growth. For the Indian petrochemical industry in 2015-16- the key application industries like packaging, construction, and automobiles actually helped pull up the demand and declining prices resulted in higher offtake by downstream converters for virtually all polymers.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
34
Government of India’s initiatives like Digital India, Swachh Bharat, Start-up India and Skill development program etc. have started and will eventually a widespread multiplier effect. One can expect them to fuel petrochemical demand in India in the years to come. India witnessed a rebound in auto sales in the second half of 2016 and the trend is expected to continue in 2017 as well as passenger vehicles recorded a growth of 9% in February 2017 and within PVs the UV sales registered a jump of 22% and Van segment at 8%. CV sales surged by more than 7%, M&HCV registered 5% while LCV segment climbed up by 9%. International markets proved to be lucrative for Indian vehicle makers in February 2017, when India’s vehicle exports surged by 11.84%. Success of ‘Make in India’ programme will be a game changer and a big boost to manufacturing in the country. Increased focus on agriculture and irrigation will boost the demand for plastics along with GOI’s thrust on infrastructure followed by a good monsoon forecast in 2017 by IMD. A few of the many such initiatives that are likely to result in new opportunity for industries and positively push the demand for petrochemicals are: Rapid expansion of Metro Rail Projects across the country and electrification of existing & addition of new railway lines. The government has set a target of constructing 15,000 km of highways in the next financial year, 50% more than that in the current fiscal. The launch of Smart Cities and emphasis on Rural Development, expected to have a huge demand push for overall petrochemicals sector. Last but not the least, the likely highly anticipated roll-out of Goods and Services Tax (GST) roll-out in 2017 would have a very positive impact on the way business is conducted. The opportunities are huge, and the petrochemical industry stands to benefit in a big way. These proposals and the focus to support the start-ups will also go a long way in encouraging domestic manufacturing and demand. A number of Indian state-owned energy companies are making major investments to boost their petrochemical activities and are expected to become significant players in the sector. Capacity expansions by several other manufacturers are moving ahead and gradually filling the gap between domestic demand and supply. Overall, the outlook for the petrochemical industry in India is somewhat more positive than it has been recently, as growth in GDP and industrial output is expected to be higher in 2016-17 than in the prior year, and key end-use industries like automotive, packaging, and consumer durables reflect this outlook.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
35
Monomers A. Ethylene & Propylene
Ethylene Capacity is further going to increase from 3907 KT in 2015-16 to 4842 KT by 2016-17. In 2015-16, production of ethylene and propylene was 3870 KT and 4590 KT respectively as shown in table below. Ethylene Production had declined in 2014-15 with respect to slow down in production at Haldia plant however in 2015-16 witnessed a rebound to touch 3870 KT. The capacity is however expected to touch 7212 KT in 2017-18 with the new capacity lined up by RIL, GAIL BCPL and OPAL. Availability of Ethylene is set to rise to 7200 KT by 2017-18 from 3895 KT in 2015-16.
Table 4: Ethylene & Propylene net availability
Reliance Industries is constructing a 1.5-million m.t./year ethylene plant, expected on-stream in 2016-17 which will crack refinery off-gases. Reliance will also adapt its 860,000-m.t./year ethylene plant at Hazira, originally designed to work on naphtha, to partly use gas. The new Jamnagar cracker will raise Reliance's HOPE total ethylene capacity to 3.4 million m.t./year. Separately, ONGC Petro additions Ltd. (OPaL), a JV among ONGC, Gail, and Gujarat State Petroleum Corp., complex’s' at Dahej having ethylene plant will be a dual-feed cracker with capacity for 1.1 million m.t./year of ethylene by 2017-18.
Propylene capacity as mentioned in the table above had witnessed a dip in 2014-15 owing to slow down at Haldia plant to 4230 KT however saw a surge in capacity numbers owing to capacity addition by RIL (Hazira) Haldia, and HMEL at 4601 KT in 2016-17 and it is further expected to increase to 4773 KT in 2016-17 with capacity additions lined up by OPAL, GAIL and BCPL Assam. Production in 2016-17 is also expected to touch 4770 KT from 4590 KT in 2015-16.
Ethylene (KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 3515 3907 4842 7212
Production 3450 3870 4780 7200
Imports 60 25 50 0
Exports 0 6 0 10
Net Availability 3510 3895 4830 7200
Propylene (KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 4230 4601 4773 4842
Production 4020 4590 4770 4840
Imports 0 0 0 0
Exports 10 10 15 0
Net Availability 4020 4590 4770 4840
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
36
State-run Bharat Petroleum, which expects to finish work on its 15.5-million tonne refinery expansion in Kochi by December and commission it in the fourth quarter, may look at further increasing its capacity to 22 MT. The expansion is expected to increase BPCL’s naphtha production by 10%-15%, which would enable the refiner to restore monthly exports from Kochi on the Indian southwest coast, to two cargoes.
BPCL is set to boost its naphtha exports next year as per industry sources. But the increase in exports from Kochi would only last for around a year, as naphtha would be diverted as feedstock into BPCL’s new petrochemical project as per source.
The propylene derivatives petrochemical project in Kochi is expected to be completed around the end of next year, and is due for commissioning around the first-quarter of 2018 - industry sources.
It will have the capacity to produce 47,000 mt/year of acrylic acid, 92,000 mt/year of oxo-alcohols and 190,000 mt/year of acrylates and will require 250,000 mt/year of propylene to produce 329,000 mt/year of petrochemicals
B. Butadiene Sharp decline in crude prices and continued soft demand for synthetic rubber, coupled with new capacities led to Butadiene prices under pressure till mid-August 2016 before witnessing a gradual climb because of turnarounds. The recent rapid and, since August’16, relentless increase in butadiene prices in Asia is forcing some consumers to think about cutbacks. Spot prices climbed from $1,000/tonne to more than $2,500/tonne as supply tightened. Butadiene has been here before with price volatility driven by tightened supply and market sentiment underpinned by steadily increasing downstream synthetic rubber demand. The demand for butadiene registered a robust growth of 40% in 2015-16 however is expected to witness a slowdown in growth rate maintain around 26% growth in next two years. ONGC Petro Additions (OPaL) has begun exports to Singapore and intends to float a tender soon for exporting more products to other countries. The first consignment of butadiene was shipped to Singapore in March 2017, and the company wants to export more products benzene, etc. to other countries as well for which it will be floating tenders. OPAL is expected to add 115 KT in 2016-17 taking total capacity to 550 by 2017-18. Production is expected to increase in line with the new capacity
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
37
addition taking place and is expected to increase from 318 KT in 2015-16 to 550 KT by 2017-18.
Table 5: Butadiene Demand Supply
Butadiene (KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 435 435 550 550
Production 229 318 416 550
Imports 0 6 6 6
Exports 46 79 96 164
Apparent Demand 172 241 306 386
Demand Growth% 43.4% 40.1% 27.0% 26.1%
There was an exportable surplus of 79 KT in 2015-16, which is expected to strengthen further and touch 164 KT by 2017-18. There are few imports expected going forward in next fiscal.
C. Styrene The demand for styrene has significantly increased since 2010, after the chemical market recovery from the global economic slowdown. The entire demand for styrene is met through imports due to lack of any production facilities within the country. This makes the demand susceptible to international fluctuations in prices as well availability of styrene. India’s total imports for Styrene was 617 KT in 2015-16 growing at a whopping 13%. Imports for Styrene are projected to increase by ~7% to 6% and expected to reach 750 KT in 2016-17 and further to 795 KT in 2017-18.
Table 6: Styrene Demand Supply
Styrene (KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Imports 617 697 750 795
Exports 0 0 0 0
Apparent Demand
617 697 750 795
Demand Growth%
7.9% 13.0% 7.6% 6.0%
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
38
Polymers The Indian domestic polymer industry (like global industry) is dominated by Polyolefin’s (PE & PP), representing about 73% of all commodity resins consumed in 2015-16. After clocking a growth of 7% in 2014-15 the polymer growth in India grew at a staggering high of 15% in 2015-16. Domestic demand is expected to outpace domestic production in coming years too.
Table 7: Polymer Demand Supply
Polymers (KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 9022 9496 11747 12747
Production 7907 9248 9822 12113
Op Rate (%) 88% 97% 84% 95%
Import 3330 3711 4175 4007
Exports 797 882 833 2014
Net Trade -2533 -2829 -3342 -1993
Demand 10004 11553 12453 13525
Demand Growth % 6.9% 15.5% 7.8% 8.6%
Polymer import dependency remained high at 32% in 2015-16 and is expected to come down in next two years to ~30%. PP exports was around 701 KT in 2015-16. PE imports in 2015-16 stood at 1650 KT and PVC imports were at 1362 KT in the same period. In 2015-16 net trade deficit of total polymers stood at 2829 KT which was higher than previous year which stood at 2533 KT. However, trade deficit is expected to rise to 3342 KT in 2016-17 and decline to 1993 KT in 2017-18. However, the demand for polymers is expected to grow at ~7% in 2015-16 and see a double digit growth of ~13% in 2016-17. India’s petrochemical industry, like the overall economy, faces near-term challenges, but the long-term growth outlook for the industry remains positive. Capacity expansions by several other manufacturers are moving ahead. Intermediates
A. EDC and VCM Almost the entire production of EDC and VCM in India are consumed captively by the polymer manufacturers for production of PVC and hence, PVC manufacturers who do not have facilities for captive production of EDC and VCM have to rely entirely on imports to meet their demand for PVC building blocks viz. EDC and VCM.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
39
Table 8: EDC & VCM Import into India
EDC witnessed a double digit growth of 13.9% in 2015-16 after a 13.7% growth in 2014-15. However is coming two years it is expected to witness a flat growth of around 1%. While VCM witnessed a rebound from a negative growth of 2.8% in 2014-15 to a staggering 8.3% in 2015-16 and is forecasted to remain around 2-3% level in 2016-17 and 2017-18. In case of EDC imports, there is once again a surge expected going forward in 2016-17 to 600 KT from present imports of 595 KT in 2015-16. Imports in case of VCM is expected to increase from 448 KT in 2015-16 to 485 KT in 2016-17. Polyolefins All PE registered a robust demand growth of 15.7% in 2015-16. It is expected that PE will see a healthy growth of 9% in next two fiscals. PP registered a staggering demand growth of 19% in 2015-16 and it is expected to witness an average growth of 7% in next two years. Polyolefins registered a robust demand growth of 17% in 2015-16 and is expected to improve to 8% average over next two fiscals.
Table 9: Polyolefin Demand in India Actual & Projected
Source: Industry Estimates. A: Actual, E: Estimate
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
40
The ONGC Petro additions Ltd (OPaL) commissioned its mega petrochemical complex at Dahej in Feb 2017 and started production in some of its units. The 1,100 KT capacity dual feed cracker unit has been operational and in Feb it delivered its first consignment of about 40 tons. The plant that was to be made operational in 2014, but was marred by several delays along with cost escalation. OPaL would be ramping up its capacity in the coming months. It is currently operating the polypropylene (PP) unit at 50% capacity. But it is expected that in about four months from Feb 2017, the plant will operate at 100% of its capacity of 340 KT per annum. The polyethylene (PE) plant too will operate at full capacity from the current 50% production within few months. OPAL now has annual capacity of 14 lakh metric tonnes of polymers, low and high density polyethylene, polypropylene and 5 lakh metric tonnes of benzene, butadiene and pyrolysis gasoline etc. Mangalore Refinery and Petrochemicals Ltd (MRPL), a subsidiary of Oil and Natural Gas Corporation Ltd (ONGC) which began commercial production of polypropylene in 2015 from its new unit as a part of its phase III expansion plan will add 110 KT of PP as the plant comes to full capacity in 2016-17. The plant has capacity to produce 440,000 tonne per annum (TPA) of polypropylene. Meanwhile in Assam State, in the far northeast of the country, Brahmaputra Cracker and Polymer Ltd. (BCPL), 70%.owned by Gail, commissioned a complex in November 2015 based around a 220,000- m.t./year ethylene and 60,000-m.t.lyear propylene plant. The complex will also produce 226,000 m.t./year of LLDPE-HDPE and 60,000 m.t./year of PP by 2016-17. Indian Oil Corporation Ltd commissioned its 15 million tons per annum (mtpa) refinery at Paradip in Odisha. The PP project at Paradip is designed co-produce 700,000 m.t./year. The company currently has 650,000 m.t./year of PP capacity at Panipat, Haryana State. Odisha government’s move to withdraw tax breaks to IOCL’s 15 million tonne Paradip refinery is likely to cost the state about Rs 50,000 crore of investments with the refinery major taking a second look at its investment plans for the state. Indian Oil’s two major proposed investments which will be given a second thought are a petroleum coke gasification and downstream product manufacturing capacity costing Rs 15,000-20,000 crore and an expansion of the refinery itself for another Rs 10,000-15,000 crore. A third project—a MEG production facility at a cost of Rs 4,100 crore —will also be reviewed. LPG bottling plants and marketing terminals are among other planned projects that will be reconsidered.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
41
Gail is also doubling ethylene capacity at the company's gas-based petrochemicals complex at Pata, Uttar Pradesh State, to 900,000 m.t./year and adding 450,000 m.t./year of LLDPE- HDPE, which will double its capacity for PE. Meanwhile, OMCs—Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL)—plan to jointly build a 60 million tonnes per annum (mtpa) refinery at a cost of Rs1.5 trillion in two phases of 40 and 20 mtpa. The OMCs will form a special purpose vehicle for the project. While Indian Oil will hold a 50% stake, HPCL and BPCL will hold 25% each. The 60-million tonne a year refinery and a mega petrochemical complex will be set up in two phases. The mega complex will require 12,000-15,000 acres and two-three sites on coast of Maharashtra are being explored. The second phase, involving a 20-mt refinery, will cost Rs 50,000-60,000 crore. The refinery being planned by the state-owned firms will be bigger than that. The phase-1 itself will be bigger than any one single unit. India has a refining capacity of 232.06 mt, which exceeded the demand of 183.5 mt in 2015-16. Vinyl’s: PVC The demand for PVC increased substantially 2015-16 from a single digit growth of 6% in 2014-15.
Table 10: PVC Demand Supply
PVC (KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 1390 1470 1482 1482
Production 1256 1362 1388 1423
Imports 1172 1335 1608 1865
Exports
Apparent Demand 2443 2699 2988 3287
Demand Growth% 5.8% 10.5% 10.7% 10.0%
As the economy is expected to perform well with the easing of monetary policy and various PVC end use sectors performance improving after the demonetization effect. PVC demand is expected to see a sustained growth in coming years. It is expected to maintain almost the same growth rate in 2016-17 and 2017-18 and sustain 10% plus growth rate levels. In case of cPVC, capacity expansion is expected by DCW Ltd in next fiscal around 12 KT which will take the total PVC capacity to touch 1482 KT from 1470 KT in 2015-16. Reliance Industries underwent debottlenecking at its PVC complex at Dahej and now the capacity stands at 750 KT capacity for 2015-16. Meanwhile,
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
42
PVC imports are expected to increase further from 1355 KT in 2015-16 to 1608 KT in 2016-17 and 1865 KT in 2017-18. Styrenics A. Polystyrene
After witnessing a negative demand growth in 2013-14, demand for PS increased by ~9.8% in 2014-15 to touch 238 KT, as shown in table below. In 2015-16 the demand for PS maintained same level of growth and touched 261 KT. However expected to witness a slowdown to around 5.4%-5.5% in next two years i.e. 2016-17 and 2017-18 to touch 275 KT and 290 KT respectively. Total Polystyrene capacity in India is expected to increase and reach 490 KTA by 2017-18 with LG polymers planning to expand capacity in 2016-17 and 2017-18 by 118 KT. Other major producers of polystyrene in India include Supreme Petrochem and Styrolution India.
Table 11: Polystyrene Demand Supply
Polystyrene (KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 472 476 490 490
Production 270 308 325 340
Imports 13 20 20 20
Exports 42 71 70 70
Apparent Demand 238 261 275 290
Demand Growth% 9.8% 9.7% 5.4% 5.5%
B. Acrylonitrile-Butadiene-Styrene (ABS) ABS, the third-largest styrene derivative, is the largest-volume engineering thermoplastic resin in the world. ABS is used in many consumer-related end-use applications including appliances, electronics/electrical, building and construction, and transportation. ABS demand in India is expected to grow strongly at 10%, owing to the growth in the Indian middle class expenditure in home appliances and automobiles, which will drive the core demand for ABS. The appliance sector will continue to be the largest ABS end-use market. Demand for ABS registered a healthy growth of 10% in 2015-16 and expected to continue to grow around 10% in 2016-17 and 2017-18.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
43
Both the manufacturers in India INEOS Styrolution India Ltd and Bhansali Engineering Polymers Ltd. witnessed capacity addition in 2015-16 by 20 KT and 15 KT respectively, making the total capacity of the industry touch 190 KT which is expected to remain same for coming two fiscals.
Table 12: ABS Demand Supply
ABS (KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 155 190 190 190
Production 102 112 120 130
Imports 64 71 80 90
Exports 0 0 0 0
Apparent Demand 166 183 200 220
Demand Growth% 9.9% 10.0% 9.6% 10.0%
C. Styrene-Acrylonitrile (SAN)
SAN has been witnessing healthy growth due to its wide ranging usage in consumer electronics, appliances and automotive sector.
Table 13: SAN Demand Supply
SAN (KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 130 150 170 170
Production 87 94 117 126
Imports 7 8 8 9
Exports 0 0 0 0
Apparent Demand 94 102 125 135
Demand Growth% 5.6% 8.0% 23.4% 7.7%
Demand for SAN surged to 8% in 2015-16 and further it is expected to grow at a staggering rate of 23% in next fiscal 2016-17 with capacity addition touching 150 KT. It is expected there will be an increase in demand of SAN grades, with a focus on consumer and industrial applications. Imports are expected to touch between 8 KT to 9 KT in next two fiscals to meet the rising domestic consumption demand. PET (Polyethylene Terephthalate)
Indian PET resin market is highly consolidated and dominated by three major players, Reliance Industries Limited (RIL), Dhunseri Petrochem Limited (DPTL) and JBF Industries Limited. In FY15-16, M/s Indorama Ventures Limited acquired
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
44
Micro PET 210 KTA & DPTL. Reliance Industries is the largest player in the country’s PET resin market and is expected to maintain its leadership position through 2016-17. In 2015-16, Reliance Industries Limited commissioned a new PET resin facility at Dahej, Gujarat. The plant consists of two lines with a combined manufacturing capacity of 648 KTA, based on Chemtex technology for Continuous Polymerization and Buhler Technology for Solid State Polymerization. This is one of the largest bottle grade PET resin capacity at a single location globally. This consolidates Reliance’s position as a leading PET resin producer with a global capacity of 1.15 MMTPA. New capacity addition by Reliance will greatly help the downstream bottle and packaging industry in meeting the increasing demand from India and the region. India's polyethylene terephthalate demand is expected to rise at a compound annual growth rate of 17%-15% over the next five years on the back of strong economic and population growth -- far outpacing the expected growth of 4%-5% in global demand. The fast pace in India's demand growth is also expected to lift the compound annual growth rate of Asia's PET consumption to 6%-8% over the same period. India's PET demand has surged significantly in recent years, rising to 710,000 mt/year over 2014-2015, from 600,000 mt/year over 2012-2013. And demand is forecast to surge to 900,000 mt/year in 2016-2017. Another main driver behind India's PET demand growth is more widespread use of PET packaging in the beverage sector in India, as most non-alcoholic beverages are currently packaged in PET bottles across Asia. Further growth is also seen from an expected large increase in PET processing and its applications within Asia. Currently, PET bottles are used primarily in the pharmaceutical sector for over-the-counter medicine such as cough syrups, antacids and vitamins, where demand is around 80,000 mt/year in 2015-2016 in India. Future growth opportunities for PET were also abundant as it had many other potential packaging applications such as for non-bottle applications and thin-wall moulded items. PET could also potentially replace polypropylene if its characteristics could be modified further. The demand for PET bottle packaging of milk and milk products is growing at around 25-30% CAGR. In 2014-15, the overall growth for PET industry in India was constrained by high volatility of prices and reduced liquidity with customers. Due to the above mentioned reason and concerns from pharma and liquor companies for use of PET the demand was subdued at 6% in 2014-15.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
45
Table 14: PET Demand Supply
PET (KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 1140 1765 1815 1915
Production 880 1280 1400 1625
Imports 150 86 80 50
Exports 330 595 660 540
Apparent Demand 700 770 900 1035
Demand Growth% 6.1% 10.0% 16.9% 15.0%
However in 2015-16 there was a rebound and demand grew at 10% and further in next two fiscals with new capacity addition and growing demand for consumer goods and government’s various initiatives such as Make in India etc. would encourage domestics manufacturing and demand is expected to grow at double digits and touch 1035 KT in 2017-18. India’s PET capacity is expected to touch 1815 KT by 2016-17 from 1140 KT in 2014-15 and this is expected to reduce the imports and boost exports going forward by 2016-17 and 2017-18. Aromatics – Paraxylene
PX demand growth rebounded in 2015-16 and witnessed a staggering growth of 32% owing to capacity addition by MRPL and RIL and is expected to grow at around 22% in next fiscal. PX demand is expected to grow at a robust pace of ~32% with lined upcoming capacities. With the commissioning of this plant, RIL’s PX capacity would more than double from 2.0 million tons to 4.2 million tons per annum. On commissioning of entire PX capacity, Reliance will be the world's second largest PX producer with 9% of global PX capacity and 11% share of global production. The new PX capacity will add value to the output from refineries and improve the profitability of the Jamnagar complex. The new capacity will complete the integration within Reliance's polyester value chain, leading to improved margins and also strengthen its position in polyester industry globally. Commissioning of the new PX plant marks beginning of the culmination of a series of projects including the refinery off-gas cracker, ethane import project and petcoke gasification. PX import’s stood at 799 KT in 2015-16 and it is expected to increase to 1179 KT in 2016-17 and see a decline in 2017-18 to 800 KT. Meanwhile exports are expected to increase from 837 KT in 2015-16 to 839 KT in 2016-17 before witnessing a robust growth and would touch a high of 1836 KT by 2017-18.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
46
Table 15: Paraxylene Demand Supply
(KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 3009 3392 3662 5643
Production 2813 3338 3296 5040
Imports 699 799 1179 800
Exports 1066 837 839 1836
Apparent Demand 2442 3219 3942 3942
Demand Growth% 6.3% 31.8% 22.5% 0.0%
Fibre Intermediates In 2015-16, the combined production of fibre intermediates viz. ACN, Caprolactam, PTA and MEG reached 5967 KT of which PTA and MEG constituted% and 18% respectively with ACN and Caprolactam together accounting for the remaining 4%.
Table 16 : Fibre Intermediate Demand Supply
ACN 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 40 0 0 0
Production 34 0 0 0
Imports 118 160 170 180
Exports 0 0 0 0
Demand 152 160 170 180
Demand Growth (%) 3.4% 5.3% 6.3% 5.9%
Caprolactam
Capacity 70 70 70 70
Production 87 86 86 87
Imports 13 45 58 60
Exports 0 0 1 0
Demand 101 131 144 147
Demand Growth (%) 5.4% 29.7% 9.9% 2.1%
PTA
Capacity 3930 5652 6226 7476
Production 3596 4619 5368 6582
Imports 1045 697 361 60
Exports 0 172 268 775
Demand 4641 5144 5461 5867
Demand Growth (%) 5.5% 10.8% 6.2% 7.4%
MEG
Capacity 1200 1200 1200 2160
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
47
PTA and MEG constituted 40% and 60% of the total 1736 KT fibre intermediates imported in 2015-16. Fibre intermediates exported from India in 2015-16 was 244 KT and is expected to jump to 344 KT in 2016-17 and 1014 KT in 2016-17 with the addition of new PTA capacity from RIL and JBF. ACN production was stopped by RIL and demand is being met by imports on the back of pesticide industry doing well. PTA import volumes into India (which is another big and growing polyester market in Asia) are also expected to decline after the new plant by Reliance Industries runs at full capacity and touch 361 KT by 2016-17 and further witness a dip by 2017-18 to touch 60 KT. IOCL, meanwhile has planned glycol project - the Mono Ethylene Glycol project includes Ethylene Recovery Unit of 180 KTA and Glycol Unit of 326 KTA. This plant is targeted for commissioning by November 2019. Two more projects have been planned for the petrochemical complex -- 1,200 ktpa PTA plant and petcoke gasification-based synthetic ethanol plant. Both projects are due to be commissioned by September 2021. Caprolactam, which is used to manufacture automobile tyre cord, should benefit from an increase in discretionary spend, once the global economy returns to the growth path. At present, GSFC is the largest (56% share) and one of the only two manufacturers of the chemical in India with 70,000 tonnes per annum production (full capacity), of which around 17,000 tonnes is used internally for production of nylon and the rest is sold. The company has also taken debottlenecking and efficiency improving measures to further improve the EBIT by around Rs 75 crore. Demand for nylon 6, which uses caprolactam as a raw material, remained largely unchanged. Caprolactam prices have been rising over the past few months (Dec 2016) after the shutting down of capacities in Europe and America. Global chemical majors such as BASF and Fibrant have closed their capacities due to falling profitability from rising capacities in Asia. Tight supplies and rise in caprolactam's raw material prices -benzene and crude-led buyers to rush to acquire the chemical. In 2015-16 demand for caprolactam grew at a staggering ~30% and is expected to grow at 10% next fiscal before a slowdown in 2017-18 to grow at 2%.
Production 960 1102 1110 1819
Imports 982 1039 1167 780
Exports 68.6 72 75 239
Demand 1873 2141 2277 2599
Demand Growth (%) 1.8% 14.3% 6.4% 14.1%
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
48
Synthetic Fibres
In 2015-16, the combined production of synthetic fibre (PSF, ASF, PPSF, PFY, PPFY, VFY, VFS and NFY) reached 4317 KT. The demand growth was at 4% in 2015-16. It is expected that the fibre demand growth would be around 3-6% in next two years. The capacity in 2017-18 is expected to increase to 6975 KT before a dip in 2016-17 to 6724 KT.
Table 17: Demand Supply Balance of Synthetic Fibre
2014-15 A 2015-16 A 2016-17 E 2017-18 E
PSF
Capacity 1260 1260 1260 1404
Production 953 974 979 1123
Imports 46 59 59 30
Exports 183 160 180 220
Demand 862 932 917 963
Demand Growth (%) 3.2% 8.1% -1.6% 5.0%
ASF
Capacity 98 98 98 98
Production 95 95 95 95
Imports 34 34 34 34
Exports 20 20 20 20
Demand 101 101 101 101
Demand Growth (%) -11.3% 0.0% 0.3% 0.0%
PPSF
Capacity 13 13 13 13
Production 4 4 4 4
Imports 1 1 1 1
Exports 11 11 11 11
Demand 5 5 5 5
Demand Growth (%) 10.0% 0.0% 0.0% 0.0%
PFY
Capacity 4623 4731 4666 4746
Production 2766 2747 2905 3062
Imports 25 21 27 15
Exports 168 118 126 115
Demand 2608 2665 2751 2926
Demand Growth (%) 3.3% 2.2% 3.2% 6.4%
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
49
Surfactants
Demand for key surfactant LAB increased by 5.3% in 2015-16 and is expected to grow at a higher rate at 7% in next fiscal. LAB capacity witnessed an addition of 20 KT by IOCL in 2015-16 and with witness another 20 KT addition in next fiscal as well taking the total capacity in India to 570 KT in that year. LAB import is were higher in 2015-16 as compared to previous year at 189 KT however will see a dip in next year to touch 167 KT in 2016-17 before spiking a high of 177 KT in 2017-18. Exports are also expected to remain at same level of 6 KT in 2015-16 till next two fiscals.
PPFY
Capacity 18 18 18 18
Production 13 15 15 15
Imports 1 2 2 2
Exports 2 2 2 2
Demand 11 14 14 14
Demand Growth (%) -0.3% 22.0% 0.0% 0.0%
VSF
Capacity 490 490 490 490
Production 364 364 364 364
Imports 27 34 36 36
Exports 130 154 144 144
Demand 268 305 339 370
Demand Growth (%) -3.5% 13.5% 11.1% 9.3%
VFY
Capacity 84 84 84 84
Production 45 50 50 55
Imports 16 10 10 10
Exports 6 0 0 0
Demand 54 55 60 65
Demand Growth (%) 2.2% 1.1% 9.1% 8.3%
NFY
Capacity 76 76 76 76
Production 50 50 50 50
Imports 2 2 2 2
Exports 2 2 2 2
Demand 52 52 52 52
Demand Growth (%) 15.6% 0.0% 0.0% 0.0%
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
50
Table 18: Demand & Supply of LAB & EO
LAB 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 530 550 570 570
Production 415 377 438 454
Imports 124 189 167 177
Exports 24 6 6 6
Demand 531 559 598 628
Demand Growth (%) 4.3% 5.3% 7.0% 4.9%
EO 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 253 268 268 268
Production 188 194 201 209
Imports 0 0 0 0
Exports 0 0 0 0
Demand 188 194 201 209
Demand Growth (%) 0.6% 3.3% 3.5% 4.1%
EO capacity increased from 253 KT in 2014-15 and further is expected to touch 268 KT in the next fiscal. Debottlenecking of EO capacity by RIL in 2012-13 happened and in 2014-15. RIL capacity was enhanced from 188 KT in 2015-16 to 203 KT in 2016-17. Demand for EO grew at 3.3% and is expected to be around 3.5-4% in next two fiscals. Synthetic Rubber SBR which accounts for 40% of the total synthetic rubber demand is consumed mostly in the tyre sector. Considering the large amount of SBR that is being consumed in the manufacture of tires and tire products, demand is very much dependent on the automotive industry and tire sectors as a whole. On a positive note, growing use of low-rolling-resistance tires to reduce fuel consumption and decrease CO2 emissions should increase SBR demand. In 2015-16, synthetic rubber demand grew at 5% and is expected to maintain the same growth rate in 2016-17. Styrene butadiene rubber (SBR) prices in India witnessed a fall in March 2017, dragged down by continued slump in the feedstock butadiene (BD) market, amid abundant stocks and tepid demand. Downstream tyre makers in the country retreated to the sidelines, holding back their purchases for the month, which marks the end of India's fiscal year.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
Spot offers for SBR non-oil grade 1502 at $2,800-2,900/tonne CFR (cost and freight) India were met with little interest. On 1 March, SBR prices were assessed stable for the second consecutive week at an average of $2,800/tonne CFR India, following a 62% surge from late November 2016, as per ICIS data. Falling prices of rival product natural rubber (NR) further exerted downward pressure on SBR prices, market sources said. NR prices have been fluctuating in the $2,000-2,300/tonne range, much lower than the current SBR prices, encouraging tyre makers to adjust their formulations to include more NR. India’s SBR demand typically weakens in March as tyre manufacturers are unwilling to
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
52
build up their stocks before the new fiscal year starts. Availability of cheaper deep-sea material from Europe and Russia has also been weighing down on demand for Asia-origin SBR. As shown in table, SBR demand registered a growth of 5.5% in 2015-16 and expected to be subdued around 3% in following two years. Imports are expected to significantly reduce by 2016-17 onwards with RIL new capacity coming up to full steam. India is expected to jump three places to become the world's No.3 car market by 2018. This has fuelled a domestic rush to produce more of the synthetic rubber that is mixed with natural rubber to make tyres. EPDM demand rebounded and witnessed a robust growth of 27.3%in 2015-16 and is expected to grow at 10% in 2016-17 before a slowdown in 2017-18. Reliance is the only producer of PBR in India. PBR demand growth rate is expected to improve to ~7% by 2016-17 from a low of ~0.1% in 2015-16 and furthermore to 8.2% in 2017-18. Carbon Black Feedstock & Carbon Black Carbon black is an additive for rubber products which also finds application as a key raw material in various chemical industries including inks, coatings, paints, batteries, electrical cables, plastic films, pipes and sealants etc. More than 60% of the demand for carbon black comes from tyres segment. According to ATMA (Automotive Tyre Manufacturers' Association), carbon black constitutes 11% of the raw material cost of tyre companies and forms 20-25% of volumes of the tyre.
The rubber industry uses a total of 95% of carbon black production while the rest is consumed by plastics, paints and dry cells. In domestic market, the company is regular supplier to all the major tyre manufacturers and has an overall domestic share of around 40%. PCBL continues to be the undisputed leader in the field of carbon black in India. India’s carbon black market is expected to grow at around 14% CAGR until 2020. Superior reinforcing properties make carbon black a suitable material for use in diverse applications ranging from tyres, plastics, electronic equipment to inks, dyes and coatings. The expansion of tyre and rubber industries in the southern region of India is boosting the demand for carbon black in the country. The shift in manufacturing base of automobiles and tyre industries is expected to be a major driver for the carbon black market over the coming years. Additionally, the use of carbon black has increased in specialty segments such as inks, conductive plastics and high-performance coatings, which has led to diversification in product range offered by key industry players.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
53
In the past, Indian carbon black industry faced stiff competition from cheaper imports coming from China, which adversely affected the sales and profit margins of domestic players. However, various duties and taxes imposed by the Indian government on these imports have provided a respite to domestic industry players in the country. Carbon black market in India is set to show promising growth in the next five years on account of various favorable developments in the country. Major players such as Phillips Carbon Black Limited have started incorporating backward integration to counter the fluctuation in prices of feedstock and volatility in crude oil prices. Moreover, low cost production in the APAC region has helped Indian players to consolidate their position in the carbon black market Demand for carbon black in paints and coatings, and inks is expected to show an increase over the next five years. Demand for non-rubber applications that mainly use specialty blacks will display significant increase. Plastic and printing inks are likely to account for significant share of specialty black demand. Another emerging application area for specialty carbon black is metallurgy. Moreover, as special blacks commands higher price than the widely used furnace blacks, they offer higher margins to suppliers. Furthermore, the demand for special blacks is not influenced by the cyclicality in the rubber and motor vehicle industries. Indian Automobile Industry’s domestic market recorded an increase in passenger vehicle sales by 7%, commercial vehicle by 11% and muted growth of 1 - 3% in two and three wheeler segments in FY16. Low cost of ownership, improving demand from infrastructural activity and better than a normal monsoon should drive the FY17 growth across the segments. Auto exports grew by 1.9% on account of lower sales in two wheeler segment. Tyre Industry recorded lower production amid exports falling by 13-15% and increased imports by 12-14% in FY16. FY17 growth across segments is expected to improve with improving rural demand and increased infrastructural activity. Driven by rising demand from tyre industry, in addition to construction and manufacturing sectors which use carbon black to provide strength to industrial rubber compounds and other equipment. Increasing demand for specialty carbon black has prompted leading carbon black manufacturers to either increase their production capacity in the segment or convert the production line for standard carbon black to specialty carbon black Demand growth was good in 2015-16 in case of carbon black growing at ~10% compared to previous year’s negative growth.
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
54
Total import of carbon black in India during 2015-16 was 100 KT and import from China and South Korea accounted for 90% of total import. Imports are expected to further increase to 150 KT by 2017-18.
Table 20: Demand Supply Balance of CBFS & Carbon Black
2014-15 A 2015-16 A 2016-17 E 2017-18 E
CBFS (KT)
Capacity 1925 1925 1925 1925
Production 1430 1520 1650 1750
Imports 1300 1300 1560 1650
Exports 720 750 750 240
Demand 1430 1520 1650 1750
Demand Growth (%) -1.4% 6.3% 8.6% 6.1%
Carbon Black (KT)
Capacity 1040 1040 1040 1040
Production 780 832 884 936
Imports 70 100 125 150
Exports 90 200 250 300
Demand 850 932 1009 1086
Demand Growth (%) -3.4% 9.6% 8.3% 7.6%
Meanwhile, CBFS too registered a healthy growth of 6.3% in 2015-16 and is expected to further improve to around 9% in 2016-17 and then slow down to 6% by 2017-18. Other Key Petrochemicals Overall other key petrochemicals demand in 2015-16 witnessed a growth of 8% and is expected to witness a growth of 2-3% in next fiscal years.
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
55
(KT) 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Toluene
Capacity 270 270 270 270
Production 140 140 140 140
Imports 300 380 390 400
Exports 0 0 0 0
Demand 440 520 530 540
Demand Growth (%) 8.9% 18.2% 1.9% 1.9%
MXS
Capacity 90 90 90 90
Production 81 79 79 80
Imports 79 79 120 138
Exports 18 0 0 0
Demand 140 157 187 208
Demand Growth (%) 40.0% 12.1% 19.1% 11.2%
OX
Capacity 420 420 420 420
Production 462 500 450 450
Imports 36 30 10 10
Exports 213 227 165 165
Demand 287 280 289 289
Demand Growth (%) 3.2% -2.4% 3.2% 0.0%
Benzene demand witnessed a positive growth after negative growth in previous year at 3.2% in 2015-16 and is expected to grow at the same rate over next two years. Exports too are expected to further increase by 2017-18 and touch 1362 KT with capacity additions by RIL and OPAL. Toluene demand registered a robust growth of ~18.2% in 2015-16 and expected to witness a subdued demand growth of 2% in next two fiscals. MXS witnessed a growth in demand at 12% in 2015-16 and is expected to register even better growth in next fiscal. Imports in case of MXS are expected to rise to 138 KT by 2017-18 from 79 KT in 2015-16. Meanwhile, OX registered a negative growth rate of 2.4% in 2015-16. There is no new capacity addition lined up for OX, however, demand is expected to increase to 289 KT by 2016-17. Outlook for the Overall Indian Petrochemical Industry India’s aggregated demand for petrochemicals increased by 13% in 2015-6. Combining the demand for all the key segments in the petrochemical industry aggregate demand for the entire petrochemical sector in India is likely to increase from 35.8 MMT in 2015-16 to 38.7 MMT in 2016-17 and further to 41.4 MMT in
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
56
2017-18 as depicted in figure below. At the aggregate level, therefore, demand for petrochemicals in India is expected to grow at Y-0-Y at 8% in 2016-17 and at 7% in 2017-18.
Polymers are likely to register growth rate of ~8% and 9% in 2016-17 and 2017-18 respectively. Polyolefins are expected to grow at 7% and 8% in 2016-17 and 2017-18 with the startup of new capacities. Surfactants are projected to grow at ~6% and 5% in the same period. Synthetic rubbers are expected to register demand growth in the range of 4% and 5% in 2016-17 and 2017-18 respectively. Other key petrochemicals expected to grow at ~11% in 2015-16. India’s demand from the automobiles, packaging, and agriculture and infrastructure sector is expected to grow at healthy rate with easing of government’s monetary policy. Polymer demand drivers are in place hence plastic industry is poised for exponential growth in coming years and healthy growth rate in end-use sectors. This optimism is based on the expectation that India's GDP would again grow at 7.5% plus in 2016-17.
32
3638
41
5%13%
8%
9%
0%
2%
4%
6%
8%
10%
12%
14%
0
5
10
15
20
25
30
35
40
45
2014-15 2015-16 2016-17E 2017-18E
MM
T
Demand (MMT) Demand Growth (%)
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
57
Section 3
Statistical Appendix
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
58
Monomers (KT)
2014-15 A 2015-16 A 2016-17 E 2017-18 E
Ethylene
Capacity 3515 3907 4842 7212
Production 3450 3870 4780 7200
Imports 60 25 50 0
Exports 0 6 0 10
Net Availability 3510 3895 4830 7200
Propylene Capacity 4230 4601 4773 4842
Production 4020 4590 4770 4840
Imports 0 0 0 0
Exports 10 10 15 0
Net Availability 4020 4590 4770 4840
Butadiene
Capacity 435 435 550 550
Production 229 318 416 550
Imports 0 6 6 6
Exports 46 79 96 164
Apparent Demand 172 241 306 386
Demand Growth% 43% 40% 27% 26%
Styrene
Imports 617 697 750 795
Exports 0 0 0 0
Net Trade 617 697 750 795
Demand Growth% 7.9% 13.0% 7.6% 6.0%
Polymers (KT)
2014-15 A 2015-16 A 2016-17 E 2017-18 E
LDPE
Capacity 205 205 205 655
Production 184 198 202 579
Imports 328 468 501 444
Exports 0 0 0 164
Apparent Demand 515 669 703 859
Demand Growth% 16.0% 29.9% 5.0% 22.2%
EVA
Capacity 15 15 0 0
Production 8 5 0 0
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
59
Imports 135 147 158 166
Exports 0 0 0 0
Apparent Demand 143 152 158 166
Demand Growth% 8.9% 6.3% 4.3% 5.1%
LLDPE
Capacity 980 980 1640 2190
Production 744 942 1155 2050
Imports 599 614 637 466
Exports 8 17 59 696
Apparent Demand 1328 1542 1695 1820
Demand Growth% 7.4% 16.2% 9.9% 7.4%
HDPE
HDPE Capacity 1830 1830 2810 2810
LLDPE Capacity 980 980 1640 2190
Total Capacity 2810 2810 4450 5000
Production 1269 1548 1745 2261
Imports 572 568 634 466
Exports 27 93 143 389
Apparent Demand 1828 2038 2239 2338
Demand Growth% 3.5% 11.5% 9.9% 4.4%
All PE
Capacity 3015 3015 4655 5655
Production 2197 2688 3102 4890
Imports 1499 1650 1772 1376
Exports 35 110 203 1249
Apparent Demand 3671 4249 4637 5017
Demand Growth% 6.5% 15.7% 9.1% 8.2%
PP
Capacity 4130 4520 5120 5120
Production 4176 4885 5007 5460
Imports 511 559 617 580
Exports 720 701 560 695
Apparent Demand 3509 4192 4395 4765
Demand Growth% 7.9% 19.5% 4.8% 8.4%
Polyolefins
Capacity 7160 7550 9775 10775
Production 6381 7578 8109 10350
Imports 2145 2356 2547 2122
Exports 755 811 763 1944
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
60
Apparent Demand 7323 8593 9190 9948
Demand Growth% 7% 17% 7% 8%
PVC
Capacity 1390 1470 1482 1482
Production 1256 1362 1388 1423
Imports 1172 1335 1608 1865
Exports 0 0 0 0
Apparent Demand 2443 2699 2988 3287
Demand Growth% 5.8% 10.5% 10.7% 10.0%
PS
Capacity 472 476 490 490
Production 270 308 325 340
Imports 13 20 20 20
Exports 42 71 70 70
Apparent Demand 238 261 275 290
Demand Growth% 9.8% 9.7% 5.4% 5.5%
Polymers
Capacity 9022 9496 11747 12747
Production 7907 9248 9822 12113
OR (%) 88% 97% 84% 95%
Imports 3330 3711 4175 4007
Exports 797 882 833 2014
Net Trade -2533 -2829 -3342 -1993
Apparent Demand 10004 11553 12453 13525
Demand Growth% 6.9% 15% 8% 9%
Intermediates (KT)
2014-15 A 2015-16 A 2016-17 E 2017-18 E
EDC
Capacity 205 205 205 205
Production 172 191 191 187
Imports 518 595 600 610
Exports 0 0 0 0
Apparent Demand 690 786 791 797
Demand Growth% 13.7% 13.9% 0.6% 0.8%
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
Source: Industry Estimates. A: Actual, E: Estimate
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
62
ABS 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 155 190 190 190
Production 102 112 120 130
Imports 64 71 80 90
Exports 0 0 0 0
Apparent Demand 166 183 200 220
Demand Growth% 9.9% 10.0% 9.6% 10.0%
SAN 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 130 150 170 170
Production 87 94 117 126
Imports 7 8 8 9
Exports 0 0 0 0
Apparent Demand 94 102 125 135
Demand Growth% 5.6% 8.0% 23.4% 7.7%
PET (KT)
Aromatics - PX (KT)
2014-15 A 2015-16 A 2016-17 E 2017-18 E
PX
Capacity 3009 3392 3662 5643
Production 2813 3338 3296 5040
Imports 699 799 1179 800
Exports 1066 837 839 1836
Apparent Demand 2442 3219 3942 3942
Demand Growth% 6.3% 31.8% 22.5% 0.0%
PET 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 1140 1765 1815 1915
Production 880 1280 1400 1625
Imports 150 86 80 50
Exports 330 595 660 540
Demand 700 770 900 1035
Demand Growth (%) 6.1% 10.0% 16.9% 15.0%
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
63
Surfactants (KT)
2014-15 A 2015-16 A 2016-17 E 2017-18 E
LAB
Capacity 530 550 570 570
Production 415 377 438 454
Imports 124 189 167 177
Exports 24 6 6 6
Apparent Demand 531 559 598 628
Demand Growth% 4.3% 5.3% 7.0% 4.9%
EO
Capacity 253 268 268 268
Production 188 194 201 209
Imports 0 0 0 0
Exports 0 0 0 0
Apparent Demand 188 194 201 209
Demand Growth% 0.6% 3.3% 3.5% 4.1%
Fibre Intermediates (KT)
2014-15 A 2015-16 A 2016-17 E 2017-18 E
ACN
Capacity 40 0 0 0
Production 34 0 0 0
Imports 118 160 170 180
Exports 0 0 0 0
Apparent Demand 152 160 170 180
Demand Growth% 3.4% 5.3% 6.3% 5.9%
Caprolactam
Capacity 70 70 70 70
Production 87 86 86 87
Imports 13 45 58 60
Exports 0 0 1 0
Apparent Demand 101 131 144 147
Demand Growth% 5.4% 29.7% 9.9% 2.1%
PTA
Capacity 3930 5652 6226 7476
Production 3596 4619 5368 6582
Imports 1045 697 361 60
Exports 0 172 268 775
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
64
Apparent Demand 4641 5144 5461 5867
Demand Growth% 5.5% 10.8% 6.2% 7.4%
MEG
Capacity 1200 1200 1200 2160
Production 960 1102 1110 1819
Imports 982 1039 1167 780
Exports 68.6 72 75 239
Apparent Demand 1873 2141 2277 2599
Demand Growth% 1.8% 14.3% 6.4% 14.1%
Synthetic Fibres (KT)
2014-15 A 2015-16 A 2016-17 E 2017-18 E
PSF
Capacity 1260 1260 1260 1404
Production 953 974 979 1123
Imports 46 59 59 30
Exports 183 160 180 220
Demand 862 932 917 963
Demand Growth (%) 3.2% 8.1% -1.6% 5.0%
ASF
Capacity 98 98 98 98
Production 95 95 95 95
Imports 34 34 34 34
Exports 20 20 20 20
Demand 101 101 101 101
Demand Growth (%) -11.3% 0.0% 0.3% 0.0%
PPSF
Capacity 13 13 13 13
Production 4 4 4 4
Imports 1 1 1 1
Exports 11 11 11 11
Demand 5 5 5 5
Demand Growth (%) 10.0% 0.0% 0.0% 0.0%
PFY
Capacity 4623 4731 4666 4746
Production 2766 2747 2905 3062
Imports 25 21 27 15
Exports 168 118 126 115
Demand 2608 2665 2751 2926
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
65
2014-15 A 2015-16 A 2016-17 E 2017-18 E
Demand Growth (%) 3.3% 2.2% 3.2% 6.4%
PPFY
Capacity 18 18 18 18
Production 13 15 15 15
Imports 1 2 2 2
Exports 2 2 2 2
Demand 11 14 14 14
Demand Growth (%) -0.3% 22.0% 0.0% 0.0%
VSF
Capacity 490 490 490 490
Production 364 364 364 364
Imports 27 34 36 36
Exports 130 154 144 144
Demand 268 305 339 370
Demand Growth (%) -3.5% 13.5% 11.1% 9.3%
VFY
Capacity 84 84 84 84
Production 45 50 50 55
Imports 16 10 10 10
Exports 6 0 0 0
Demand 54 55 60 65
Demand Growth (%) 2.2% 1.1% 9.1% 8.3%
NFY
Capacity 76 76 76 76
Production 50 50 50 50
Imports 2 2 2 2
Exports 2 2 2 2
Demand 52 52 52 52
Demand Growth (%) 15.6% 0.0% 0.0% 0.0%
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
66
Elastomers (KT)
PBR 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 85 114 124 124
Production 85 101 112 123
Imports 86 70 64 73
Exports 1 2 6 10
Apparent Demand 170 171 172 186
Demand Growth% 1.6% 0.5% 0.6% 8.1%
SBR
Capacity 40 140 290 290
Production 40 70 143 223
Imports 245 230 191 130
Exports 15 10 28 30
Apparent Demand 270 290 306 323
Demand Growth% 17.4% 7.4% 5.5% 5.6%
NBR
Capacity 20 20 20 40
Production 20 20 20 40
Imports 18 27 32 38
Exports 0 0 0 4
Apparent Demand 38 45 50 56
Demand Growth% 8.6% 18.4% 11.1% 12.0%
EPDM
Capacity 10 10 10 10
Production 0 0 0 0
Imports 35 33 40 45
Exports 0 0 0 0
Apparent Demand 35 33 40 45
Demand Growth% 8.0% -5.7% 21.2% 12.5%
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
67
Carbon Black & CBFS (KT)
CBFS 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Capacity 1925 1925 1925 1925
Production 1450 1430 1520 1610
Imports 800 1300 1300 1450
Exports 800 720 750 750
Demand 1450 1430 1520 1610
Demand Growth (%) -6.1% -1.4% 6.3% 5.9%
Carbon Black
Capacity 1040 1040 1040 1040
Production 780 780 832 884
Imports 100 70 100 125
Exports 120 90 200 250
Demand 880 850 932 1009
Demand Growth (%) 10.3% -3.4% 9.6% 8.3%
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
68
Other Key Petrochemicals (KT)
2014-15 A 2015-16 A 2016-17 E 2017-18 E
Benzene
Capacity 1260 1315 1492 1767
Production 1062 1075 1305 1550
Imports 0 0 0 0
Exports 495 571 775 1020
Apparent Demand 567 504 530 530
Demand Growth% -4.4% -11.1% 5.2% 0.0%
Toluene
Capacity 270 270 270 270
Production 140 140 140 140
Imports 264 300 380 390
Exports 0 0 0 0
Apparent Demand 404 440 520 530
Demand Growth% -9.6% 8.9% 18.2% 1.9%
MXS
Capacity 90 90 90 90
Production 86 81 79 90
Imports 34 79 79 75
Exports 18 18 0 0
Apparent Demand 100 140 157 164
Demand Growth% 20.5% 40.0% 12.1% 4.5%
OX
Capacity 420 420 420 420
Production 412 462 500 485
Imports 65 36 30 22
Exports 205 213 230 220
Apparent Demand 278 287 303 287
Demand Growth% -1.1% 3.2% 5.6% -5.3%
Indian Petrochemical Industry
2017 Asia Petrochemical Industry Conference May 18th – 19th 2017, Japan
69
Chemicals & Petrochemicals Manufacturers’ Association
CPMA is the apex forum representing the Indian Petrochemical Industry, Established in 1993, and the Association offers its members a podium to collectively present their ideas, voice their concerns and offer suggestions on relevant issues. It provides a linkage between the industry, the Government and society. It interacts with policy makers and industry associations to develop and maintain harmonious and conducive business conditions. The Association, registered under the Indian Societies Act, is widely recognized as one of the national apex bodies of the Indian Petrochemical Industry by all Ministries and Departments of Government of India, apex Chambers of Commerce and Industry and other related Associations in India and abroad. CPMA is affiliated to the Confederation of Indian Industry (CII). The Association is also a Steering Committee Member of the Asia Petrochemical Industry Conference (APIC) and had successfully hosted the annual APIC 2010 conference on May 13-14, 2010 in Mumbai. CPMA comprises various sub-committees constituted to effectively focus on key areas within petrochemicals like Polyolefins, Vinyls, Styrenics, Glycols, Elastomers, Fibre Intermediates and Surfactants. CPMA has also taken the lead to set up and promote the India Centre for Plastics in the Environment (ICPE) to deal with all environmental issues connected with the usage of plastics.
CPMA Members
1. Chemplast Sanmar Ltd. 10. Indian Oil Corporation Ltd. 2. DCM Shriram Ltd. 11. INEOS Styrolution India Ltd. 3. DCW Ltd. 12. LG Polymers (India) Pvt. Ltd. 4. Finolex Industries Ltd. 13. MCPI Materials Chemicals and
Performance Intermediates Pvt. Ltd. 5. Engineers India Ltd. 14. MRPL 6. GAIL India Ltd. 15. Reliance Industries Ltd. 7. Gujarat State Fertilizers & Chemicals Ltd.16. ONGC Petro Additions Ltd. 8. Haldia Petrochemicals Ltd. 17. Supreme Petrochem Ltd. 9. HPCL – Mittal Energy Ltd. 18. Tamilnadu Petroproducts Ltd.
19. Indian Synthetic Rubber Ltd. Associate Members: - Sabic India Pvt Ltd and Indorama Industries Ltd.
Address Chemicals & Petrochemicals Manufacturers’ Association
708, 7th Floor, Kailash Building 26, Kasturba Gandhi Marg, New Delhi-110001, INDIA
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 3
India’s GDP growth rate for 2015-16 revised to 7.9% from 7.6%
• The industrial sector is now estimated to have grown at 8.2% against the earlierestimation of 7.4%, the services sector is estimated to have grown at 9.9%against 8.9% earlier
The upward revision of the 2015-16 datawas mostly due to a significant increase ingrowth estimates for the industrial andservices sectors
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 4
Economic fundamentals remain strong
• Good Monsoons, strong Rabi sowing, betterharvests could improve rural economy
• Urban demand remained relatively stable -visible in growth in passenger car sales anddomestic airline traffic growth
• That along with the govt. focus on pushing upspending in infra and job creation to lead toimproved demand conditions across economy
• Medium to long term outlook for Indiacontinues to be robust
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 5
Indian economy grew faster than market expectation in Q3FY17 with GDP growing at 7% Y-o-Y
• Q3 GVA was driven by improvement in
• Agriculture, forestry and fishing-up 6.0% Y-0-Y vs negative 2.2% Y-0-Y in Q3FY16• Electricity, gas and water supply and other utility services – up 6.8% Y-0-Y• Public administration, defence and Other Services - up 11.9% Y-0-Y
7.8 8.3
6.97.9
7.2 7.4 7.0
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17
Quarterly Estimates of GDP Growth(GVA basis in percent)
Source: CSO
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India
IIP rose to 2.7% in Jan’17, with mining, electricity and manufacturing registering positive growth
6
Source: CSO
• The resumption of growth in consumer durables output signals normalization of production schedules
• Capital goods output surged 10.7%• While mining sector grew by 5.3% in January, electricity production increased
by 3.9% and manufacturing output rose by 2.3%
Source: CSO
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India
India’s trade deficit at a five-month low in Feb’17
7
• Exports rose for the seventh consecutive month• India’s exports grew at its fastest pace in multiple years by 17.5%
in February while imports were up 21.8%• During the same month, China’s exports dropped 1.3% and imports
soared 38.1%.
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India
Wedge between WPI and CPI based inflation has been widening
8
• The surge in wholesale prices will not allow retail inflation to fall below a certainlimit, but the positive base effect from last year may keep it at “benign” levels
Source: CSO
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India
Indian Markets rallied to near recent high, despite correction post demonetization… led by strong DII flows and return of FPI flows
9
• Sensex is expected to scale new highs in the year 2017-18.
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India
The rupee stormed to a new 17-month high - a level not seen since October 2015
10
• INR has appreciated to a 17-month high of Rs. 65.3/US$, intra-day on March 21st
2017, making it one of the best performing currencies in Asia excluding Japan rallied4.8% since Dec. 31
• Rupee set for best first quarter since 1975, all thanks to foreign flows• Strong capital inflows to equity and debt markets also provided support
Source: Bloomberg
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India
Forex reserves surge $2.67 bn to reach $366.7 bn
11
• India’s foreign exchange reserves surged by whopping $2.671 billion to$366.781 billion for the week ended March 2017 on account of increasein foreign currency assets
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India
FDI inflows into India jump 18% to a record $46.4 bn in 2016 despite global fall
12
• With this surge in FDI, India may beat its peers in terms of attracting foreignfunds
• It has grown at an annual average of 28.2% for the past three years
Source: RBI
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India
FII investments into India hit a record $6.45 bn in March
13
• Net investments made by FIIs in stocks in March alone is higher thanthose made in the entire of 2016
• FIIs have pumped a massive $3.6 billion into stock markets on a netbasis so far in March, the highest in a month since February 2013
Source: RBI
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India
CAD at 0.6% of GDP in Q2’17
14
• CAD at $3.4 billion was lower than the $8.5 billion in the same period a year ago• The contraction in CAD has been due to a sharp fall in imports relative to exports
during the quarter as oil and commodities prices• Balance of payments was at a surplus of $8.5 billion compared with a deficit of
$900 million a year ago
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India
On the expenditure side, the government consumption rose sharply
