Documente Academic
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APIC 2017
Prepared by
Chemicals & Petrochemicals Manufacturers’ Association
708, 7th Floor, Kailash Building,
26, Kasturba Gandhi Marg,
New Delhi – 110001, INDIA
Phone: 91-11-43598337, Fax: 91-11-43598337
Email: cpmai@airtelmail.in
Website: www.cpmaindia.com
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2017 Asia Petrochemical Industry Conference
May 18th – 19th 2017, Japan
Indian Petrochemical Industry
Content
SECTION 1 ........................................................................................................ 5
THE INDIAN ECONOMY: REVIEW OF 2016-17 & OUTLOOK FOR 2017-18 ........................... 6
THE INDIAN ECONOMY REVIEW OF 2016-17 ........................................................... 6
SNAPSHOT OF KEY INDICATORS ......................................................................... 9
I. IIP – INDEX OF INDUSTRIAL PRODUCTION ..................................................... 12
II. CORE INDUSTRIES PERFORMANCE ............................................................. 14
III. BALANCE OF PAYMENTS ........................................................................... 15
IV. FDI ......................................................................................................... 16
V. FOREX RESERVES .................................................................................... 17
VI. FII FLOW AND STOCK MARKET ................................................................... 18
VII. CURRENT ACCOUNT DEFICIT ...................................................................... 20
VIII. INFLATION ............................................................................................... 23
IX. RUPEE (₹) ................................................................................................ 24
OUTLOOK FOR 2017-18: INDIA ............................................................................ 26
SECTION 2 ...................................................................................................... 29
PETROCHEMICAL INDUSTRY IN INDIA ..................................................................... 30
PETROCHEMICAL INDUSTRY REVIEW OF 2016 & OUTLOOK FOR 2017 ............................ 30
MONOMERS ................................................................................................... 35
A. ETHYLENE & PROPYLENE .......................................................................... 35
B. BUTADIENE ............................................................................................. 36
C. STYRENE ................................................................................................ 37
POLYMERS .................................................................................................... 38
INTERMEDIATES ............................................................................................. 38
A. EDC AND VCM .......................................................................................... 38
POLYOLEFINS ................................................................................................ 39
VINYL’S: PVC ................................................................................................. 41
STYRENICS.................................................................................................... 42
A. POLYSTYRENE ......................................................................................... 42
B. ACRYLONITRILE-BUTADIENE-STYRENE (ABS) ............................................... 42
C. STYRENE-ACRYLONITRILE (SAN) ................................................................ 43
PET (POLYETHYLENE TEREPHTHALATE) ............................................................ 43
AROMATICS – PARAXYLENE............................................................................. 45
FIBRE INTERMEDIATES .................................................................................... 46
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Indian Petrochemical Industry
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TABLE
TABLE 1: USE BASED CLASSIFICATION OF (IIP) .................................................................... 13
TABLE 2: CORE INDUSTRIES GROWTH RATE (IN PERCENT) ...................................................... 15
TABLE 3: INDIA’S GDP GROWTH PROJECTION – 2017 - 18 ...................................................... 27
TABLE 4: ETHYLENE & PROPYLENE NET AVAILABILITY .......................................................... 35
TABLE 5: BUTADIENE DEMAND SUPPLY ............................................................................. 37
TABLE 6: STYRENE DEMAND SUPPLY ................................................................................ 37
TABLE 7: EDC & VCM IMPORT INTO INDIA .......................................................................... 39
TABLE 8: POLYOLEFIN DEMAND IN INDIA ACTUAL & PROJECTED .............................................. 39
TABLE 9: PVC DEMAND SUPPLY ...................................................................................... 41
TABLE 10: POLYSTYRENE DEMAND SUPPLY ........................................................................ 42
TABLE 11: ABS DEMAND SUPPLY ..................................................................................... 43
TABLE 12: SAN DEMAND SUPPLY ..................................................................................... 43
TABLE 13: POLYMER DEMAND SUPPLY .............................................................................. 38
TABLE 14: PET DEMAND SUPPLY ..................................................................................... 45
TABLE 15: PARAXYLENE DEMAND SUPPLY ......................................................................... 46
TABLE 16 : FIBRE INTERMEDIATE DEMAND SUPPLY ............................................................... 46
TABLE 17: DEMAND SUPPLY BALANCE OF SYNTHETIC FIBRE ................................................... 48
TABLE 18: DEMAND & SUPPLY OF LAB & EO ....................................................................... 50
TABLE 19: DEMAND SUPPLY BALANCE OF PBR, SBR, NBR & EPDM ............................................. 51
TABLE 20: DEMAND SUPPLY BALANCE OF CBFS & CARBON BLACK ............................................ 54
TABLE 21: DEMAND SUPPLY BALANCE OF BENZENE, TOLUENE, MXS & OX................................... 54
Figure
FIGURE 1: INDIA’S GDP GROWTH (YEAR-ON-YEAR IN PER CENT) ................................................ 9
FIGURE 2: QUARTERLY ESTIMATE OF GDP GROWTH (IN PER CENT) ........................................... 10
FIGURE 3 : QUARTERLY GROWTH IN SECTORS TILL Q3 FY17 ................................................... 11
FIGURE 4: INDEX OF INDUSTRIAL PRODUCTION (IIP) ............................................................. 13
FIGURE 5: FDI INFLOWS ............................................................................................... 16
FIGURE 6: FOREX RESERVES JUMPED $1.2 BILLION .............................................................. 17
FIGURE 7: FOREIGN INSTITUTIONAL INVESTORS .................................................................. 18
FIGURE 8: STOCK MARKET PERFORMANCE ......................................................................... 20
FIGURE 9: Q2 CAD AT 0.6% OF GDP ................................................................................. 21
FIGURE 10: TRADE DEFICIT AT $8.89 BILLION .................................................................... 22
FIGURE 11: RATE OF INFLATION (IN PERCENT).................................................................... 23
FIGURE 12 : RUPEE MOVEMENT IN LAST ONE YEAR .............................................................. 25
FIGURE 13: PER CAPITA POLYMER CONSUMPTION VS PER CAPITA GDP ~ 2016 ............................. 30
FIGURE 14: AGGREGATE PETROCHEMICAL DEMAND (ALL KEY SEGMENTS – MMT) ........................... 56
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2017 Asia Petrochemical Industry Conference
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Indian Petrochemical Industry
Section 1
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2017 Asia Petrochemical Industry Conference
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Indian Petrochemical Industry
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.
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.
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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.
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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.
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.
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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.
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.
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.
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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.
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
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(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.
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
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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.
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.
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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)
Trend in IIP Growth
Sectoral Use-Based Claasification
IIP Mining Manufacturing Electricity Basic Capital Intermediate Durables Non-Durables
Weight 100% 14.2% 75.5% 10.3% 45.7% 8.8% 15.7% 8.5% 21.4%
Month
Dec-15 -0.9% 2.8% -1.9% 3.2% 0.7% -18.6% 1.5% 16.6% -2.7%
Jan-16 -1.6% 1.5% -2.9% 6.6% 1.9% -21.6% 2.8% 5.6% -3.2%
Dec-16 -0.1% 5.5% -1.7% 6.3% 5.3% -3.9% -1.3% -8.9% -4.4%
Jan-17 2.7% 5.3% 2.3% 3.9% 5.3% 10.7% -2.3% 2.9% -3.2%
Apr-Jan 2016 2.7% 2.1% 2.5% 4.7% 3.3% -0.6% 2.1% 11.6% -1.2%
Apr-Jan 2017 0.6% 1.4% -0.2% 5.0% 4.4% -15.0% 2.2% 4.9% -2.3%
Source: Central Statistics Office (CSO)
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
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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.
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.
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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)
Growth in Index of Index of Core Natural Refinery
Core Industries Industries Coal Crude Oil Gas Products Fertilizers Steel Cement Electricity
Weight 37.9% 4.4% 5.2% 1.7% 5.9% 1.2% 6.7% 2.4% 10.3%
Month
Nov-15 0.6% 3.8% -3.3% -3.9% 1.7% 13.9% -6.8% -1.7% 5.6%
Dec-15 2.9% 5.3% -4.1% -6.1% 2.1% 13.5% -3.1% 4.1% 8.8%
Jan-16 5.7% 7.9% -4.7% -15.2% 8.9% 8.2% 0.0% 9.2% 11.6%
Nov-16 4.9% 6.4% -5.4% -1.7% 2.0% 2.5% 5.6% 0.5% 10.2%
Dec-16 5.6% 4.5% -0.8% 0.0% 6.4% -4.8% 14.9% -8.7% 6.0%
Jan-17 3.4% 4.8% 1.3% 11.9% -1.5% -1.6% 11.4% -13.3% 4.8%
Apr-Jan 2016 2.9% 4.9% -1.2% -4.0% 3.0% 11.0% -1.5% 3.3% 6.7%
Apr-Jan 2017 4.8% 2.3% -2.8% -1.9% 6.8% 2.9% 9.2% 1.0% 5.4%
Source: Index of Eight Core Industries, Central Statistics Office (CSO)
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.
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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.
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
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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
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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.
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-
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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.
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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.
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.
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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.
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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.
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.
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)
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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.
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.
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.
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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.
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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.
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.
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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.
Agencies 2017-18
CSO 7.4%
ADB 7.4%
Fitch Ratings 7.7%*
RBI 7.4%
Moody’s 7.1%*
Morgan
7.7%*
Stanley
IMF 7.2%*
OECD 7.3%*
UN 7.7%*
World Bank 7.6%*
*figures represent calendar year 2017
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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.
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Section 2
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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
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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.
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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.
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.
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.
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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.
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.
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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.
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.
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Monomers
A. Ethylene & Propylene
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.
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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.
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
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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
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.
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Polymers
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.
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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
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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.
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.
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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
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,
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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
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
B. Acrylonitrile-Butadiene-Styrene (ABS)
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.
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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
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
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
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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.
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 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.
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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
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.
Fibre Intermediates
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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.
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%.
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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
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%
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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%
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.
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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.
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.
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Table 19: Demand Supply Balance of PBR, SBR, NBR & EPDM
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
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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.
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 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.
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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.
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.
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.
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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
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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.
Figure 14: Aggregate Petrochemical Demand (All key segments – MMT)
45 14%
Demand (MMT) Demand Growth (%) 9%
40 8% 41 12%
13%
35 5% 38
36 10%
30
32
25 8%
MMT
20 6%
15
4%
10
2%
5
0 0%
2014-15 2015-16 2016-17E 2017-18E
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.
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Section 3
Statistical Appendix
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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
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
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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%
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VCM
Capacity 906 981 981 981
Production 865 939 928 964
Imports 375 448 485 484
Exports 0 0 0 0
Apparent Demand 1281 1387 1413 1448
Demand Growth% -2.8% 8.3% 1.9% 2.5%
Polyolefins (KT)
(KT) Actual Projected % Change year on year
2014-15 2015-16 2016-17 2017-18 2015-16 2016-17 2017-18
LDPE+EVA 658 821 861 1025 25% 5% 19%
LLDPE 1328 1542 1695 1820 16% 10% 7%
HDPE 1828 2038 2239 2338 11% 10% 4%
PP 3509 4192 4395 4765 19% 5% 8%
Total PO 7323 8593 9190 9948 17% 7% 8%
Source: Industry Estimates. A: Actual, E: Estimate
Vinyls (KT)
2014-15 A 2015-16 A 2016-17 E 2017-18 E
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%
Styrenics (KT)
2014-15 A 2015-16 A 2016-17 E 2017-18 E
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%
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PET (KT)
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%
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%
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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%
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Elastomers (KT)
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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.
2
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 earlier
estimation of 7.4%, the services sector is estimated to have grown at 9.9%
against 8.9% earlier
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 3
Economic fundamentals remain strong
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 4
Indian economy grew faster than market expectation in
Q3FY17 with GDP growing at 7% Y-o-Y
Quarterly Estimates of GDP Growth
(GVA basis in percent)
7.8 8.3 7.9
6.9 7.2 7.4 7.0
• 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
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 5
IIP rose to 2.7% in Jan’17, with mining, electricity and
manufacturing registering positive growth
Source: CSO
Source: CSO
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India 6
India’s trade deficit at a five-month low in Feb’17
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India 7
Wedge between WPI and CPI based inflation has
been widening
Source: CSO
• The surge in wholesale prices will not allow retail inflation to fall below a certain
limit, but the positive base effect from last year may keep it at “benign” levels
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India 8
Indian Markets rallied to near recent high, despite correction post
demonetization… led by strong DII flows and return of FPI flows
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India 9
The rupee stormed to a new 17-month high - a
level not seen since October 2015
Source: Bloomberg
• 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 rallied
4.8% 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
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India 10
Forex reserves surge $2.67 bn to reach $366.7 bn
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India 11
FDI inflows into India jump 18% to a record
$46.4 bn in 2016 despite global fall
Source: RBI
• With this surge in FDI, India may beat its peers in terms of attracting foreign
funds
• It has grown at an annual average of 28.2% for the past three years
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India 12
FII investments into India hit a record $6.45 bn in
March
Source: RBI
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India 13
CAD at 0.6% of GDP in Q2’17
• 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 14
On the expenditure side, the government
consumption rose sharply
• Private consumption growth
was positive surprise amid the
challenging environment
Indian Petrochemical Industry - Review & Future Prospects APIC 2017, CPMAI, India 15
India’s GDP growth projections
Agencies 2017-18
CSO 7.4%
ADB 7.4%
IMF 7.2%*
OECD 7.3%*
UN 7.7%*
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 16
Review & Outlook : Petrochemical Industry
17
Capacity for polymers to go up significantly by ‘18
PS PVC PP All PEs Total
12.7
14 11.7 0.5
0.5
12
9.0 9.5 1.5
1.5
10 0.5 0.5
MMT 8 1.4 1.5 5.1
5.1
6
4.2 4.5
4
5.7
2 4.7
3.0 3.0
0
2014-15 2015-16 2016-17 E 2017-18 E
In case of PP, capacity addition of 330 KT is expected by MRPL and 60
KT by RIL in 2015-16 and going forward in 2016-17 340 kT by OPAL,
110 by MRPL, 60 KT by BPCL-Assam and 90KT by RIL
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 18
Polymer demand grew at 15.5% in 2015-16
PS PVC PP All PEs Total
12.5
14 11.2
9.2 9.9 0.2
12 0.2
0.2 2.9
10 0.2 2.7
MMT
8 2.4
2.3
4.7
6 4.1
3.3 3.5
4
2 4.2 4.6
3.4 3.7
0
2013-14 A 2014-15 A 2015-16 E 2016-17 E
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 19
Net Trade: Polymers
All PE PP PVC PS
-1.17
-1.34
-1.46 -1.54 -1.57 -1.61
-1.87
2014-15 2015-16 2016-17 E 2017-18
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 20
Petrochemical demand continuously growing
Aggregate petrochemicals demand combining all the key sector (mmt)
45
41
40 38
36
35
32
30
25
20
15
10
0
2014-15 2015-16 2016-17E 2017-18E
Indian Petrochemical Industry - Review & Future Prospects - APIC 2017, CPMAI, India 21
Chemicals & Petrochemicals Manufacturers’ Association
708, 7th Floor, Kailash Building,
26, Kasturba Gandhi Marg,
New Delhi – 110001, INDIA
Phone: 91-11-43598337, Fax: 91-11-43598337
Email: cpmai@airtelmail.in Website: www.cpmaindia.com 1
Review : Elastomers
300
200
100
0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
A A A A A A E E
PBR SBR
225 350
kT kT 313
322
198 306
200
183 300 290
171 172
175
250
150
125 200
100 150
75
100
50
50
25
0 0
2014-15 E 2015-16 A 2016-17 E 2017-18 E 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Demand for PBR to witness healthy growth in next two years around
8% while SBR is expected to grow at ~3% in the same period
Elastomers - Review & Future Prospects - APIC 2017, CPMA, India 4
Elastomers imports stood at 327 kT in 2015-16
kT
-16
-25-23 -30-32 -23-32 -32-36 -39
-36
-48
-57 -59
-74
-150
30% Figs in %
27.3%
15%
11.1%
9.5%
10% 7.4% 8.2% 7.7%6.5%
5.5% 6.6%
4.0%
5% 2.3% 2.9%
0.7% 0.1%
0%
-5%
-5.7%
-10%
2014-15 A 2015-16 A 2016-17 E 2017-18 E
38% NBR
2016-17 E 42%
65%
100% EPDM
42%
2017-18 E 38%
68%
100%
2
Fibre Intermediate witnessed 12% growth in
2015-16
8000 KT
7576
7000
6767
6481
5958
6000
5000
2012-13 2013-14 2014-15 2015-16
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 3
Caprolactam demand grew at a staggering 30%
in 2015-16
175 140
KT Acrylonitrile KT Caprolactam
131
160 130
152
150 147 120
110
101
125 100
96
90
100 80
2013-14 2014-15 2015-16 2013-14 2014-15 2015-16
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 4
PTA demand grew at a robust 10.8% in 2015-16
6000 2400
KT PTA KT MEG
5144 2141
5000 2100
4641
4398
1873
1840
4000 1800
3000 1500
2013-14 2014-15 2015-16 2013-14 2014-15 2015-16
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 5
Fibre intermediate Demand supply : 2015-16
Figs in %
ACN
0%
Caprolactum ACN
1% 2%
Caprolactum 2%
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 6
Fibre Intermediate Total Capacity @6922 KT:
2015-16
Acrylonitrile Caprolactum PTA MEG
5652
KT
3930 3930
40 70 40 70 0 70
PTA capacity addition to take place over next two fiscal years
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 7
Outlook : Fibre Intermediate Sector
8
Fibre Intermediate witnessed a 8% growth over
next two years
KT 8793
8052
7576
6767
6481
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 9
Demand Outlook for next two years
Acrylonitrile Caprolactum PTA MEG
Figures in %
29.7%
14.3% 14.1%
10.8% 9.9%
7.4%
5.4% 5.5% 6.3% 6.2% 6.4% 5.9%
5.3%
3.4%
1.8% 2.1%
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 10
ACN and Caprolactam expected to grow by 6% in
next two years
200 150 Caprolactam 147
KT Acrylonitrile KT
144
180 140
110
125
101
100
100 90
2014-15 2015-16 2016-17 E 2017-18 E 2014-15 2015-16 2016-17 E 2017-18 E
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 11
Demand for PTA to grow at ~7% and MEG ~10%
over two years
6000 5867 2700
KT PTA KT MEG 2599
5461
5144 2400
2277
5000
4641 2141
2100
4000
1873
1800
3000 1500
2014-15 2015-16 2016-17 E 2017-18 E 2014-15 2015-16 2016-17 E 2017-18 E
10000 9706
8000 7496
6922
6000 5240
4000
2000
0
2014-15 2015-16 2016-17 E 2017-18 E
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 13
Fibre Intermediate Total Capacity expected to
touch 9706 KT by 2017-18
Acrylonitrile Caprolactum PTA MEG 7476
6226
KT
5652
3930
2160
40 70 0 70 0 70 0 70
2014-15 2015-16 2016-17 E 2017-18 E
RIL had two lines of PTA capacity at Dahej plant in 2015-16 and
further 1250 KT capacity would be added by JBF in 2017-18
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 14
Fibre Intermediates trade deficit at 66 KT by
2017-18
Acrylonitrile Caprolactum PTA MEG
715
KT
-525 -541
-913 -967
-1045 -1092
2014-15 2015-16 2016-17 E 2017-18 E
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 15
Import dependency to reduce significantly for PTA
by 2017-18
Acrylonitrile Caprolactum PTA MEG
78%
%
52% 51%
49%
40%
41%
34% 30%
23%
13% 14%
7%
1%
Fibre Intermediate - Review & Future Prospects – APIC 2017, CPMA, India. 16
Chemicals & Petrochemicals Manufacturers’ Association
708, 7th Floor, Kailash Building,
26, Kasturba Gandhi Marg,
New Delhi – 110001, INDIA
Phone: 91-11-43598337, Fax: 91-11-43598337
Email: cpmai@airtelmail.in Website: www.cpmaindia.com 1
Review : Polyolefins Sector
Indian Polyolefins Industry - Review & Future Prospects - APIC 2017, CPMA, India 2
Polyolefins demand grew at a staggering 17% in
2015-16
MMT
9.95
9.19
8.59
7.32
6.83
Indian Polyolefins Industry - Review & Future Prospects - APIC 2017, CPMA, India 3
Demand of Polyolefins in 2015-16
LLDPE+HDPE+LDPE Polypropylene
5.02
MMT
4.64 MMT 4.77
4.40
4.25 4.19
3.67
3.45 3.51
3.25
2013-14 2014-15 2015-16 2016-17E 2017-18E 2013-14 2014-15 2015-16 2016-17 E2017-18 E
Indian Polyolefins Industry - Review & Future Prospects - APIC 2017, CPMA, India 4
Polyolefin production increased 18% in 2015-16
LDPE
LDPE+ +EVA
EVA 8%
3% PP
49%
PP
64% LLD/HD
33% LLD/HD
42%
Indian Polyolefins Industry - Review & Future Prospects - APIC 2017, CPMA, India 5
PE & PP Demand Trend
LDPE+EVA Lin PE PP
4.8
MMT 4.4
4.2 4.2
3.9
3.5 3.6
3.3 3.2
3.0
1.0
0.8 0.9
0.6 0.7
Lin PE and PP demand growth expected to rise further in next two years
Indian Polyolefins Industry - Review & Future Prospects - APIC 2017, CPMA, India 6
Polyolefins net trade deficit in 2015-16
LDPE+EVA LLD+HDPE PP
0.49
MMT
0.21 0.15 0.12
0.14
-0.06
-0.37
-0.46 -0.45
-0.61 -0.66
-0.75
-1.07 -1.07
-1.14
LLD + HDPE registered net trade deficit of 1.07 MMT and PP registered trade
surplus of 0.14 MMT in 2015-16; LLD+HD would be in surplus in 2017-18
Indian Polyolefins Industry - Review & Future Prospects - APIC 2017, CPMA, India 7
Outlook : Polyolefins Sector
Indian Polyolefins Industry - Review & Future Prospects - APIC 2017, CPMA, India 8
Projected demand for Polyolefins in India
Indian Polyolefins Industry - Review & Future Prospects - APIC 2017, CPMA, India 9
PE import dependency to reduce by 2017-18
LDPE+EVA LLD+HDPE PP
2013-14 65% 28% 12%
Indian Polyolefins Industry - Review & Future Prospects - APIC 2017, CPMA, India 10
Chemicals & Petrochemicals Manufacturers’ Association
708, 7th Floor, Kailash Building,
26, Kasturba Gandhi Marg,
New Delhi – 110001, INDIA
Phone: 91-11-43598337, Fax: 91-11-43598337
Email: cpmai@airtelmail.in Website: www.cpmaindia.com
Review : Styrenics Sector
Styrenics in India - Review & Future Prospects - APIC 2017, CPMA, India 2
Styrene Demand Trend
900
Styrene demand for derivative production (kT)
795
800 750
697
700
617
600 572
500
400
300
200
100
0
2013-14A 2014-15 A 2015-16 A 2016-17 E 2017-18 E
Styrenics in India - Review & Future Prospects - APIC 2017, CPMA, India 3
Styrene derivatives : Demand
ABS, SBR and SAN expected to grow over 10% CAGR in 2011-18 period
Styrenics in India - Review & Future Prospects - APIC 2017, CPMA, India 4
Outlook : Styrene Sector
Styrenics in India - Review & Future Prospects - APIC 2017, CPMA, India 5
Projected demand for Styrenics in next two years
Source: CPMA
ABS, SBR and SAN to grow at ~10%, ~3% and ~8% in 2017-18 respectively
Styrenics in India - Review & Future Prospects - APIC 2017, CPMA, India 6
Chemicals & Petrochemicals Manufacturers’ Association
708, 7th Floor, Kailash Building,
26, Kasturba Gandhi Marg,
New Delhi – 110001, INDIA
Phone: 91-11-43598337, Fax: 91-11-43598337
1
Email: cpmai@airtelmail.in Website: www.cpmaindia.com
Review of Vinyl Sector
Vinyls in India -Review & Future Prospects - APIC 2017, CPMA, India 2
PVC witnessed a growth of 10.5% in 2015-16
1979
Vinyls in India -Review & Future Prospects - APIC 2017, CPMA, India 3
PVC Capacity addition in 2015-16
PVC Capacity
KT
1470
1390 1390
1335 1345
Vinyls in India -Review & Future Prospects - APIC 2017, CPMA, India 4
Net trade of EDC & VCM
KT
-326
-375
-411 -416 -412
-440 -450 -448
-518
-595
Vinyls in India -Review & Future Prospects - APIC 2017, CPMA, India 5
PVC demand supply balance in India
Capacity Demand Import 2699
KT 2443
2263 2309
1979
1470
1335 1345 1390 1390 1335
1172
1048 1026
749
Vinyls in India -Review & Future Prospects - APIC 2017, CPMA, India 6
Outlook for Vinyl Sector
Vinyls in India -Review & Future Prospects - APIC 2017, CPMA, India 7
PVC demand expected to register robust 10%
growth in next two years as well
PVC Apparent Demand
3287
2988
2699
KT 2443
2263 2309
1979
Vinyls in India -Review & Future Prospects - APIC 2017, CPMA, India 8
PVC deficit to increase in future
Capacity Demand Import
3500 3287
KT 2988
3000
2699
2443
2500 2263 2309
1979
2000 1865
1608
1470 1482 1482
1500 1335 1345 1390 1390 1335
1172
1048 1026
1000
749
500
0
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17E 2017-18E
Vinyls in India -Review & Future Prospects - APIC 2017, CPMA, India 9
EDC & VCM Net Trade
KT
-375
-412
-450 -448
-485 -484
-518
-595 -600 -610
Vinyls in India -Review & Future Prospects - APIC 2017, CPMA, India 10