Indian Polyolefin Market

Indian polyolefinmarket was slow in Q2-09 and expected to remain slow in Q3-09.

The Indian polyolefin market was expected to remain slow inQ3-09 as it exhibited quite uncertainty in the Q2-09. Demand was declined inthe last quarter as financial crunch hit the industrial customers and projectsin pipeline. Market sentiment for the olefin was also affected highly due todeteriorating environment of petrochemical industry. It was widely discussedamong the industrial fraternity that the completion of PP plant of RIL in Jamnagar by end of the Q2-09 will make the supply side overflowed. As an advanced planningIndian Indian chemicals and petrochemicals producers had raised their voice. Werecently go through the Polypropylene antidumping measures imposed by the Government of India on PP imports fromselect countries. According to the according to the proposal, now PP importfrom S Arabia based Advanced Polypropylene will attract anti dumping duty ofUS$ 448/ton. Import of PP from any other S Arabian companies except Basell willattract a hefty anti dumping duty of US$ 820.55/ton. Basell is only companywhich kept away from the measures. Similar anti dumping duty was levy on theSumitomo, Itochu and ExxonMobil where anti dumping duty fixed at US$ 81.20/ton,472.29/ton and 1033.65/ton respectively. For More details please refer thetable below:

In the Q2-09 economic environment was revived little bit, still for Q3-09 its expected to remain uncertain. Indian Polyolefin producer kept their plant utilization rate near by 90 percent in Q2-09 and if market sentiment allow they may increase up to 100 percent, but risk of over capacity and high inventories may not able to prevent price volatility. Even in recent survey by FICCI it was observed that all the petrochemical industry facing tough times as export of plastic, textiles, car accessories and consumer goods went down.

The growth potential of Indias polymer and petrochemical industry has not completely materialized largely due to the high excise duty rate on petrochemicals. Futures contracts expiring in 2010 remain optimistic relative to 2009. Markets are bullish, going forward, with contract prices picking up each quarter. To boost petrochemical consumption to partially/fully offset the loss in revenue from excise duty, the industry has a few expectations that include:

• Import duty on basic feedstock material like naphtha and propane should be nil from current 5 percent.
• Import duty on should be increase on polymers, chemicals and fibre intermediates up to 10% from current 5%.
• Excise duty on naphtha should be cut down to 8 percent from 16 percent now and excise duty on polymer at 8 percent should maintain.
• Customs duty on capital goods imported by Petrochemicals sector be made nil and the customs duty on catalysts imported for use in manufacture of petrochemicals (like EDC, VCM and Styrene) be made nil.

New production facilities for olefin are under construction in India are mentioned below:

• Petrochemicals have clearly become a global market with production and consumption based on regional comparative advantages.  Indias comparative advantage is as a consumer, not a producer.  If the new capacity gets built, it will have to be price protected which will eventually drain Indias comparative advantage in exports.  As the article states, plans are under review.  Hopefully, they will be reviewed carefully.
  
  
• IOC has also put on hold a petrochemical complex in Paradip, which is 15 million ton/year export-oriented refinery. Total project costs estimated up to INR150 billion to INR450 billion (US$9.4 billion). It is likely be completed by 2012.
  
  
• Oil and Natural Gas Corporations (ONGC) US$3 billion complex at Dahej, The proposed INR500 billion (US$10.3 billion) 15 million tpa refinery and petrochemical project in Vishakhapatnam is also likely to face delays which could impart additional cost by 20-30%, could deter investors interest.

• A joint venture (JV) between Mittal Energy and Hindustan Petroleum Corporation Limited (HPCL) in Bhatinda, Punjab for 9 million ton/year refinery which is expected to start in 2012 with cost of INR 189 billion
  
  
• India coming up with three massive integrated petrochemical hubs, this was proposed, from the state governments which have been approved. According to this proposal new projects will come up in West Bengals Haldia region, Dahej in Gujarat and Visakhapatnam in Andhra Pradesh. This would give a enthrust to industrialization in these regions by way of setting up of downstream units, and in turn leading to the development of socio-economic infrastructure in the areas in and around the regions.

Indian Production Capacity in 2009:

• India had PP capacity of 2.84 million tons/year
• PE capacity amounted to 3.12 million ton/year (720,000 ton/year was HDPE) (218,500 ton/year LDPE) (2.37mn ton/year LLDPE)
• PVC capacity was 1.27 million ton/year.

It is interesting to know that By 2013 India will produce 7.3 million ton of Ethylene, 6.5 million ton of PE every year. PP production will increase to 5.65 million tons where as production of PS and PVC will surge to 900000 ton/year and 1.62 million ton/year respectively.

References:

1. &sec=article&uinfo=<%=server.URLEncode(1996)%>" target="_blank">http://www.prw.com
2. &sec=article&uinfo=<%=server.URLEncode(1996)%>" target="_blank">http://www.plastemart.com/
3. &sec=article&uinfo=<%=server.URLEncode(1996)%>" target="_blank">www.Gulfbase.com
4. &sec=article&uinfo=<%=server.URLEncode(1996)%>" target="_blank">www.chemguide.asia
5. &sec=article&uinfo=<%=server.URLEncode(1996)%>" target="_blank">http://www.icis.com