Indian Petrochemical Industry Review of 2016-17 & Outlook for 2017-18 APIC 2017 Country Paper ...

140 Pages·2012·5.15 MB·English

Indian Petrochemical Industry

Indian Petrochemical Industry

Review of 2016-17 & Outlook for 2017-18

APIC 2017

Country Paper from India

Prepared by
Chemicals & Petrochemicals Manufacturers’ Association
708, 7th Floor, Kailash Building,
26, Kasturba Gandhi Marg,
New Delhi – 110001, INDIA
Phone: [phone], Fax: [phone]
Email: [email protected]
Website: www.cpmaindia.com
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2017 Asia Petrochemical Industry Conference
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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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2017 Asia Petrochemical Industry Conference
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Indian Petrochemical Industry

SYNTHETIC FIBRES ......................................................................................... 48
SURFACTANTS ............................................................................................... 49
SYNTHETIC RUBBER ....................................................................................... 50
CARBON BLACK FEEDSTOCK & CARBON BLACK ................................................. 52
OTHER KEY PETROCHEMICALS ........................................................................ 54
OUTLOOK FOR THE OVERALL INDIAN PETROCHEMICAL INDUSTRY ................................ 55
SECTION 3 STATISTICAL APPENDIX – DEMAND SUPPLY BALANCE ................................... 57
MONOMERS (KT) ............................................................................................... 58
POLYMERS (KT) ................................................................................................ 58
INTERMEDIATES (KT) ......................................................................................... 60
POLYOLEFINS (KT) ............................................................................................ 61
VINYLS (KT) .................................................................................................... 61
STYRENICS (KT) ............................................................................................... 61
PET (KT) ........................................................................................................ 62
AROMATICS - PX (KT) ........................................................................................ 62
SURFACTANTS (KT) ........................................................................................... 63
FIBRE INTERMEDIATES (KT) ................................................................................. 63
SYNTHETIC FIBRES (KT) ..................................................................................... 64
ELASTOMERS (KT) ............................................................................................ 66
CARBON BLACK & CBFS (KT) ............................................................................... 67
OTHER KEY PETROCHEMICALS (KT) ....................................................................... 68

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Indian Petrochemical Industry

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
May 18th – 19th 2017, Japan
Indian Petrochemical Industry

Section 1

The Indian Economy

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Indian Petrochemical Industry

The Indian Economy: Review of 2016-17 & Outlook for 2017-18

The Indian Economy Review of 2016-17
India has become the sixth largest manufacturing country in the world, rising up
from the previous ninth position, and thus retaining its bright spot in the world
economic landscape. In the last few months, two far reaching changes happened
in the Indian economy – demonetisation and passing of the GST Bill.
In order to weed out unaccounted money from the system, the Government
demonetized high value currency notes in November 2016. As a result, there was
a temporary shortage of cash, which also provided a major boost to digital
transactions. However, after the initial period of hardship, things have rapidly
normalized.
The other major economic event which happened in the Indian economy in the last
few months was the passing of the GST Bill. The GST Bill paves the way for roll
out of the GST regime in India which will transform India to a unified market with a
single tax structure.
Post the demonetization announcement, the pace of remonetisation has picked
up, and it is expected that the effects of demonetisation will not spill over into the
next financial year.
India seems to have braved the effects of demonetisation with the economy
growing at an unexpectedly robust 7% in what was deemed to be the worst hit
October-December quarter. It's now forecast to achieve 7.1% growth in the year
to March. Going by these projections, India will retain its tag of being the fastest-
growing major global economy.
The IMF expects the Indian economy to grow by 6.6% in 2016–17, which is not
only a significant one percentage point lower than the previous estimate, but also
brings India back to the status of the second-fastest growing economy, especially
as China is expected to outgrow by 6.7%.
Recognizing the strength of Indian economic fundamentals, the IMF expects the
impact of demonetization to fade away gradually, as it pegs the 2017–18 growth
at 7.2%, overtaking China again by a good 0.7 percentage points. The World Bank,
however, is more optimistic and has projected a GDP growth of 7% in 2016–17,
7.6% in 2017–18 and 7.8% in 2018–19. Clearly, what makes India resilient to
global flurries, to a great extent, is its rock-solid domestic demand, accounting for
about 60% of the GDP. This figure is 37% for China, and this has led the Chinese
economy’s restructuring and rebalancing to rely less on exports and investment
and more on consumption demand.
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Indian Petrochemical Industry

The broad macroeconomic indicators, based on latest data, are as follows:
Firmer food and fuel prices drove India’s overall inflation higher in February, further
dimming any possibility of a cut in interest rate by the Reserve Bank of India amid
worries of hardening global commodity prices and expectation of vegetables
turning dearer as summer approaches.
India’s headline inflation rate based on the Consumer Price Index (combined) went
up to was 3.65% in February compared with 3.17% in January and 5.26% a year
ago. Wholesale inflation firmed up to a 39-month high of 6.55% in February from
5.25% in January. With likely GST rollout in July, analyst suggest, this could add
to inflationary pressure. The fiscal deficit as a percentage of GDP was budgeted
at 3.5% for 2016–17 in the previous year’s budget. This stands revised to 3.2% for
2017–18.
FDI in India grew 18% during 2016 to touch $46 billion. The country attracted FDI
of $39.32 billion in 2015. India’s forex reserves increased by $1.2 billion to $364.01
billion for the week ended March 10th 2017 due to surge in currency assets to touch
a high new. FIIs invested about $1.5 billion (Rs 9,902 crore) in equities during
February 2017, the highest in the last five months.
India’s trade deficit narrowed by 25% in the cumulative period of April to December
2016 when it stood at $76.5 billion, as against $100.1 billion in the corresponding
period of the previous year. This is on the back of a 7.4% decline in imports coupled
with a meagre growth of 0.75% in exports during said period. Imports of both oil
and non-oil products dropped during this period by 10.76% and 6.42%,
respectively, reflecting the subdued gross capital formation.
The rupee on 14th March 2017 surged to touch 17 month high against the US dollar
at 65.39 ahead of the key events in domestic as well as international markets. At
the current level rupee is the third best performing Asian currency after South
Korean Won and Taiwanese dollar since the start of the calendar year.

In March last year, former RBI governor Raghuram Rajan had said that market
forces bring the exchange rate to its Goldilocks level and the regulator only
intervenes to smoothen the journey. Going by his words, the rupee seems to have
found its Goldilocks level.

India posted a current account deficit (CAD) of $3.4 billion, or 0.6% of gross
domestic product (GDP), in the July-September quarter. The value of Indian
equities has climbed to $1.82 trillion, a nine-year high, after the Nifty gauge
rebounded from a low in December as data showed Asia’s third-largest economy
is recovering from Modi’s decision late last year to junk high-value currency notes.
That is about 87% of the nation’s GDP.
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Indian Petrochemical Industry

As a result of very good rainfall during monsoon 2016 and various policy initiatives
taken by the Government, the country has witnessed record foodgrain production
in the current year. As per second advance estimates for 2016-17, total foodgrain
production in the country is estimated at 271.98 million tonnes which is higher by
6.94 million tonnes than the previous record production of Foodgrain of 265.04
million tonnes.
Proactive policy reforms along with several campaigns and initiatives, such as
Make in India, Digital India, Skill India, Start-up India and Swachh Bharat Abhiyan
(Clean India Mission), are likely to transform the extent and the quality of rural and
urban infrastructure. These steps are expected to bring forth a number of
investment opportunities.

Prime Minister Modi's 'Make in India' initiatives and push towards manufacturing
remains in place, where by road building targets of 40 km per day and attracting
foreign companies to establish factories, India will continue to boost oil demand.

The government has set a target of constructing 15,000 km of highways in the next
financial year, 50% more than that in the current fiscal. The government has
approved an over Rs 110 billion project to construct all-weather roads and improve
connectivity for security reasons.
The projects identified under Sagarmala Programme are expected to mobilize
more than Rs. 7 trillion of infrastructure investment, double the share of domestic
waterways (inland& coastal) in the modal mix, generate logistic cost savings of Rs.
350-400 billion per annum, boost merchandize exports by USD 110 Billion and
enable creation of 10 million new jobs, including 4 million direct jobs, in the next
10 years.
Indian Railways has set a daily target of laying 9.5 km of tracks to complete its
ambitious line doubling and capacity expansion projects earmarked for the next
financial year. The railway ministry plans to spend Rs 1.31 trillion — the highest-
ever for capacity expansion — in the next financial year. It has received Rs 550
billion from the finance ministry as gross budgetary support.
In FY17, government utilized the additional revenues from tax revenues to boost
rural spending. Total spending in rural areas has exceeded the budget estimate by
12% to register a robust 27% growth. And now that India’s GDP growth forecast
for 2016 is slated to be 7.1%, India is firmly on its way to catapult into a global
growth engine. This growth rate also makes India one of the fastest growing large
economy in the world, overtaking a slowing China, on the back of an improvement
in the manufacturing and farm sectors.
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Indian Petrochemical Industry

With the government ready to run the extra mile on key reforms including land
acquisition and infrastructure, the economy is poised for growth in the coming
months.
Snapshot of Key Indicators
The last year saw India enter a sweet spot as growth rebounded, inflation declined
and the external accounts came under control. From then on there has been a lot
of positivity built around the India growth story and India seems to be poised to
enjoy another spurt in growth.
There is a real sense that a new set of reforms and the enthusiasm in the markets
can lead India towards another prosperous era of high growth. India’s economy
grew faster in 2015-16 than earlier estimated, which could result in slower growth
in the current fiscal because of a higher base.
Figure 1: India’s GDP Growth (year-on-year in per cent)

The upward revision of the 2015-16 data was mostly due to a significant increase
in growth estimates for the industrial and services sectors. While the industrial
sector is now estimated to have grown at 8.2% against the earlier estimation of
7.4%, the services sector is estimated to have grown at 9.9% against 8.9% earlier.
The farm sector growth rate was, however, cut to 0.76% from 1.2% estimated
earlier.
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2017 Asia Petrochemical Industry Conference
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Indian Petrochemical Industry

Gross fixed capital formation, the proxy for investment demand in the economy,
was also underestimated earlier. It is now revised to 6.1% from the earlier estimate
of 3.9% for 2015-16. Private consumption demand, however, has been marginally
revised downward, from 7.4% to 7.3% for 2015-16.
As a start, growth rebounded in the crucial industrial sector as all the three major
components namely the mining, manufacturing and electricity picked up pace from
last year.
Figure 2: Quarterly Estimate of GDP Growth (in per cent)

Gross domestic product (GDP) for the third quarter (Q3) of financial year 2016-17
(FY17) grew at 7%, allaying fears of any major effect of demonetisation though it
was the lowest expansion in four quarters.
Private final consumption expenditure, denoting demand, rose at double the rate
(10%) in Q3, against five per cent in Q2. Government consumption continued to
be the greatest support for the economy in the current year. In the third quarter,
government consumption grew 19.6%
Gross fixed capital formation, an indicator of private investment, also rose after a
three quarter decline.
The Q3 numbers not only made India the fastest-growing large economy in the
world but also helped the Central Statistics Office (CSO) retain its earlier projection
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2017 Asia Petrochemical Industry Conference
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