MOSCOW (MRC) -- The Indian petrochemicals industry will continue to surge in 2013 as the market becomes increasingly self-sufficient and domestic producers benefit from a weak rupee and a revised tariff structure, as per Pastemart with reference to a report by Business Monitor Index (BMI).
However, a poor business climate, exacerbated by chaotic government policies and land disputes, is undermining progress and could prove detrimental in the long term. The possible collapse of Haldia Petrochemicals in West Bengal, amid a dispute between the main private shareholder and the state government, underlines the problems facing the sector, in spite of the growth potential that India is beginning to realise.
BMI believes that India's demand for polymers will grow at around 10% in 2013 and 2014, spurred by the stronger consumption of polyolefins. As a result, polymer demand should rise to 9.86 mln tons in 2013 and 10.84 mln tons in 2014. Growth is slightly down on the 13% reported in 2013 due to lingering weakness in global demand as well as a more subdued economic environment.
Over the last quarter BMI has revised the following forecasts/views:
- Much of the growth in 2013 will be served by growing domestic capacities. A 50% leap in PE capacity is anticipated. Around 60% of the 1.88 mln tpa rise in polyethylene (PE) capacity will come from linear low density polyethylene (LLDPE). At the same time, polypropylene (PP) capacity is set to increase by a quarter to 4.72 mln tpa in 2013.
- India implemented an increase in duties on imports of all polymers and ethylene vinyl acetate (EVA) from 5.0% to 7.5% in May, a move that helped domestic producers but hit converters with higher costs. BMI believes that it will lead to higher domestic list prices of polymers in the domestic market as well as lower imports. At the same time, domestic producers will benefit from a lower import duty of 5% on feedstocks - such as naphtha, ethylene, EDC and VCM - in which India suffers from some under-supply. BMI does not believe that a consequent increase in domestic prices will hit demand, which remains strong due to robust demand and tight supply.
We remind that, as MRC informed earlier, The Supreme Court (SC) has not granted a stay on the stake sale process in eastern Indian biggest petrochemical company - Haldia Petrochemicals Ltd (HPL) - and set the stage for the West Bengal government to call price bids by August 31.
MRC