India Petrochemicals Report Q2 2016 - New Market Research Report

The Indian government is set to embark on a change to the country's petrochemicals development strategy in 2016, although the principle of clustering complexes in Petroleum, Chemicals and Petrochemicals Investment Region s (PCPIRs) will remain the same. It is expected that the government will encourage more foreign investment in the sector. However, long-standing issues relating to land acquisition and environmental clearance could still prove to be a deterrance with delays lasting years, leading to mounting costs.

India's petrochemicals industry rebounded in 2015 following a lacklustre 2014. In the 2015 calendar year, the chemicals index grew by 4.7% y-o-y compared to a decline of 0.3% in 2014, while rubber and plastic rose 2.8%, up from 2.5%.

The Indian petrochemicals industry is set to get a boost from the opening of the Brahmaputra Cracker and Polymers (BCPL) project in Dibrugarh district, Assam, in Q116 and the settling of disputes over the ownership of West Bengal's Haldia Petrochemicals Ltd (HPL), which should support higher capacity utilisation rates. Commercial operations are also due to begin at the ONGC Petro-Additions Ltd (OPaL) project in Dahej, Gujarat, in 2016. JBF Petrochemicals Ltd is also set to open a 1.25mn tpa purified terephthalic acid (PTA) unit at the Mangalore special economic zone, which will supply downstream PET producers.

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The agriculture sector accounts for the bulk of polyvinyl chloride (PVC) demand in the country, with 70% of the resin purchased for use in irrigation pipes. The remaining 30% finds use in the construction sector, where PVC is used to make profiles, films, sheets and fittings, and in calendaring applications. We forecast that agribusiness will grow annually by 5.6% on average from 2016 to 2020. We also maintain our real growth forecast of 5.0% for India's construction sector for FY2015/16 and expect a gradual pickup in construction activity over the coming years as reform momentum gains traction amid an improving funding outlook.

The automotive sector will be a major force in driving engineering and high-performance plastics and synthetic rubber in India, and is fuelling the diversification of downstream industries. Producers are seeking to increase the value of production and to raise margins by tapping into growth in the autos industry, particularly in styrene-butadiene rubber, which India does not produce but which is needed for tyre production. The automotive component and tyre sectors are witnessing double-digit growth, fuelling demand for high value materials.

Growth is set to strengthen in coming years. The chemical industry is likely to touch USD190bn by FY2017/18 to serve a market that will see per capita consumption double between 2015 and 2020, with increasing levels of self-sufficiency as output grows by over 10% per annum.

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