Kishor Jhalaria Reliance Industries Ltd. 20 Aug 2018 India’s place in the new Asian landscape – Petchem supply demand and competitiveness
Kishor Jhalaria
Reliance Industries Ltd.
20 Aug 2018
India’s place in the new Asian landscape –
Petchem supply demand and competitiveness
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performance or achievements, could thus differ materially from those projected in any
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amend, modify or revise any forward looking statements, on the basis of any subsequent
developments, information or events, or otherwise.
2
1.Indian Economy: Growth & Outlook
2.Implications for Petrochemicals in India
3.Indian Petchem Demand and supply
and competitiveness
3
AGENDA
4
A few interesting facts about India
7th largest country by area, 2nd most populous ~ 1.3 Bn People
At ~ 7.4 % GDP 2018-19 (F), India is the fastest growing economy
Youngest Nation – Expected average age of ~29 years by 2025
Low cost YET highly skilled manpower: 2nd most no. of English
speakers
Highly diversified: 29 states, multiple languages, dialects – Allows
mass customization of goods and services
Burgeoning Consumption – Will have largest middle class population
by 2027
Growth in per capita purchasing power - Household savings 3x in last
8 years
India – World’s most diverse nation
Sources: IMF, Reuters, World Bank, World Economic Forum
5
Economy is Scaling new heights, against all odds
After 150 years,
India overtakes
UK to become
the world’s 5th
largest
economy
India emerges as
2nd fastest
growing market in
passenger cars
and aviation
Sensex crosses 37500
for the first time even as
Brent crude spiked
above $75/barrel in July
2018
Sources: IMF, Reuters, World Bank
6
Indian Economy is at an inflection point
India’s GDP
$1Trn.
$2 Trn.
$3 Trn.
60
Years taken to
reach
8
5Sustained &
Faster growth
rates
In the midst of an expansion
to position India as one of
the three largest
economies in the world
Has reached an
inflection
point
This inflection point reflects the
growth trajectory of developed
economies
India’s GDP
growth pegged at
~7- 8% p.a.
Requires sustained
investment in basic
building blocks, like
Petrochemicals
Sources: IMF, Reuters, World Bank
7
Rising Incomes Feeding Aspirations
➢ Consumption spiking across markets
➢ Affordable housing
➢ White goods
➢ Branded goods & apparels
➢ Automobiles
➢ Electronics
2016 2017 2018 2019 2020 2021
6.8
7.2
7.7 7.8 7.98.1
India – GDP Growth Rate Forecast, IMF Growth in %
Avg. Household
Income ($)2441 6393 18448
Source: BCG CCI proprietary income database; BCG analysis, IMF forecast July’17
Continued growth is driving up purchasing power
8
Well Structured Government Initiatives such as…
GST
• Robust integrated comprehensive tax compliance
• Widening tax base, reducing cost of operation
Make in India
• To raise share of manufacturing from 16% of GDP (current)
to 25%
• Built on four pillars: New Processes, New Infrastructure, New
Sectors, New Mindset
Infrastructure Development Initiatives
• Investing in roads, railways and ports
• Connectivity to remote parts of the country
• Shelter and power to all Indians
….Causing a tectonic shift from Un-organized to Organized economy
9
Changing macro trends driving growth across
industries
CAGR 20.6% CAGR 41.4% CAGR 15.7%
CAGR
PV 13.4% | CV 12.2%
CAGR 15.9% CAGR
8.7%
• Economic & Population
Growth
• Increasing Urbanization
& Changing
Demographic Mix
• Increasing Energy
Demand & Production
• Higher Disposable
Incomes
• Rapid Digitization
• Sustainability
Primary “enablers”(aka Petrochemicals) set to grow to at an exceptional rate
CAGR estimates for FY 16-20 (E)
Sources: Assocham-TechSci Research report | NEC Technology and Assocham study | CMA, CMIE Database, TechSciResearch | SIAM, NEMMP 2020, TechSci Research; | ASSOCHAM-IITTM study; | PHD Chamber of Commerce
10
AGENDA
1.Indian Economy: Growth & Outlook
2.Implications for Petrochemicals in India
3.Indian Petchem Demand and supply and
competitiveness
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Petrochemicals: Demand Drivers
Robust macro trends & evolving demographics driving demand
• Make in India• Swachh Bharat• Smart Cities• GST• Food Security
• Rising middle class
• Higher disposable
Income
• Imp in standard of
living
• LOCAL SUPPLY
• Retail –Food packaging
• Agriculture/ Irrigation
• Healthcare• Automobiles• White Goods
• Infrastructure• Housing• Automobiles• Electronics goodEco
Growth
New end uses
Demand Drivers
Govt. Policies / Program
➢ India’s Per Capita
consumption
lower across
all key
Petrochemical
products
➢ Low Consumption
and a large
population →
Huge volume
potential
12
Petchem Per Capita Consumption - India v/s
World Per Capita Consumption –
2017 (E)
ChinaGlobal Avg.
(Kg/person)
Po
lym
ers
India
PP3.7 9.2 18.3
PE4.0 12.8 20
2.6
PVC12.45.7
PET0.9 3.82.9
PBR /
SBR 0.39 1.550.96
Fibre5.8 17.212
Ela
sto
mer
Fib
re
Strong, growing & sustainable consumption and demand
Sources: Consultant Estimates, RIL Internal Estimates
India getting uniquely positioned for RAPID
Petrochemicals Growth:
➢ Conducive Government Policies
➢ Economical Stability – Robust Fundamentals
➢ Young and Skilled Man Power
➢ Huge Demand Potential across all Sectors
➢ But a HIGHLY Competitive Market
13
In Summary …………
Best of India is yet to arrive….
14
AGENDA
1.Indian Economy: Growth & Outlook
2.Implications for Petrochemicals in India
3.Indian Petchem Demand and supply and
competitiveness
2.2
10.7 0.7 0.9
0.2
2.9
0.40.6
0.3
0.5 0.40.1
PP PE
• ~2.5 MMT PE capacity addition by RIL, OPAL,
GAIL & BCPL (past 24-36 months)
• Sizeable proportion of PP integrated with
refinery FCC’s
• PP capacity nearly at par with PE (no on-
purpose C3”)
15
Polyolefins Capacity in India
Sources: Consultant Estimates
Polyolefins Players & Capacities in India
Do
mesti
c P
E c
ap
acit
y
Do
ub
led
in
past
2 y
ears
16
Global Ethylene Cash Cost Curve Steepened
with Rising Crude…
0
200
400
600
800
1000
1200
2 11 21 32 39 45 52 58 64 72 79 84 89 94 100 106 114 121 128 137 143 147 151 157 162 166 169
Q2/2019 Q1/2019 Q2/2018
Q1 2019: Crude ~72.1 $/bbl
Q4 2018: Crude 63.9 $/bbl
Q1 2018 Crude 49.7 $/bbl
European & JKT
Naphtha Crackers
Other Smaller
Gas Crackers &
MTO
Middle East
Gas
Crackers
Asian
Naphtha
Crackers
US Gas
Crackers
Cumulative Global Ethylene Capacity (MMT)
Ca
sh
Co
st
( $
/ M
T E
+P
)
(Source: RIL internal estimates)Note: Crude prices are average of Dubai Crude for the quarter
Various Indian Crackers
17
0
2
4
6
8
10
2010 2017 2025E
MM
T
Demand Capacity
Indian PE market balance
• HPCL Mittal Energy planning to add 1.2 MMT PE
capacity over next 4-5 years (refinery integrated)
• GAIL / HPCL JV Mixed feed cracker in East Coast of
India (20??)
• Mega-refinery cum petchem complex in West Coast of
India (20??)Sources: Consultant Estimates
18
0
2
4
6
8
10
2010 2017 2025E
MM
T
Demand Capacity
Indian PP market balance
Sources: Consultant Estimates
• IOCL’s 700 KTA PP capacity (Paradip) is expected to come in 2019
• HPCL Mittal Energy planning to add 500 KTA PP capacity over next
4-5 years (refinery integrated)
• GAIL / HPCL JV Mixed feed cracker in East Coast of India (20??)
• Mega-refinery cum petchem complex in West Coast of India (20??)
19
0
2
4
6
2010 2017 2025E
MM
T
Demand Capacity
India PVC Supply Demand
Sources: Consultant Estimates
• DCW Ltd to add 60 KTA PVC capacity
• GAIL/HPCL JV to build 300 kta PVC in East
Coast India (20??)
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In Conclusion ……………
Unparalleled Demographic Advantage in India
Various initiatives of Government of India
Improvement in Purchasing Power, wealth distribution
INDIA POISED FOR RAPID GROWTH ACROSS MULTIPLE PETCHEMS FAMILIES
Integration with oil refining - Reasonably competitive
cost position
Home market with high growth potential
Sources: IMF, Reuters, World Bank, World Economic Forum
• Indian economy is an elephant that’s starting to run
• India can be almost what China was for the world
economy
• India has 3 decades before it hits the point where the
working age population starts to decline
• IMF views India as a “long run source of global growth”
21
Quote from IMF (Aug-2018)