-
On 9 October 2019, Reliance Jio said that it will now be
recovering
Petrochemicals are downstream hydrocarbons derived from crude
oil and
natural gas. The downstream process involves refining of crude
oil and
purifying and processing of natural gas. The refining process
calls for
fractional distillation which fragments crude oil into its
constituent parts
and results in production of main petrochemical feedstocks like
petroleum
gases, naphtha, kerosene and gas oil. Ethane, propane and
natural gas
liquids derived from natural gas are the other vital feedstocks
used in
petrochemicals industry.
Petrochemicals are used in day to day activities and have been
playing a
crucial role in development and smooth functioning of various
industries
and human life. As they are derived out of petroleum, their
prices tend to
move in line with that of petroleum. Here in this report, we
detail about
the production and trade scenario of various petrochemicals by
India.
Also, the trend in domestic and international prices of
petrochemicals is
discussed. Further, brief update on petrochemicals industry in
India amid
Covid-19 is detailed.
Market structure
The major petrochemicals industry in India is broadly divided
into 3
segments: basic major petrochemicals (second largest
segment),
intermediates (the largest segment) and other petro-based
chemicals (the
smallest segment) which are explained in the report.
Chart 1: Trend in production of major petrochemicals in India
(million
tonnes)
Source: Department of Chemicals and Petrochemicals
During the last 5 years, the basic major petrochemicals segment
has
grown at a fastest pace of 4.9% CAGR compared to the other
two
segments of the industry. This has increased the share of basic
major
petrochemicals segment in the total major petrochemicals
industry to
43.4% in FY19 compared to its share of 41.7% in FY15. The
intermediates
2.0 2.2 2.2 2.1 2.2
16.8 18.7 18.7 19.1 19.1
13.4 14.9 15.5 15.7 16.3
0
5
10
15
20
25
30
35
40
FY15 FY16 FY17 FY18 FY19
Other Petro-Based Chemicals Intermediates Basic Major
Petrochemicals
July xx, 2019 I Industry Research June 25, 2020 | Industry
Research Petrochemicals Industry
Contact: Madan Sabnavis Chief Economist
[email protected] 91-22-6837 4433 Author Bhagyashree
C. Bhati Deputy Manager – Industry Research
[email protected] 91-11-4533 3306
Mradul Mishra (Media Contact) [email protected]
91-22-6837 4424
Disclaimer: This report is prepared by CARE Ratings Ltd. CARE
Ratings has taken utmost care to ensure accuracy and objectivity
while developing this report based on information available in
public domain. However, neither the accuracy nor completeness of
information contained in this report is guaranteed. CARE Ratings is
not responsible for any errors or omissions in
analysis/inferences/views or for results obtained from the use of
information contained in this report and especially states that
CARE Ratings has no financial liability whatsoever to the user of
this report.
mailto:[email protected]
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Industry Research I Petrochemicals
2
segment and other petro-based chemicals segment grew at a slower
CAGR of 3.2% and 2.8%, respectively, during these
years. Resultantly, the share of intermediates segment
contracted to 50.8% in FY19 from 52% in FY15 and that of other
petro-based chemicals segment reduced to 5.8% in FY19 from 6.1%
in FY15.
Overall, the major petrochemicals industry production rose at a
CAGR of 3.9% to 37.5 million tonnes in FY19 from 32.2
million tonnes in FY15.
A. Basic major petrochemicals
Basic major petrochemicals are the raw materials used for
production of finished goods that can be utilised for final
consumption and intermediates are the inputs that go in the
manufacturing of basic major petrochemicals. For example – i.
Fibre intermediates are used to make synthetic fibres which, in
turn, are utilised to produce textiles. ii. Propylene is used
as
feedstock to make polypropylene which finds its application in
packaging, automotives, consumer products like furniture,
appliances etc.
Table 1: Production of Basic Major Petrochemicals in 2018-19
(‘000 tonnes)
I. Synthetic Fibres/Yarn II. Polymers III. Synthetic Rubber
1. Polyester Filament Yarn (PFY) ($) 2316
1. Linear Low Density Polyethylene
(LLDPE) 1581
1. Styrene Butadiene Rubber
(SBR) 229
2. Nylon Filament Yarn (NFY) ($$) 47 2.High Density Polyethylene
(HDPE) 1598
2. Poly Butadiene Rubber
(PBR) 122
3. Nylon Industrial (NIY) ($$) 110 3. Low Density Polyethylene
193 3. Nitrile Butadiene Rubber 0
4. Polypropylene Filament Yarn
(PPFY) ($$) 2 4. Polyestyrene 293 4. Ethyl Vinyl Acetate (EVA)
0
5. Acrylic Fibre (Inc. Dry Spun) (AF) 99 5. Polypropylene
4779
6. Polyster Stable Fibre (PSF) 931 6. Poly Vinyl Chloride (PVC)
1488
7. Polypropylene Satple Fibre 21 7. Expandable Polystyrene
(EX-PS) 108
8. Polyester Staple Fibrefil (PSFF) 53
9. Ployester Industrial Yarn (PIY) 15
10. Elastomeric/ Spandex Filament
Yarn 7
Total Synthetic Fibres/Yarn 3,601 Total Polymers 10,041 Total
Synthetic Rubber 351
% share 22.1% 61.7% 2.2%
IV. Synthetic Detergent Intermediates V. Performance Plastic
1. Linear Alkyl Benzene (LAB) 455 1. ABS Resin 148
2. Ethylene Oxide 232 2. Nylon-6 & Nylon 66 22
3. Polymethyl Methacrylate (PMMA) 0
4. Styrene Acrylonitrile (SAN) 132
5. PET Chips/Polyester Chips 1271
6. PTFE (TEFLON) 16
Total Synthetic Detergent Intermediates 687 Total Performance
Plastic 1,589
% share 4.2% 9.8%
Total Basic Major Petrochemicals (I+II+III+IV+V) 16,269
Source: Department of Chemicals and Petrochemicals
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Industry Research I Petrochemicals
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Synthetic fibres/yarn
Synthetic fibre is artificial fibre or man-made fibre made
completely from chemical substances or petrochemicals. It
comprises small unit or polymer which is created from many
repeating units that are called monomers. Monomer (a small
molecule) is a chemical substance whose basic molecules can join
together to form polymers. Some common synthetic
fibres include polyester, rayon, nylon, acrylic and spandex.
These fibres are used to produce 100% non-cotton fabrics and
blended fabrics which, in turn, are used in readymade garments,
home textiles and other industrial textiles.
Polymers
Polymer is a chemical compound with large molecules made of many
smaller molecules of the same kind. It is a very large,
chain-like molecule made up of monomers. Some of the common
varieties of polymer comprise polypropylene, Linear Low
Density Polyethylene (LLDPE), High Density Polyethylene (HDPE),
Poly Vinyl Chloride (PVC), etc. Polymers are used in
packaging, textiles, plastics, auto parts among others.
Synthetic rubber
Synthetic rubber is made from petrochemical feed stocks and is
artificial in nature. Synthetic rubbers are of different
chemical types and they have their own characteristics and
benefits. They find their application in making of tyres,
automotive hoses, cable insulation, seals etc.
Synthetic detergent intermediates and performance plastic
Synthetic detergent intermediates are the chemicals used as an
intermediate in the production or manufacture of
surfactants or detergents. For example, Linear Alkyl Benzene
(LAB) is generally used in making of detergents that can be
used for household and industrial purpose. Performance plastic
that includes PET chips/polyesters chips finds their
application in textiles industry and PTFE (TEFLON) is used to
coat dental fillings, to make non-stick cooking utensils,
windscreen wipers etc.
B. Intermediates
Fibre intermediates are raw materials for polyester and textile
industries and also finds its application in industrial
chemicals. Olefins and aromatics are building blocks for other
chemicals, fibres among others. They act as intermediates
that are required to produce a variety of products of everyday
use.
Table 2: Production of Intermediates in 2018-19 (‘000
tonnes)
I. Fibre Intermediates II. Building Blocks
1. Acrylonitrile (ACN) 0 a. Olefins b. Aromatics
2. Caprolactum 93 1. Ethylene 3832 1. Benzene 1415
3. Mono Ethylene Glycol (MEG) 1160 2. Propylene 4640 2. Toluene
141
4. Purified Terephthalic Acid 3405 3. Butadiene 386 3. Mixed
Xylene 249
4. Orthoxylene 406
5. Paraxylene 3332
Total Olefins 8,857 Total Aromatics 5,543
Total Fibre Intermediates 4,657 Total Building Blocks (a+b)
14,400
% share 24.4% 75.6%
Total Intermediates (I+II) 19,057
Source: Department of Chemicals and Petrochemicals
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Industry Research I Petrochemicals
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C. Other petro-based chemicals
In addition to the above segments, other petro-based chemicals
segment also forms a part of the total major
petrochemicals production. The share of this segment however is
very small compared to the other two segments
discussed above. The major petro-chemicals produced under this
head include Vinyl Chloride Monomer (VCM), C4-
Raffinate, Ethylene Dichloride (By Product) and Phthalic
Anhydride (PAN). These chemicals are used are as raw materials
for making materials that finds their usage in finished
products. For example, VCM is primarily used to make polyvinyl
chloride (PVC) which has its application in products like PVC
pipes, window frames, wire and cable insulation, floor and wall
coverings etc.
Table 3: Production of Other Petro-Based Chemicals in 2018-19
(‘000 tonnes)
Other Petro-Based Chemicals
1. Butanol 22 10. Phthalic Anhydride (PAN) 275
2. C4-Raffinate 380 11. Propylene Oxide (PO) 35
3. Di-Ethylene Glycol 107 12. Propylene Glycol (PG) 19
4. Diacetone Alcohol 4 13. Polyvinyl Acetate Resin 0
5. Ethylene Dichloride (By Product) 339 14. Vinyl Acetate
Monomer (VAM) 0
6. 2-Ethyl Hexanol** 59 15. Vinyl Chloride Monomer (vcm) (By
Product) 804
7. Iso-Butanol 2 16. Polyol 82
8. Isopropanol (IPA) 58 17. PBT 1
9. Methyl Methacrylate (MMA) 4 18. Polycarbonate 0
Total of 18 chemicals 2,192
Source: Department of Chemicals and Petrochemicals
Olefinic complexes in India
As already discussed, intermediates are the largest segment of
petrochemicals produced in India and forms the basis of
petrochemicals industry. Of the intermediates, olefins accounted
for the major share of 46.5% during the year 2018-19.
The olefinic cracker complexes in India have a combined ethylene
capacity of 7.1 million tonnes which include naphtha
crackers, natural gas crackers, dual feed crackers and off gas
crackers as can be seen in the table 4 below. The increased
capacity stands at 7.3 million tonnes as on 11 March 2020.
Table 4: Olefinic complexes in India
Cracker type
Ethylene capacity ('000
tonnes)
Naphtha crackers 2,562
Natural gas crackers 1,671
Dual feed crackers 1,313
Off gas cracker 1,500
Total 7,047
Source: Department of Chemicals & Petrochemicals
It can be seen that naphtha is the major feedstock used among
all the crackers mentioned as naphtha crackers have a
capacity of 2.6 million tonnes. This is followed by natural gas
crackers with a capacity of 1.7 million tonnes, off gas cracker
with a capacity of 1.5 million tonnes and dual feed crackers
with a capacity of 1.3 million tonnes. It is to be noted that
the
cracking yield of ethylene is the highest when feedstock natural
gas- ethane is used, followed by natural gas- propane and
then naphtha.
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Industry Research I Petrochemicals
5
Trend in major petrochemicals trade by India
It can be seen from the table 4 below that India has been a
net-importer in all the 3 segments of major petrochemicals
except for intermediates segment during FY18 when exports
exceeded imports by 0.7 million tonnes.
Table 5: Trend in exports-imports of major petrochemicals
Exports FY14 FY15 FY16 FY17 FY18 CAGR
Basic Major Petrochemicals (million tonnes) 2.6 2.3 2.7 3.0 3.3
5.9
Exports as % of production 19.5 16.8 18.4 19.1 21.0
Intermediates (million tonnes) 2.0 2.0 2.4 2.2 3.9 18.6
Exports as % of production 12.1 12.1 13.0 11.7 20.5
Other Petro-Based Chemicals (million tonnes) 0.1 0.1 0.1 0.1 0.2
19.1
Exports as % of production 4.9 6.3 6.0 6.6 9.3
Total exports of major petrochemicals (million tonnes) 4.7 4.4
5.3 5.3 7.4 12.1
Exports as % of production 14.8 13.7 14.8 14.5 20.1
Imports FY14 FY15 FY16 FY17 FY18 CAGR
Basic Major Petrochemicals (million tonnes) 4.3 5.1 5.7 5.9 6.4
10.5
Imports as % of consumption 28.5 31.2 31.8 32.1 34.1
Intermediates (million tonnes) 3.0 3.3 3.2 3.5 3.2 1.9
Imports as % of consumption 17.1 18.0 16.6 17.6 17.4
Other Petro-Based Chemicals (million tonnes) 2.2 2.4 2.7 2.7 3.3
10.2
Imports as % of consumption 54.0 56.3 57.4 56.6 63.3
Total imports of major petrochemicals (million tonnes) 9.5 10.7
11.7 12.1 12.8 7.9
Imports as % of consumption 25.9 27.8 27.7 28.0 30.4
Source: Department of Chemicals and Petrochemicals
Nevertheless, the overall major petrochemical exports grew at a
faster CAGR of 12.1% compared with imports that
increased at a CAGR of 7.9% during the period FY14 to FY18. This
was mainly on account of exports from intermediates and
other-petro based chemicals segment that rose at a higher CAGR
of 18.6% and 19.1%, respectively, compared with their
imports. The inbound shipments of intermediates increased at a
CAGR of 1.9% and that of other petro-based chemicals
grew at 10.2% CAGR. The exports of basic major petrochemicals
however rose at a slower 5.9% CAGR compared to imports
that increased at a CAGR of 10.5%.
It is to be noted that the share of exports of major
petrochemicals in production which was in the range of
13.5%-15%
during FY14 to FY17 expanded to 20.1% during FY18 and the share
of imports of major petrochemicals in consumption
increased to 30.4% in FY18 from the range of 26%-28% during FY14
to FY17. Also the above table 4 indicates that India is
highly dependent on imports of other petro-based chemicals
segment compared to the other two segments.
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Industry Research I Petrochemicals
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Demand drivers for major petrochemicals industry
Petro-chemical based products are used by us in our day to day
activities and have been playing a crucial role in
development and smooth functioning of various industries and
human life. To understand this better, the usage of various
petrochemical based products in numerous industries that diverse
from construction to computers and electronics is
explained below.
Agriculture
Pesticides, fungicides and herbicides used for protection of
plants and crops are products made from petrochemicals.
Other petrochemical based products like Polyvinyl Chloride (PVC)
and High Density Polyethylene (HDPE) are used to make
irrigation pipes, rigid sheets. Also, Low Density Polyethylene
(LDPE) film/sheet linings are used in lining of various sizes
of
ponds for water conservation. Even packaging of agricultural
products is difficult without the usage of plastics. Thus,
petrochemical based products are almost used at all stages in
agriculture.
Apparels
Apparels are made of natural, man-made and blended fibres. While
natural fibre does not involve petrochemicals, blended
and man-made fibres involve the usage of petrochemicals. The
common man-made fibres that are based out of
petrochemicals include polyester, nylon, rayon and spandex.
Polyester for example is made of key raw materials, Purified
Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG). Blended
yarn is integrating fibres of various lengths, origins,
thickness or colour to prepare yarn. It also helps in reducing
the cost by integrating expensive fibres with the not so
expensive ones. The major types of blended yarn in India include
polyester/cotton and polyester/viscose yarns. The other
major blended yarn includes cotton/viscose, acrylic/cotton,
poly/acrylic, poly/wool among others. Also, synthetic dyes in
various shades are produced using petrochemicals which are
applied to apparels.
Automotive uses and transport
The petrochemical products provide the benefit of light weight,
design flexibility and durability to automotive bodies and
components. Various petrochemical products find application in
transport and automotive uses. For example, synthetic
rubber, a petrochemical based product, is usually used for
aircraft and bicycle tyres and also automotive vehicles and
motorcycles. Styrene Butadiene Rubber (SBR), a common synthetic
rubber, is used for belts, tyres and hoses as it has great
abrasion resistance and durability. High Density Polyethylene
(HDPE) gasoline tanks in automotives help in prevention of
fires as its excellent shape resistance does not allow leak in
case of a collision.
Computers and electronics
Petrochemical based plastics have benefitted the computers and
electronics industry as well. The LCD flat screens generally
used in televisions and computer monitors involve application of
liquid crystalline plastics that uses 65% less electricity
compared to screens with cathode ray tubes. The new
refrigerators are insulated with thermal efficient plastic foam
with
interiors created of durable, easy to clean plastics.
Polystyrene plastic is used in making of refrigerator trays and
linings.
Plastics are used in making of cable sheathing and small
internal components that are not visible like micro-chips.
Polyester
plastic is used in switches and electrical insulation and also
polyethylene plastic find its application in electrical
insulation
among others.
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Industry Research I Petrochemicals
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Construction
Plastics which are petrochemical based products have changed the
construction industry as durability, flexibility, great
strength to weight ratio, cost-effectiveness, rust resistance
and low maintenance are the advantages associated with them.
They are used in construction that involves seals, windows,
doors, pipes, cables, floor coverings and insulation. PVC and
polyethylene are normally used in making of large pipes for
sewage, drainage and potable water and cabling.
Petrochemicals supports making of sealers for concrete. Sealers
better the water tightness of concrete which makes it
simple to clean and prevent concrete from damage caused by toxic
spills. For example plasticisers that are known as water-
reducing admixture products decreases the volume of water
required in concrete mix. Paints used in construction consists
synthetic binders (involves resins like acrylics,
vinyl-acrylics, polyesters, epoxy resins etc.) that supports it to
stick to
surfaces and impacts paint’s strength, longevity, gloss and
flexibility. Also, solvents adjust paint’s viscosity and other
petrochemical based additives modify surface tensions, improve
flow and finished appearance among others.
Another petroleum product, asphalt which is a by-product of
crude oil refining is used on roads, streets, footpaths,
airport
runways, playgrounds etc. Asphalt pavements are considered to be
safe, smooth, cost-effective and durable.
Food
Food additives derived from petrochemicals are primarily divided
into food flavourings, food colourings and food
preservatives. Food flavourings involve wide usage of
petrochemical butyric acid which when converted into butyric
esters
develops aroma and taste in food and beverages. Food
preservatives like benzoic acid that can be synthesised from
petroleum based intermediates like phthalic anhydride or toluene
are generally used in fruit juices and soft drinks.
Glycerine a petrochemical based food additive has a double
effect of food flavouring and preservative. Food dyes derived
from petroleum are used to add colour to the food.
Healthcare and cosmetics
Petrochemicals find their usage in healthcare products. For
example, ASA or Acetylsalicylic acid forms a vital part of many
over the counter pain medications. Also, petrochemical resins
are used in drug purification. Resins and plastics are used to
make artificial limbs and joints. They are also used in medical
facilities for storing blood and vaccines, disposable syringes
and other items of medical equipments which are used one time to
prevent a person from contagion. Special polymers are
used primarily during cardiac surgery or for auditory and visual
stimulators. Petrochemical based products also find their
application in cosmetics. Mineral waxes and synthetic waxes made
from petrochemicals are used in creams to provide
thickening and emulsifying properties and are also used in
lipsticks and lip balms, baby products, make up, nail care,
skincare, hair care, fragrance and sunscreen among others.
Packaging
Petroleum based plastics finds wide application in packaging.
PET plastic is used for plastic bottles that are used for soft
drinks, juice, water which provides the advantage of great
resistance to many solvents, clear and smooth surfaces. The
HDPE plastic that has temperature capabilities and higher
tensile strength is used for bottles of shampoo, household
cleaners, cereal box liners etc. The LDPE plastic that are used
for squeezable bottles are tough, flexible and relative
transparent.
Source: World Petroleum Council and CARE Ratings
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Industry Research I Petrochemicals
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In addition to the above mentioned industries, segments like
water storage and supply, sports and leisure, industrial
segment among others also involve wide usage of petrochemical
based products that helps in smooth operations of their
businesses.
As discussed earlier, naphtha is a major feedstock used by
crackers to make petrochemicals in India which is derived from
crude oil. Thus, the prices of petrochemicals tend to move in
line with that of crude oil. Before we begin to discuss the
prices of petrochemicals, let us have a look at the movement in
crude oil prices.
Trend in crude oil prices
The Brent crude oil prices had declined by 12.7% y-o-y to USD 61
per barrel during the year FY20. This was due to the US-
China trade war which affected the global economic growth and
subdued oil demand. It was despite production cuts
undertaken by OPEC+ group.
Chart 2: Movement in Brent crude oil prices (USD/barrel)
Source: CMIE Note: The prices for June 2020 are up to 20
th June 2020
In the month of March 2020, the crude oil prices plunged by
42.5% to USD 32 per barrel on m-o-m basis and fell to the
lowest level of USD 18 per tonne in April 2020 due to severe
spread of coronavirus which affected its demand and lack of
storage facilities for crude oil. Further, oil price war between
OPEC and Russia also affected the prices in March 2020. The
prices however improved in the following period on account of
moderate pick-up in demand backed by opening up of
economic activities and supply cut efforts by OPEC and its
allies.
In the following section, we discuss the trend in various
petrochemical prices which will help us understand the influence
of
crude oil prices on petrochemical prices to an extent.
Trend in prices of petrochemicals
A. Basic major petrochemical prices
i. Synthetic fibre/yarn prices
During FY19, the prices of PSF and PFY (126 D) rose by 17%-23%.
The trend in prices however witnessed a change in FY20 as
the prices saw a steep decline during April 2019-February
2020.
0
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Industry Research I Petrochemicals
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The prices of PSF declined by 13.5% to Rs.108per kg and that of
PFY
(126 D) fell by a sharper 19.2% to Rs.99 per kg during the
mentioned
period. Lower raw material prices (PTA and MEG) led to the drop
in
prices of PSF and PFY (126 D) varieties which are discussed
later in the
report.
Source: Office of Textile Commissioner
ii. Polymer prices
Chart 4: Movement in polymer prices (Rs. per kg)
Source: CMIE Note: The prices for June 2020 are up to 22nd June
2020
The prices of polypropylene hovered around Rs.94-Rs.101 per kg
and the prices of LLDPE and HDPE were in the range of
Rs.83-Rs.89 per kg and Rs.100-Rs.114 per kg, respectively,
during the period April-November 2018. In the following month
December 2018, the prices of polypropylene, LLDPE and HDPE
declined by 7%-12%, respectively, on m-o-m basis. After a
year in December 2019, the prices of polypropylene fell by 7.5%
y-o-y to Rs.80 per kg and the prices of LLDPE decreased by
17.9% to Rs.66 per kg and that of HDPE declined by 22.7% to
Rs.71 per kg. The prices of LLDPE and HDPE were the lowest
during the month (December 2019) for the period mentioned in the
above chart and for polypropylene the price was
lowest at Rs.75 in June 2020 so far. The PVC prices also had
remained range bound during FY19 hovering around Rs.76-
Rs.81 per kg. In April 2019, the prices fell to their lowest
level of Rs.72 per kg for the mentioned timeframe and post this
price of PVC remained in the scale of Rs.73-Rs.78 per kg.
In the first 6 months of 2020 up to 22 June 2020, the prices of
polypropylene, LLDPE and HDPE were range bound and
declined by 13%-14% y-o-y to average at Rs.79 per kg, Rs.69 per
kg and Rs.73 per kg, respectively. Demand-supply
disruption caused on account of lockdown due to Covid-19 and
weak consumption from user industries like building &
construction, automotives among others impacted the prices. Also
lower feedstock price (which is discussed in the report
60
70
80
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120
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Polypropylene (Injection moulding) LLDPE (Film) HDPE (Blow
moulding) PVC (Suspension)
124
108 123
99
50
100
150
FY19 (Apr-Feb) FY20 (Apr-Feb)
PSF PFY (126 D)
Chart 3: PSF and PFY prices (Rs. per kg)
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Industry Research I Petrochemicals
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going ahead) supported the fall in prices of these varieties.
Ethylene is used as a feedstock for making both LLDPE and
HDPE while propylene goes in the making of polypropylene. It is
to be noted that the prices of LLDPE and HDPE have almost
moved in tandem. The prices of PVC remained in the range of
Rs.73-Rs.76 per kg during January-22 June 2020 and
averaged at Rs.75 per kg in this period, marginal decline of 1%
y-o-y. The feedstock required for making PVC is VCM; the
trend in prices of VCM is discussed later in the report.
B. Intermediate prices
i. Fibre intermediate prices The primary or key raw materials
used to make polyester are Purified Terephthalic Acid (PTA) and
Mono Ethylene Glycol
(MEG). During FY20, the domestic prices of PTA declined by 15.4%
to Rs.60 per kg and that of MEG fell by a steeper 29% to
Rs.46 per kg.
Chart 5: Movement in PTA and MEG prices (Rs. /kg)
Source: CMIE Note: The prices for June 2020 are up to 16th June
2020
The US-China trade war impacted the prices of these raw
materials during the year. In addition to this, excess capacities
of
PTA in China kept the prices of PTA under check. Also, higher
port inventory of MEG in China affected its prices. India is
net
importer of PTA and MEG and thus the demand-supply situation in
the international market have a direct influence on the
domestic prices. Moreover, lower crude oil prices during the
year exerted pressure on prices of PAT and MEG. The crude oil
prices had declined by 12.7% to USD 61 per barrel during FY20.
PTA and MEG are derivatives of crude oil and thus their
prices are influenced by the movement in crude oil prices.
Moreover, Covid-19 outbreak impacted the polyester demand in
China (the largest polyester market) which, in turn, has kept
the prices of raw materials PTA and MEG under pressure so far
in the year 2020.
Also, demand for apparels continues to remain tepid in the
Indian market post lockdown that came into effect from 25
March 2020 due to Covid-19 thus affecting the prices of fibre
intermediates. Resultantly, the prices of PTA declined by
22.3% to Rs.44 per kg and that of MEG fell by 10.4% to Rs.38 per
kg in April 2020 on m-o-m basis. The prices of PTA and
MEG were the lowest at Rs.43 per kg in May 2020 and at Rs.38 per
kg in April 2020, respectively, for the duration
considered in the above chart.
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PTA MEG
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Industry Research I Petrochemicals
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ii. Building block prices (Olefins and Aromatics)
a. Olefins
Chart 6: Movement in propylene and ethylene prices in USD/tonne
(CFR)
Source: CMIE Note: The prices for June 2020 are up to 20
th June 2020
During FY20, the international prices of propylene declined by
15% to USD 855 per tonne and that of ethylene fell by a
sharper 29% to USD 769 per tonne. Well supplied markets amid
lower demand were the prime reasons that led to the price
fall. Higher capacity additions for ethylene production also
weighed on its prices. It is to be noted that the prices of
ethylene were higher than that of propylene for most of the
months during FY19. The trend however reversed during FY20
as the prices of propylene were higher than that of ethylene for
most of the months in FY20.
Prices of propylene (USD 747 per tonne) and ethylene (USD 609
per tonne) averaged at their lowest levels in March 2020
during the years FY19 and FY20. Post this, the prices of
propylene declined by 19.5% to USD 602 per tonne and that of
ethylene fell by a steeper 38.1% to USD 377 per tonne in April
2020. The greater fall in ethylene prices was mainly due to its
higher supply while the supplies of propylene were better
balanced and also the commodity sees demand coming in from
segments like packaging, hygiene wear, sanitary, etc.
Nevertheless, prices of both the varieties improved by 16%-28%
during May 2020 on a sequential basis while on a yearly basis
the prices of propylene declined by 18.5% to USD 696 per
tonne and that of ethylene dropped by a sharper 46.3% to USD 481
per tonne during the month. In the following month
June 2020 (up to 20 June), prices of propylene improved by 5.3%
(averaged at USD 733 per tonne) and that of ethylene
spiked by 50.2% (averaged at USD 723 per tonne) m-o-m primarily
backed by higher crude oil prices. The prices of these
varieties however were lower by 7%-18% y-o-y. Going ahead, it
remains to be seen if the spike in ethylene prices will
sustain.
b. Aromatics
The prices of benzene declined by 21.3% to Rs.62 per kg in FY20
due to higher supplies in the international market and fall
in crude oil prices by 12.7% to USD 61 per barrel during the
year. Benzene is a natural constituent of crude oil. Prices of
benzene decreased sequentially for third month in a row in May
2020 witnessing a sharp fall of 28% to Rs.44 per kg on m-o-
m basis and continued to decline in June 2020 as it averaged at
Rs.40 per kg (up to 16th June 2020). This was the lowest
benzene price recorded since April 2018 as shown in the above
chart.
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Propylene (South Korea) Ethylene (South East Asia)
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Industry Research I Petrochemicals
12
Chart 7: Movement in benzene prices (Rs. per kg)
Source: CMIE Note: The prices for June 2020 are up to 16
th June 2020
Sluggish demand from user industries like automotive and
construction due to lockdowns and low crude oil prices led to
the slowdown in benzene prices. It is to be noted that from the
average of USD 61 per barrel during FY20, crude oil prices
have plunged by 52.8% to USD 30 per barrel in May 2020.
iii. Other petro-based chemical prices
Chart 8: Movement in VCM prices in USD/tonne (CFR)
Source: CMIE Note: The prices for June 2020 are up to 20
th June 2020
The international VCM prices remained almost flat in FY20 with a
marginal fall of 0.3% to average at USD 734 per tonne
during the year. In April 2020, the price of VCM however
plummeted by 34.7% to USD 475 on m-o-m basis and continued
to decline by 5.3% to USD 450 per tonne in May 2020. This was
primarily on account of sharp slowdown in construction
activities due to lockdown restrictions in many countries which
affected the demand for PVC that is used to make pipes,
window frames, vinyl sliding among others. VCM is primarily used
to make PVC. Also ethylene which is used as feedstock to
make VCM has seen its prices decline by 38.1% in April 2020 on
m-o-m basis. Ethylene and chlorine are the initial
feedstocks that go in the making of VCM.
The trend in VCM prices however reversed in June 2020 (up to 20
June) as the prices averaged higher by 30.1% to USD 586
per tonne influenced by the growth in prices of ethylene.
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400450500550600650700750800850
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Industry Research I Petrochemicals
13
It can be seen that prices of almost all the petrochemical
products discussed were under pressure and fell in the broad
range of 0.3%-29% y-o-y in FY20. Weak demand due to slowdown in
global manufacturing amid US-China trade war, well-
supplied markets and lower crude oil prices were the prime
factors that impacted the movement in petrochemical prices
during the year. The moderation in prices is likely to continue
in FY21 as well due to Covid-19 which is explained in the
following section.
Petrochemicals industry amid Covid-19
India witnessed nation-wide lockdown from 25 March 2020 onwards
due to severe spread of Covid-19. This affected the
demand-supply situation of various downstream segments of
petrochemicals industry as only the essential sectors were
allowed to operate while the not so essential ones were asked to
remain shut initially. Even while restrictions were eased
gradually, demand-supply disruptions continued. Resultantly, the
demand for petrochemical products was impacted and
the effect of this was seen in lower petrochemical prices during
the 2 months of lockdown April-May 2020 which is shown
in the table below. It can be seen that prices of all the
petrochemical products mentioned in the table 6 declined in
double-
digits during April-mid June 2020 except for PVC prices which
saw a marginal growth of 1.6%.
Table 6: Y-o-Y% change in petrochemical prices during April-mid
June 2020
Domestic prices International prices
Polymers Olefins
i. Polypropylene -20.4% i. Propylene -22.3%
ii. LLDPE -13.1% ii. Ethylene -40.6%
iii. HDPE -13.3%
iv. PVC 1.6%
Fibre intermediates Other petro-based chemicals
i. PTA -36.4% i. VCM -30.1%
ii. MEG -19.2%
Aromatics
i. Benzene -13.3% Source: CMIE
It is to be noted that the y-o-y fall in ethylene prices is the
steepest at 40.6% during April-mid June 2020. Ethylene prices
have improved sequentially by 27.5% in May 2020 and spiked by
another 44.8% in June 2020 (up to 15 June) primarily
backed by higher crude oil prices. However, it remains to be
seen if the growth in ethylene prices will continue to sustain
amid Covid-19 disruptions.
Considering the scenario of subdued demand, shortage of storage
facilities for finished products and logistics issues many
petrochemical units in India reduced their operation rates in
the earlier days of lockdown. Also, disruptions at ports during
lockdown impacted the imports of various petro-based chemicals
which, in turn, affected the operations at these units. The
operation rates nevertheless are improving gradually as the
restrictions continue to ease.
Also, consumption from downstream industries is expected to
improve though at a gradual pace as demand from these
segments will take time to pick up. While demand from packaging,
hygiene wear, sanitary is likely to improve or remain
steady, demand from construction and automotives are expected to
take a hit. Also, purchase of goods like apparels,
furniture & fixtures, personal products etc. which are not
so essential may be postponed as consumers will avoid visiting
shopping areas for some time now. In addition to this, reduced
purchasing power of some consumers on account of
lockdown will also delay purchase of not so essential goods and
services. Thus subdued consumption from some segments,
in turn, will constrain the demand of petrochemical products by
downstream industries. Moreover, labour shortage at
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Industry Research I Petrochemicals
14
some of the downstream industries will also affect production at
their end. Resultantly, the petrochemical prices are
expected to remain under check during FY21. Also, the scenario
in international market is not expected to be different
which will further impact the prices. The domestic petrochemical
product prices do take a cue from the global prices as
petrochemical products used by India are imported as well.
As per the release by the World Bank on 8 June 2020, the world
economy is expected to shrink by 5.2% in 2020 due to
Covid-19. This signals slowdown in various industries across the
globe. In addition to this, well supplied markets amid weak
demand from downstream segments are also expected to weigh on
prices. Considering the demand scenario, some
companies may resort to production cuts in the international
market.
Concluding remarks
The prices of almost all the petrochemical products discussed in
the report were under pressure and had declined
in the broad range of 0.3%-29% y-o-y in FY20. Weak demand due to
slowdown in global manufacturing amid US-
China trade war, well-supplied markets and lower crude oil
prices were the prime factors that impacted the
movement in petrochemical prices during the year.
The moderation in prices is likely to continue in FY21 as well
given the severe situation of Covid-19. Subdued
demand from downstream industries amid labour issues at their
end will affect consumption of petrochemicals.
Also, muted demand scenario in the international market amid
well supplied markets is expected to exert pressure
on petrochemical prices.
The y-o-y fall in ethylene prices is the steepest at 40.6%
during April-mid June 2020 (USD 518 per tonne) of all the
petrochemical products mentioned in the report. Ethylene prices
have improved sequentially by 27.5% in May
2020 to USD 481 per tonne and spiked by another 50.2% in June
2020 (up to 20 June) to USD 723 per tonne
primarily backed by higher crude oil prices. However, it remains
to be seen if the growth in prices will continue to
sustain amid Covid-19 disruptions.
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