Cautious
Optimism : Says Future Demand
Fortunes
of Indian petrochemicals industry are closely linked with global patterns.
Cyclicality forms the main characteristic of this business. Capacity
additions and expansions are taking place particularly rapidly in
the feedstock- rich Middle East. The extent of China’s imports
have a large role to play in future world trade in petrochemicals.
It is expected that global demand will rise and move faster than supply.
If this happens, operating rates will improve, so will margins in
basic petrochemicals and polymers. This may mean better profitability
for the Indian industry, which has been under stress. For the moment,
owing to over-capacity, Indian companies have put all new and expansion
plans on hold. However, demand – especially for polymers–
has been strong and continuously growing and players expect that this
growth will take care of the existing surplus and offer enough scope
for major capacity expansion. But this will be restricted to those
players capable of putting up world-class facilities. The integrated
plants will be better equipped for survival with the weaker players
either teaming up with the stronger companies or simply exiting the
business.
Petrochemicals
are chemicals obtained primarily from petroleum products (frequently
naphtha) or natural gas. The cracking (heating to break larger molecules
into smaller ones) of naphtha/natural gas yields six major petrochemicals
which are the building blocks for all downstream products (see chart
‘Breaking Down to Build Up’). These petrochemicals are called
olefins (ethylene, propylene and butadiene) and aromatics (benzene,
toluene and xylene). While natural gas based crackers produce mainly
ethylene, naphtha based crackers produce more of the other petrochemicals.
Aromatics are made in reformers (process units wherein the molecular
structure of the raw material undergoes transition) which use aromatics-
rich naphtha as feedstock. Basic petrochemicals can be further processed
to yield polymers, fibres, surfactants and a variety of chemicals
for various applications. Commodity polymers (used in various plastic
products) constitute the bulk of demand for basic petrochemicals.
In India, the share of commodity polymers in overall product mix ranges
from 60 per cent to 90 per cent for various crackers (RIL 60%, Gas
Authority of India Limited (GAIL) 90%) with gas based units having
a higher share. Ethylene is used mainly to produce polyethylene (PE,
which has three forms– high density polyethylene or HDPE; linear
low density polyethylene or LLDPE and low density polyethylene or
LDPE), ethylene dichloride (used to produce polyvinyl chloride or
PVC), ethyl-benzene (used for making styrene monomer and eventually
polystyrene or PS, a commodity polymer) and ethylene oxide (used mainly
in the production of ethylene glycol, a fibre intermediate). Propylene
is largely used to make polypropylene (PP), propylene oxide, acrylic
derivatives, cumene (used to produce phenol) and oxo-alcohols. While
in the end-use of light olefins (ethylene and propylene), commodity
plastics account for a significant share, aromatics (benzene, toluene
and xylene) are chiefly used for producing fibre intermediates (from
paraxylene) and downstream petrochemicals (mainly from benzene). Plastic
products (made from commodity polymers) are widely used in packaging,
construction, appliances, automobiles and other sectors (see table‘End-User
Markets for Polymers: Key Characteristics’).
Global
Scenario
The petrochemical industry is the largest segment –
around 40 per cent – of approximately $2 trillian chemical industry.
Within petrochemicals, commodity plastics are the most important component
with a share of over 50 per cent by volume. North America, Western
Europe and Japan are the largest users of all commodity plastics at
more than 60 per cent of overall consumption. The share is even higher
in polyethylene. However, these markets are saturated with high per
capita consumption and have the lowest growth rates. There has been
a significant increase in capacities in other...
....contd.
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