Boston, MA -- (ReleaseWire) -- 04/15/2014 -- The structure of the Indian market is likely to be affected by the combination of an economic downturn and rupee depreciation. BMI's latest India Petrochemicals Report notes slower than expected growth in construction and the automotive sectors that will impact negatively on overall polymers consumption rates, while industrial growth and economic activity overall will be lower than averages seen in recent years. Rupee depreciation combined with slower consumption growth and a surge in capacity expansion will lead to lower import growth, ending a period when India was seen as a market able to absorb growth in Middle Eastern production.
Starting with the sell-off in the rupee, economic headwinds have accumulated quickly in India, forcing us to downgrade our real GDP growth expectations. The rupee's performance, and the harsh response enacted by the central bank, suggests to us that private domestic demand will be much weaker than previously anticipated. As such, we now see full-year real GDP growth remaining flat at 5.0% in FY2013/14 (April- March). On the upside, industrial growth will strengthen in line with exports, which should support a recovery in petrochemicals over the medium term, although it will remain below par compared to previous years. Overall, the operating environment in 2014 should be better than the previous year.
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A series of major projects are due to come on stream in 2014 that will significantly boost Indian petrochemicals output. Many of these were supposed to come on stream by end-2013 and have been delayed.
- In the synthetic rubber segment, India is set to achieve self-sufficiency in styrene butadiene rubber (SBR) with Indian Oil Company (IOC) opening a 120,000tpa SBR facility fed by a 138,000tpa butadiene extraction unit at its Panipat complex.
- In polymers, the ONGC Petro-Additions Ltd (OPaL) project and the delayed Brahmaputra Cracker and Polymers (BCPL) complex will together bring onstream 1.3mn ethylene, 420,000tpa propylene, 1.28mn tpa polyethylene (PE) and 840,000tpa polypropylene (PP).
- In the polyesters production chain, ONGC and IOC will lead expansion, bringing onstream a total of 1.5mn tpa of paraxylene (PX) and 370,000tpa purified terephthalate acid (PTA).
- Fertilisers are also set to receive a boost with ONGC due to bring on stream an 864,000tpa urea plant and a 1.3mn tpa urea plant with joint venture partners.
- A separate petrochemicals complex at Paradip - likely to come on stream by 2015 - will add capacities of 1.2mn tpa PX, 700,000tpa PP, 600,000tpa of styrene and possibly a mixed feed cracker, by 2017. Other PTA and PX plants at Koyali are under consideration, to include capacities of 370,000tpa PX and 600,000tpa PTA.
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