New Delhi: India’s petrochemical demand is projected to grow at around 8 per cent in 2024, surpassing the country’s economic growth rate of 6 per cent-7.1 per cent annually from 2024-2026, according to a report by S&P Global Commodity Insights. Despite this robust demand, domestic producers face margin pressures due to suppressed prices of key bulk chemicals, driven by ample supplies and new capacities.
The report, titled “Unraveling India’s Petrochemical Puzzle,” highlights that India’s economic activity has seen a significant rebound post-COVID-19 lockdowns. The S&P Global India Services PMI Business Activity Index reached 58.4 in October, indicating expansionary conditions for output and new orders.
Polymer producers are expected to face market oversupply challenges despite strong demand. India’s imports of polyolefins, the largest segment of its petrochemical imports, surged in 2023, particularly from China. Polypropylene imports increased by 39 per cent year on year to 1.02 million mt between January and September, while polyethylene imports rose by 108 per cent to 2.34 million mt, driven by demand from the packaging, infrastructure, durables, and automobile sectors.
The China Plus One strategy has prompted some Indian chemical producers to plan production increases in 2024, focusing on domestic demand and export opportunities. However, cheaper Chinese imports of several petrochemicals, including phenol, acetic acid, nitric acid, and aniline, remain a concern for Indian producers.
The implementation of mandatory Bureau of Indian Standards (BIS) certification in 2024 for imports of polyethylene (PE), polypropylene (PP), and other chemicals could help regulate imports and promote local production. BIS norms were already implemented for monoethylene glycol (MEG), purified terephthalic acid (PTA), and polyester fibers in 2023.
“Greater demand is unlikely to bring much relief to domestic producers struggling with pressure on margins,” the report stated, citing the imbalance in the market due to new production capacities and changing trade flows.
