SPECIAL REPORT: PETROCHEMICALS
India to outweigh Chinese polyolefin demand growth
over the next ten years
September 2014
by Hetain Mistry, Senior Analyst, Petrochemicals
www.platts.com/petrochemicals
India to outweigh Chinese polyolefin demand growth over the next ten years
India to outweigh Chinese polyolefin
demand growth over the next
ten years
Global demand is expected to average 4.8% for PE and 4.5% for PP,
making India’s demand growth higher than the global market.
However, India’s demand is working from a smaller base and, in
absolute tonnage terms, is relatively small compared to China and in
a global context.
Globally, the regional growth centres for polyethylene (PE) and
polypropylene (PP) are Asia, Central and South America, Central and
Eastern Europe, South America and the Middle East. Asia and Africa,
is forecast to show the strongest polyethylene demand growth over
the next ten years, with 6% CAGR and 7% CAGR respectively,
according to Platts Petrochemical Analytics. Out of Asia, Indian
demand growth is projected to be stronger than China’s, with the
subcontinent’s PE demand expected to be 8% CAGR, compared to
China’s 6.1 % CAGR. In terms of polypropylene, Asia and Africa are
both expected to exhibit the strongest growth in consumption over the
forecast period with growth rates of 6% and 5% respectively. Within
Asia, Indian demand growth is expected to outweigh China’s with the
former to register an annual growth of 7.7% over the next ten years,
compared to China’s 6.2%.
The nation’s share of global demand is set to increase from 5% to 7%
between 2013 to 2025, which is a rise of close to 50%, putting it above
the Middle East, Central and South America and Africa. During this
period, India will reach half the size of the mature North American
market. This shows the progress that India is expected to make, however
the country will still lag significantly behind China in the years to come.
Polypropylene demand per capita
Projected % CAGR (2014-2025)
8
3
Asia
India
China
6
3
1 Africa
3
4
China and India’s gross domestic product (GDP) growth are forecast to
be similar over the next ten years. However, India’s demand growth
for PE and PP is expected to be much higher, as Platts Petrochemical
Analytics forecasts higher multipliers of growth versus GDP for India,
compared to the Far East Asian giant.
19
32
Eastern Europe
Central and
South America
4
Middle East
Western Europe
7
2
North
America
Size of bubble indicates 2014
market size in million mt
0
0
5
10
Japan
3
8
15
20
25
Polypropylene consumption (2014) kg/capita
Source: Platts
Polyethylene demand per capita
Projected % CAGR (2014-2025)
8
7
Population growth to play a part
India’s stronger demand outlook will be boosted by its population
growing at a faster rate than China’s especially if the latter continues
to adopt the one child policy.
China
1500
(millions)
China
Africa
5
5
5
Asia 5 Eastern
Europe
Central and
South America
4
3
2
Size of bubble indicates 2014
market size in million mt
1
0
Source: Platts
5
10
India
22
39
6
0
For India we see growth of PE and PP to be 1.2 times GDP, whereas
for China we see future growth below economic growth at 0.75 times
GDP, underlying our belief that the India’s demand for plastics has a
lot more potential.
China and India population forecast
9
4 India
3
Due to the huge potential of India’s petrochemical industry, we
envisage India surpassing China in terms of demand growth.
Furthermore, in terms of economic development, the South Asian
giant remains behind China. India’s plastics penetration into
traditional material based goods is yet to gather momentum, with per
capita use relatively low compared to demand size. While this is true
to China, it is not as low, with 15kg per person for PE and PP,
compared to India’s 5kg per person for PE and PP. Incidentally, India’s
per capita use is on a par with Africa. This illustrates there is a lot of
progress to be made in India, as per capita use is still growing and
has a long way to go.
15
Middle East
1000
North America
Western Europe
16
12
500
Japan
3
20
25
30
35
40
Polyethylene consumption (2014) kg/capita
0
1990
1997
2004
Source: World Bank
platts Special Report: PETROCHEMICALs
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2011
2018
2025
India to outweigh Chinese polyolefin demand growth over the next ten years
According to World Bank population forecasts, India’s rate of
population growth is expected to be 1% year on year over the next
ten years, compared to China which is predicted to flat line. As a
result, by 2024, India’s population is forecast to catch up with China’s.
India’s ethylene/polymers industry remains small
India’s petrochemical industry is much smaller than China’s with 9
operational ethylene crackers, whereas China has close to 58
crackers. In terms of future projects, China outweighs India on that
front, even if we exclude the coal based olefins revolution that is
taking place in the Far East.
Currently, we see up to 18 ethylene crackers projects mooted in
China, compared to three in India. Although, major petrochemical
producers such as Reliance are undertaking construction of large
world scale crackers using feedstock from their refineries, evidently
more can be done in the future.
to build six very large ethane carries (VLEC’s) in order the ship the
ethane to India and these long haul movements are expected to feed
Reliance’s Jamnagar refining and petrochemical complex in Gujarat
on the west coast of India. This development is an encouraging sign
that Indian petrochemical producers are looking to find a competitive
feedstock in order to grow production, however having a viable
competitive domestic feedstock.
India’s PE and PP balances
This investment across the olefin and polyolefin value chain is crucial when
looking at the supply and demand balances of PE and PP. India is
forecasted to remain in deficit over the next ten years and grow to a deficit
of 4.3 million mt by 2025, quadrupling from the 2013 position. This is
expected to materialise despite some projects coming on in the near term.
Indian PE supply/demand balance
10
No feedstock advantage
Unlike the Middle East and the US, India does not have access to cheap
feedstock whether it is gas or refinery stream based. The majority of
existing facilities rely on naphtha coming from refineries as a feedstock
for olefins production. China is similar in terms of their feed
composition, having to rely on refinery supplies, however unlike India,
China have invested heavily in petrochemicals and continue to do so.
Taking a look at India’s net trade position of the petrochemical
feedstock, it is currently a net exporter according to the latest set of
annual data for 2013. Net exports have remained above 6 million mt/
yr since 2010, illustrating that supplies remain ample, especially with
recent refining additions.
With this surplus, instead of major producers selling at a premium
on the international market, refiners (especially the companies
integrated with petrochemical facilities) could take a wider strategic
outlook by discounting naphtha prices and divert their light end
feedstock production to the domestic petrochemical industry in
order to boost supply.
Recent moves to capture US ethane
The key Indian petrochemical producer Reliance has made moves to
capture the cheap US ethane for their crackers. It has been an
objective of the producer for a while to bring the feedstock in and
recent moves by European producers has spurred the major into
action. South Korea’s Samsung Heavy Industries has been contracted
(million mt)
8
6
4
2
0
-2
-4
-6
PE production
2013
PE demand
2016
surplus/deficit
2019
2022
2025
Source: Platts Petrochemical Analytics
Indian PP supply/demand balance
8
(million mt)
6
4
2
0
-2
-4
PP production
2013
PP demand
2016
Surplus/deficit
2019
2022
2025
Source: Platts Petrochemical Analytics
Indian cracker projects (mt)
Project
Location FEED bidders/
FEED EPC bidders/ Estimated EPC
awarded
stage year awarded
stage year
Reliance Jamnagar Refinery
Jamnagar Fluor
Expansion Ethylene Package
BPCL Kochi Petrochemical
Kochi
Complex with Ethylene cracker
ONGC Naheij OPAL Ethylene Dahej
Linde
Feedstock Capacity Estimated year
use estimate of completion
2012 Technip
2013 Refinery Off Gases
950,000
Q1 2015
2014
2015
Naphtha
220,000
Q2 2018
2012 Samsung Engineering
2014
Naphtha 1,050,000
Q2 2016
Source: Platts Petrochemical Analytics
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India to outweigh Chinese polyolefin demand growth over the next ten years
For polypropylene the story is different in the context of the short to
medium term, as PP surpluses will remain up to 2020, despite
narrowing. The net trade position is expected to grow from 0.3 million
Indian PE/PP Projects (mt)
Producer
Location
Product Capacity Start up
BCPL
BCPL
Reliance Industries
Reliance Industries
Reliance Industries
GAIL
GAIL
Oil and Natural Gas Corp
Oil and Natural Gas Corp
Mangalore Refinery MRPL
ONGC Indian Oil Corp.
Essar Gujarat PC
Assam
Assam
Jamnagar
Jamnagar
Jamnagar
Pata
Pata
Dahej
Dahej
Mangalore Dahej
Paradip
Vadinar
LLDPE110,000 2014
HDPE 110,0002014
LDPE
400,000
2015
LLDPE
250,000
2015
HDPE
250,000
2015
LLDPE200,000 2015
HDPE 200,0002015
LLDPE
540,000
2018
HDPE
520,000
2018
PP
440,000
2014
PP
340,000
2014
PP
700,000
2016
PP
900,000
2020
mt in 2013 to 1.1 million mt by 2016 as projects come on stream and
then fall back to 400,000 mt by 2018. The market is expected to
remain balanced in 2019, and rise to surplus in 2020 when Essar’s
project will boost supplies. However by 2022 a deficit 400,000 mt is
expected, growing to 2.1 million mt by 2025, as demand growth
continues without project expansions.
The other question to ponder is could India explore other feedstock
options not linked to oil and natural gas, following China’s path?
Currently, the Far East Asian giant is planning to exploit its coal
reserves over the next ten years in order to boost olefin production
and increase polymer output. As with China, India has an abundance
of coal, ranked fourth in terms of coal production globally behind
the US, Russia and China, with current estimated reserves to be
606.8 million mt. Despite having ample coal reserves the appetite
for using this raw material within the chemicals arena is practically
non-existent.
One of the key barriers to India not being able to exploit coal for
olefins production is down to the type of coal available. Sub-
Source: Platts Petrochemical Analytics
Chinese cracker projects (mt)
Project
Location
FEED bidders/
FEED EPC bidders/ Estimated EPC
Feedstock Capacity Estimated year
awarded
stage year awarded
stage year use estimate of completion
Fujian ethylene project Ligure
Zhanzhou
HQCEC
2014 HQCEC
2015
Naphtha
Sinochem Quanzhou
Quanzhou UOP/Honeywell
2011 SEG
2013
Naphtha
Petrochemical Co., Ltd
China oil refinery project
Jieyang
SEG
2012 SEG, HQCEC
2017
Naphtha
CNOOC Huizhou ethylene project
Huizhou
Technip
2013 Technip
2014
Naphtha
Sinopec Kuwait Petroleum
Zhanjiang
2015
2016
Naphtha
Zhanjiang Branch of joint
integration projects
CNOOC Hainan ethylene project
Yangpu
CB&I
2014 CB&I
2015
Propane/
Butane
Sinopec Hainan Refining & Hainan SEG
2015 SEG
2016
Naphtha
Chemical (HRCC)
Sinopec Lianyungang
2015
2016
Naphtha
Dalian Shide Group Ethylene Phase 1 Dalian
2015
2016
Naphtha
Sinopec Qingdao Refining & Quiangdao
2014
2015
Ethane
Chemical Co., Ltd
Shanghai Gaoqiao ethylene
Shanghai
SEG
2013 SEG
2015
Naphtha
relocation project to Caojing
PetroChina Sichuan
Chengdu
Technip
2010 Chengda engineering 2011
Naphtha
Petrochemical Co., Ltd & Technip
PetroChina-Rosneft Orient Tianjin
Nangan
SEG, HQCEC
2015 SEG, HQCEC
2017
Naphtha
Refinery & Petrochemicals
PetroChina oil refinery project
Kunming
2010
2016
Naphtha
in Yunnan
PetroChina Lanzhou Ethylene
Lanzhou
Wison
2015 Wison
2016
Naphtha
Sinopec Yangzi ethylene III
Nanjing
SEG
2012 SEG
2015
Naphtha
transformation
Formosa Plastics Ningbo
Ningbo
2014
2015
Naphtha
Ethylene Cracker
CNPC Taizhou Refinery & Taizhou
2015
2016
Naphtha/
Petrochemical Complex condensate
Source: Platts Petrochemical Analytics
platts Special Report: PETROCHEMICALs
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1,200,000
1,000,000
2018
Q2 2017
n/a
1,000,000
1,000,000
2020
2016
2020
1,500,000
2018
1,000,000
2019
2,000,000
1,300,000
1,000,000
2018
2019
2020
1,000,000
2017
800,000
2014
1,200,000
2020
1,000,000
2019
1,000,000
800,000
2019
2017
1,200,000
Q2 2018
1,200,000
Q4 2020
India to outweigh Chinese polyolefin demand growth over the next ten years
bituminous coal is the preferred coal for chemicals production as it is
a lighter, cleaner and easier to extract than the alternative anthracite
coal. China have idled most their older methanol and PVC plants
based on anthracite coal due to the lack of competitiveness mainly
down to high capital costs and inefficiencies of these plants. A key
factor driving the new proposed coal based chemical projects are as a
result of having access to the cleaner sub-bituminous coal using more
efficient technology. The coal reserves India mostly has is anthracite
coal, with limited levels of sub-bituminous coal available, compared
to China, where nearly half the available reserves are based subbituminous coal reserves.
Furthermore, the energy derived from coal in India is twice that of
energy derived from oil. Worldwide, energy derived from coal is about
30% less than energy derived from oil. Despite around 51% of coal in
China currently used mainly for power generation, growth in CTO/
MTO capacity is potentially huge.
Despite India having an abundance of coal reserves, actual production
of coal in India is ranked lower, which is also another limiting factor
for the raw materials use in other industries apart from energy
generation. According to BP’s statistical review, India’s overall
production share of coal globally is 5.9%, compared to China’s 47.4%,
and fifth overall. Also, India’s coal production only accounts for 16%
of Chinese production and this has been the lowest ratio between the
two countries in the last few years.
Location is an issue
Another key factor in determining why China has capitalised coal
more swiftly than India, is the location of the coal reserves. In
China, the majority of the coal is inland in rural areas, which are
less densely populated.
Whereas in India, the majority of the coal reserves are situated in
densely populated states of West Bengal, Bihar, Orissa, Jharkhand,
Chhattisgarh, Telangana and Madhya Pradesh. As a result, stronger
environmental pressures in India could be a reason why projects are
not moving forward. The CTO process emits more carbon dioxide (co2)
and uses more water than the traditional methods of olefin
production. The amount of water needed to produce one ton of olefins
using a CTO process is estimated between 15 metric tons (using new
technology) and 40 metric tons (using older technology). This
compares to just 0.8 to 2.7 metric tons of water needed to produce
one ton of olefins using refinery based feedstocks in a cracker. With
regards to co2, around 7.2 mt of carbon dioxide is emitted for every
ton of olefin produced, compared to 1.5-3 mt of co2 emissions for
naphtha cracking. These higher numbers, combined with India’s
efforts to provide clean water and better air for its ever growing
population, especially in the poorer states of Orissa and Bihar,
constitute a clear impediment to CTO production.
Political structures play apart
Different political structures between India and China could be a
possible factor why India has not considered coal to chemicals. All
the coal mines are state owned in India and are geared towards
power and energy generation. In China, however it is a mixed
Indian ethylene capacity by feedstock
Propane (16%)
Ethane (17%)
Naphtha (67%)
Source: Platts Petrochemical Analytics
Indian naphtha net trade
8
(million mt)
6
4
2
0
2010
2011
2012
2013
Source: JODI
Global PE and PP demand
2013
World (%)
2025
World (%)
China
27China
32
Asia (excl. China & India)
17 Asia (excl. China & India)
17
North America
16 Europe
16
Europe
19 North America
12
Middle East
7 India7
Central & South America
6 Middle East
6
India5 Central & South America
6
Africa
3Africa
4
Source: Platts Petrochemical Analytics
China vs India growth
10
(%)
India GDP
China GDP
9
8
China PO demand growth
India PO demand growth
7
6
5
4
3
2013
2016
2019
2022
2025
Source: IMF/Platts Petrochemical Analytics
ownership structure between the private and public sector, and
the government has encouraged further coal based investments
through a more stream lined structure, with central governments
having a stronger say in provincial matters. This is in contrast to
platts Special Report: PETROCHEMICALs
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India to outweigh Chinese polyolefin demand growth over the next ten years
India where structures are more inefficient due to more convoluted
political structures.
Finally, economic development and stronger disposable income in
China has led to rapid growth for various industries on the demand
and supply side. India has a long way to go to catch up to China and
until they do that, they are unlikely to look at coal and expand their
petrochemical industry as a whole.
next few years, which could mute demand from key consumer
sectors. If this materialises, we could one day see the elephant
surpass the dragon.
Top global coal reserves
250000
(million mt)
Anthracite
Sub-bituminous
200000
However, for all of China’s strengths there are weaknesses which
could let India catch up. In the future China is planning to add more
environmental legislation which could curb growth for various
industries, especially heavier process chemical production. Also,
gone are days of double digit economic growth in China,
indications are that super cycles may not repeat themselves in the
150000
100000
50000
0
India’s existing ethylene crackers (mt)
Producer Location
FeedstockCapacity
GAIL
Pata- Uttar Pradesh
GAIL
Pata
Haldia Petro- Haldia- West Bengal
chemicals Ltd.
IOC
Haryana- New Delhi
IPCL
Baroda- Gujarat
IPCL
Gandhar- Gujarat
IPCL
Nagothane- Maharashtra
RelianceVadodara
Industries
Reliance
Hazira- Gujarat
Industries
OPAL Dahej
BCPL Assam
Ethane/Propane 500,000
Naphtha/Ethane450,000
Naphtha
670,000
Naphtha
Naphtha
Ethane/Propane
Ethane/Propane
Naphtha
Naphtha
USA
Russia
China
India
Source: BP
800,000
130,000
300,000
550,000
170,000
1,000,000
Naphtha1,050,000
Naphtha220,000
Source: Platts Petrochemical Analytics
Coal production in China and India
4500
(million mt)
China
(%)
India
20
% of Chinese production
3600
19
2700
18
1800
17
900
16
0
2005
2007
2009
2011
2013
15
Source: BP
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