Roland Berger India Chem 20101109
-
Upload
naveen-kamat -
Category
Documents
-
view
231 -
download
0
Transcript of Roland Berger India Chem 20101109
-
7/27/2019 Roland Berger India Chem 20101109
1/235
2010
SustainingtheIndiaAdvantag
Prepared by :
Handbook on
Indian Chemical Industry
-
7/27/2019 Roland Berger India Chem 20101109
2/235
Disclaimer:
All rights reserved. Includes copyrighted material.
The same may not be reproduced, distributed, modified or in any manner communicated to any third party except with the written approval of Tata
Strategic Management Group.
This report is for information purpose only. While due care has been taken during the compilation of this report to ensure that the information is
accurate to the best of Tata Strategic Management Group's knowledge and belief, the content is not to be construed in any manner whatsoever as a
substitute for professional advice. Tata Strategic Management Group accepts no responsibility for any loss arising from any action taken or not taken by
anyone basis this report.
-
7/27/2019 Roland Berger India Chem 20101109
3/235
www.indiachem.in
-
7/27/2019 Roland Berger India Chem 20101109
4/235
-
7/27/2019 Roland Berger India Chem 20101109
5/235
-
7/27/2019 Roland Berger India Chem 20101109
6/235
-
7/27/2019 Roland Berger India Chem 20101109
7/235
-
7/27/2019 Roland Berger India Chem 20101109
8/235
2010
Handbook on Indian Chemical Industry 03
demand shift has happened in the past, but is largely completed, customer industries
like textile and leather, asclassicexamples, havecompletedthatyearsago. Whatis
essentialtounderstandis, thatemergingmarketsshowstrongergrowthpotential
andhaveproventodosoevenin the financial crisis, e.g. with China showing approx.5% growth even in 2009 andthemarketsarebecomingcriticalsize. Theimpactof
thesedevelopmentshastobeanalyzeddifferentlyforglobalmajorsandthelocal
championsinthesecountries.
For the global majors, the crucial questions will be the strategyaroundhowto
participateonthisgrowth, includingassetandinvestmentallocation, exportsvs.
localproduction, adoptionofbusinessmodels, cooperationwithlocalsvs. stand-
aloneactivitiesandmanymore. Aboveallthisistheneedtoachieveandsustaina
profitabilitythatsatisfiestheirshareholders. And, nottobeforgotten, tomaintain
andideallyincreasethebusinessinthestronghomemarketsEuropeandtheUS
thesewilleveninthe next 20 years account for a very large portion of global
chemical business:
For the local champions, the challenge consists of two steps. First step is the coverage
and supply of domestic markets not leaving them to the global majors, and secondly
the subsequent development of a global business where sustainable competitive
advantages can be achieved. A good example for this is API production, where
accordingtoindustryreports, IndianandChineseproducersalreadycover 65-70%
oftheworldmarket
In feedstock driven commodities (in particular petrochemicals and polyolefins) the
increasing production capacity in low feedstock cost countries is a historical fact and
is likely to continue. However, it is clear amongst industry experts, that Middle East
will never serve the whole world. Considering that, the long-term challenge for the
chemical industry is to find the right balance between low cost production hubs and
local/regional commodity production close tothe customers. Western Europe and
the US have been through this process to a large extent already, plant closure and
efficiency gains as well as value chain integration efforts have shown results. Looking
to China and India as the major countries of futuredemand, bothhaveshowna
strongwilltoestablishandmaintainacommodityindustrythemselves, howeverthe
strategiesaredifferent.
While China is putting a lot of effort into developing a coal-based petrochemical
industry (andbydoingsorelyingonthe domestic carbon feedstock) and successfully
invites international partners to do so, the Indian Government has set up PCPIRs with
strong focus on downstream integration, providing an ecosystem for chemical
companies to prosper. This is an India only effort so far, and international companies
are not heavily involved yet. Irrespective of which strategy will be more successful, it
clearly shows that these regions are willing and able to develop a commodity industry
on their own, but, also as a matter of fact, that has to prove its position in a global
context still.
Concepts for feedstock driven commodities
-
7/27/2019 Roland Berger India Chem 20101109
9/235
2010
Handbook on Indian Chemical Industry04
Understanding customer industries' needs
Implications for India
Last but not least, theglobalchemicalindustryhastofacethechallengeto
completeits
transformation
from
aproduction
and
technology
driven
industry to a
customer oriented one. Given the complexity and the tremendous range of products
and services offered by the chemical industry, this will play a more prominent role for
customer oriented segments like specialty chemicals than for specification-based
commodities. There is for sure no "one-size-fits-all" approach, but the following two
issues will playastrongroleintermsoffutureprofitability
Adapting product developments to the actual needs of the customers, in mature
countries where customerindustriesarenotwillingtopayforthebestpossible
product/serviceanymorebutonlyforthebest suitable one, as well as adapting
product portfolio and service to the local needs of emerging marketse.g. a
growingmiddleclassinIndiagettingaccess to chemical related products has
different needs and perceptions vis--vismatureEuropeangroupofcustomers
Andinparticularlocalcompaniesare "naturally" positionedbesttofulfillthese
needs
Set up organizations (from sales force to group structures) that allow to most
efficiently target these customer groups.Anumberofcompanieshavealready
designedtheirfrontendaccordingtocustomergroups (e.g. DuPont), andthisis
likelytocontinue
Summarizing, it becomes clear that the global future of the chemical industry willlook substantially different than today. There will be a place for everybody - the global
majors of today, the world-scale Middle East commodity producers as well as local
champions in India and elsewhere developing their home markets. But amongst all
groups, the successful ones will be those who manage to adapt early to the upcoming
changes and doing so, createalong-lastingcompetitiveadvantage. Indianchemical
playersareexcellentlypositionedinthis "newgame", supportedbyaPCPIR
infrastructurebeing built, having a government that understandsandsupportsthe
needsofthechemicalindustry, beinglocatedinoneofthemostprosperous
marketsintheworldandlastbutnotleastbeingabletorely on a well skilled and
educated workforce. Taking these good staring points combined with the
entrepreneurial spirit, social and political responsibility and a forward looking
understanding of the future framework provides an excellent outlook to the Indian
Chemical industry.
l
l
By-Dr. Alexander Keller, Partner - Energy & Chemicals, Roland Berger Strategy Consultants
-
7/27/2019 Roland Berger India Chem 20101109
10/235
2010
Handbook on Indian Chemical Industry 05
Global Chemical Industry
Globally, the chemical industry is estimated to be ~USD 3.4 trillion. Global chemicals
industry grew at a healthy rate of ~9% p.a. during the period 2004-2008. However,
the industry went through a dramatic downturn in 2008-2009 due to the global
economic recession. In 2009, the global chemical industry is estimated to have seen a
decline of 4.5 5% over 2008 levelsasdemandfromlargeend-useindustriessuch
asconstruction, automotives, electronics etc. fell massively worldwide. The
downturn witnessed shutting down and idling of significant capacities and other cost-
cutting measures like workforce reduction.
Post 2009, as global economy has started recovering, chemicals industry is starting to
register slow volume growth due to restocking and revival of underlying demand.
While the recovery in Europe is still sluggish, America is expecting a V-shaped
recovery curve as per the American Chemistry Council and China saw a 21% y-o-y
growth in chemicals output in October 2009. However, it is expected that with
subdued demand in near future and reduced margins due to poor capacity utilization,
it might still take 2-3 years before the global chemicals industry is back to the growth
rate levels of 2008. During the period 2008-2013, the chemicals industry is expected
to grow at ~5.3% CAGR.
Source: Datamonitor, Tata Strategic Analysis
Global chemicals industry Fy 10(USD Bn, % share)
Base Chemicals,
1,525 , 45%
Specialty
Chemicals, 740
22%
Pharmaceuticals
900 , 27%
Biotechnology
180 , 5%
Agrochemicals,
50, 1%
Total: USD 3,395 Bn
-
7/27/2019 Roland Berger India Chem 20101109
11/235
-
7/27/2019 Roland Berger India Chem 20101109
12/235
2010
Handbook on Indian Chemical Industry 07
Base chemicals has a lager share of the domestic chemicals industry vis--vis global.
Base chemicals are raw material driven; bulk manufacturing chemicals produced by
standardized reactions unlike pharmaceuticals, and specialty chemicals which are
more R&D intensive, high value, low volume chemicals.
Petrochemicals (Olefins and aromatics) form the largest sub-segment of the base
chemicals industry. Olefins demand in India is expected to grow at 10% per annum
while aromatics demand is expected to grow at 12% per annum over the next four-
five years. India is soon expected to be among the world's top 5 manufacturers ofpetrochemicals products ETA and poly-propylene.
Pharmaceuticals is the second largest segment with 24% share. Over the last 30
years, India's pharmaceutical industry has evolved from being a marginal global
player to becoming a world leader in the production of high quality generic drugs.
India exports pharmaceutical products to more than 200 countries. Exports of drugs
and pharmaceuticals from India rose by 25% to ~ Rs. 384 billion in FY09 compared to
~ Rs. 307 billion in FY08.
Indian specialty chemicals industry is expected to return to pre-recession growth in
the next couple of years primarily driven by large demand in end use industries like
automotives, electronics, packaged food, textiles etc. and strong domestic capabilitybeing supplemented by both domestic and international investments. Many foreign
companies have made significant commitments to India and have plans to continue
to invest over the long term not only because of the abundant availability of skilled
and cheap labor but also because of the certainty of potentially huge markets.
Biotechnology accounts for 3% of the total chemicals industry. Indian biotechnology
industry crossed the USD 3 billion mark in FY10 (including bio-services and bio-
informatics), registering a y-o-y growth of 17%. The industry is fragmented in nature
with presence of over 300 domestic and international companies. However, it is
witnessing several partnerships/ acquisitions as companies try to expand capabilities
and capacities.
Source: Industry reports, Tata Strategic Analysis
Agrochemicals
2, 2%
Base Chemicals,
43.3, 53%
Biotechnology
2.5, 3%
Pharmaceuticals
20, 24%
Specialty
Chemicals, 15
18%
Indian chemicals industry Fy10(USD Bn, % share)
Total: USD 83 Bn
-
7/27/2019 Roland Berger India Chem 20101109
13/235
2010
Handbook on Indian Chemical Industry08
Agrochemicals comprise ~2% of the total industry. The agrochemicals consumptions
in India (580 gms/ hectare) is low compared to global standards of 10-12 kg/ hectare.
Indian agrochemicals industry is largely exports driven with over 60% of production
being exported to USA, U.K., Russia, Europe, South Africa, Bangladesh, Malaysia etc.
Strong end use industry demand is expected to boost growth for the Indian chemical
companies, both domestic & multinational.
Increasing local production requires global competitiveness to withstand imports as
well as for exports of surplus. Key success factors needed are feedstock cost &
availability, value chain access, technology, capital investment, presence of strong
local players as well as access to a rapidly growing large domestic market. India is
today seen as a growth market for many western companies. Domestic companies
have built significant assets and have the opportunity to leverage them and will needto strengthen them further to withstand global competition. It could be worthwhile
to explore partnerships, in select areas, for mutual beneficial development.
CONCLUSION
-
7/27/2019 Roland Berger India Chem 20101109
14/235
Basic Organic Chemicals
-
7/27/2019 Roland Berger India Chem 20101109
15/235
-
7/27/2019 Roland Berger India Chem 20101109
16/235
2010
Handbook on Indian Chemical Industry 11
Introduction
Organic chemicals are a significant part of Indian chemicals industry. The chart below
shows select major organic chemicals. Availability of natural gas for use as feedstock
is a critical part of the entire production process. Formaldehyde and acetic acid are
important methanol derivatives and are used in numerous industrial applications.
Phenol is an aromatic compound and derived from Cumene, a benzene and
propylene derivative.
Feedstock (Natural Gas/Naphtha)
Methanol
FormaldehydeAcetic Acid
Select organic chemicals
PhenolFormaldehyde
UreaFormaldehyde
Benzene
Cumene
Phenol
Indian Organic Chemicals Industry
Industry Overview
The consumption of organic chemicals in India has increased at a CAGR of 6.4% from2.02 million metric tons per annum (mmtpa) in FY04 to 2.76 mmtpa in FY09. The
domestic supply however, has shown a negative CAGR of 2.3% to reach 1.31 mmtpa
in FY09 against 1.47 mmtpa in FY04. The deficit has been met by a large increase in
imports over the years. The net imports have grown at a CAGR of more than 20%
2.0 2.02.2
2.4
2.62.8
1.5 1.5 1.6 1.5 1.5
1.3
FY 04 FY05 FY06 FY07 FY08 FY09
Demand Supply
Demand & Supply(Mn tons)
Source: Dept. of Chemicals & Petrochemicals
-
7/27/2019 Roland Berger India Chem 20101109
17/235
2010
Handbook on Indian Chemical Industry12
from 0.55 mmtpa in FY04 to 1.51 mmtpa in FY 2009. Themajorreasonoflower
domesticproductionoforganicchemicalshasbeenoversupplyinglobalmarkets
leadingtocheaperimportsoforganicchemicalsintoIndia. Asaresult, thecapacity
utilizationlevelsofdomesticproducershavefallenfrom92% in FY04 to 65% in FY09.
Evenafterdiscountingtheimpact of the global economic crisis on the Indian
industry, the average utilization levels have been around 80% in FY07 and FY08.
No. Organic Chemical Production (000 tons) Share in
Fy07 Fy08 Fy09 Fy09
1. Methanol 396 351 237 18%
2. Formaldehyde 235 243 232 18%
3. Acetic acid 288 316 266 20%
4. Phenol 71 75 76 6%
5. Others 555 567 506 38%
Total 1,545 1,552 1,317 100%
Production details of major organic chemicals in India
Source: Dept. of Chemicals & Petrochemicals, CMIE
The major organic chemicals are methanol, acetic acid, formaldehyde and phenol. The
four chemicals constitute around 60% of total organic chemicals produced in India in
FY09.
Post the global economic crisis, the production of organic chemicals in India is also
expected to have recovered and reached 1.5 mmtpa in FY10.
Methanol, a very versatile chemical is primarily produced from natural gas or naphtha.
Key SegmentsMethanol
0.01
Demand and supply of methanol (Mn tons, Fy09)
0.24
1.3
1.06
Production Import Export Consumption
Source: CMIE report
-
7/27/2019 Roland Berger India Chem 20101109
18/235
2010
Handbook on Indian Chemical Industry 13
Demand for methanol has increased at a CAGR of 10% from 0.8 mmtpa in FY04 to 1.3
mmtpa in FY09. The domestic production of methanol is not sufficient to meet the
demand of methanol in India. As a result, in FY09, the net import of methanol was
1.06 mmtpa i.e. more than 4 times the domestic production of 0.24 mmtpa. Import of
methanol has increased at a high CAGR of 22% from 0.4 mmtpa in FY04 to 0.85
mmtpa in FY09.
The two main end-user industries of methanol are chemicals and energy. In the
chemicals industry, methanol is used mainly to manufacture formaldehyde, acetic
acid, di-methyl terephthalate (DMT) and some solvents. In the energy industry,
methanol goes into the manufacture of methyl tertiary butyl ether (MTBE), tertiary
amyl methyl ether (TAME), di-methyl ether (DME) and bio-diesel among other
chemicals. Methanol is also used for blending with petrol.
Over the years the usage pattern of methanol has remained same. However, share of
formaldehyde in sectoral usage of methanol has improved from 34% in FY06 to 38%in FY09 primarily due to increase in demand of formaldehyde from plastic and paints
industries. The demand of methanol for production of DMT has fallen primarily due
to closure of Bombay Dyeing's DMT plant.
Indian manufacturers have small capacities compared to global standards. GNFC, the
largest producer of chemicals in India has a capacity of 230 kilo tons per annum (kta)
followed by Deepak Fertilizers and Rashtriya Chemicals and Fertilizers Ltd (RCF) with
capacities of 100 kta each.
MTBE
16%Pharma
14%
DMT9%
AceticAcid9%
Others18% Formald
hyde34%
MTBE16%
Pharma15%
DMT2%
AceticAcid9%
Others20% Formald
yde38%
Sectoral usage of methanol(% share)
Source: Crisil research, Tata Strategic analysis
FY06 FY09
Acetic Acid
Acetic Acid is the main alcohol based chemical and is primarily used in the production
of Vinyl Acetate Monomer (VAM), Purified Terephthalic Acid (PTA), AceticAnhydride
andAcetateEsters. TheAceticacidderivativesareappliedinvariousindustriesas
mentionedintablebelow:
-
7/27/2019 Roland Berger India Chem 20101109
19/235
2010
Handbook on Indian Chemical Industry14
Demand for acetic acid has grown at a CAGR of 10% from 0.34 million tons in FY04 to
0.55 million tons in FY10.
The demand growth has happened mainly due to increase usage by manufacturers of
PTA and organic esters such as RIL and Vinyl Chemicals. New PTA capacities added by
Indian Organic Chemicals (IOC) (0.55 million tonnes per annum) and RIL (0.53 milliontonnes per annum) in the recent past have spurred demand growth further.
Most of the demand was met through domestic production earlier. However, due to
oversupply of acetic acid in global markets and depressed prices, imports of acetic
acid have grown from 0.02 mmtpa in FY04 to 0.29 mmtpa in FY09. Cheap imports
have led the domestic manufacturers to reduce their plant capacity utilization.
Market size of acetic acid is estimated to be around Rs. 1,450 crores in India in FY09,
of which imports constitute more than 50%. Major acetic acid producing companies
in India are GNFC, Jubilant Organosys and IOC. Acetic acid is manufactured in India
S. N Derivatives Applications
1. Vinyl Acetate Monomer Adhesives, textiles, paints and paper
2. Purified Terephthalic Acid (PTA) PET bottle resins, films and polyester fibre
3. Acetic Anhydride Cellulose Acetate which goes in cigarettefilters and textile applications
4. Acetate Esters Solvents in a wide variety of paints, inks and
other coatings
0.27
0.550.01
0.29
Production Import Export Consumption
Demand and supply of acetic acidMn tons, Fy09
Source: CMIE report
through two routes: the methanol route and the ethyl alcohol (from molasses) route.
Manufacturing acetic acid using methanol is more cost-competitive and, therefore,
more profitable. GNFC is the only company in India to manufacture acetic acid
through the methanol route. It has a competitive advantage in acetic acid because of
-
7/27/2019 Roland Berger India Chem 20101109
20/235
2010
Handbook on Indian Chemical Industry 15
the assured supply of the raw material and its lower cost of production and hence,
was able to hold its 30% market share in a weak global price scenario.
Unlike methanol, production of its derivative formaldehyde in India is sufficient to
meet the domestic demand. The production of formaldehyde has increased, at a
similar pace as has its demand, at a CAGR of 3% from 0.20 mmtpa in FY04 to 0.23
mmtpa in Fy09.
Formaldehyde
0.23 0.23
Production Consumption
Demand and supply of formaldehydeMn tons, FY09
Source: CMIE report
Phenol is a significant type of organic chemical with numerous applications as
mentioned in the table below. Its demand is closely linked to end user industries like
the construction and automobile industries.
More than 70% of demand of phenol is met through imports with no fresh supply
addition in last few years. There are only two suppliers - Hindustan Organics and S I
Group with capacity of 40 Kta each in FY09. As the consumption has grown from 0.18
MarketsizeofformaldehydeisestimatedaroundRs. 190 croresinIndia. Total
productioncapacityis 0.23 mmtpainFY09. Major formaldehyde producingcompanies in IndiaareKanoriaChemicals, HindustanOrganic, RockHardandAsian
Paints. Thefirsttwocompanies account for 44% of formaldehyde production in India.
AsianPaintsproducesformaldehydeforcaptiveconsumption.
Derivatives Applications
Phenolic resins Plywood adhesives, construction, automobile
& appliance industries
Caprolactam Nylon and synthetic fibre
Bisphenol-A Polycarbonates in electronics and housing industries
Phenol
-
7/27/2019 Roland Berger India Chem 20101109
21/235
-
7/27/2019 Roland Berger India Chem 20101109
22/235
2010
Handbook on Indian Chemical Industry 17
l
Growth Forecast & Drivers
Recently, Government has also levied anti-dumping duty on import of phenol
from countries such as USA, South Korea and Taiwan.
Indian organic chemicals market is expected to grow at a growth rate of 5% to reach ~
3.53 mn tons by FY14. Key segments expected to grow are methanol and phenol.
1. Rise in methanol demand: Domestic methanol demand is expected to grow at a
CAGR of 6.8% from FY10 to FY14. The key growth drivers are growth in
construction, infrastructure and new areas such as fuel blending and bio diesel.
The demand from the formaldehyde segment (largest user of methanol) is
expected to grow at 8%. Despite the higher operating rates expected in future,
more than 2/3rd of demand will still be required to be met by imports.
0
0.5
1
1.5
FY10 FY11 FY12 FY13 FY14
0
20
40
60
80
100
Demand Production Operating rate
Methanol Market Outlook
RHS
Demand & Supply (Mn tons)
LHS
Operating rate (%)
Source: Crisil report, Tata Strategic analysis
2. Rise in phenol demand: The demand of phenol is expected to grow at a CAGR of
8% from 0.14 mmtpa in FY10 to reach 0.19 mmtpa in FY14. The improvement in
demand is primarily driven by growth in application of phenolic resins in the
decorative laminates sector, dyes and drugs in pharmaceutical industries. growth
in application of phenolic resins in the decorative laminates sector, dyes and drugs
in pharmaceutical industries.
-
7/27/2019 Roland Berger India Chem 20101109
23/235
2010
Handbook on Indian Chemical Industry18
Key Challenges
1. Lack of cheaper raw material availability: Feedstock (naphtha and natural gas)
and power are critical inputs for organic chemicals industry. Costs of these rawmaterials are high in India compared to countries like China, Middle East and other
South East Asian countries such as Thailand and Indonesia. Given the poor
infrastructure with lack of adequate facilities at ports and railway terminals and
poor pipeline connectivity, domestic manufacturers will continue facing difficulty
in procuring raw materials at a cost competitive with the global peers.
2. No domestic price discovery: Domestic prices of organic chemicals are highly
correlated with international prices. Given the small scale of domestic operations,
local manufacturers are more influenced by global demand and supply forces.
3. Large global capacity additions: Apart from the current oversupply in global
markets, there is another cause of concern for domestic manufacturers, withfurther large capacity additions happening in global markets. For example,
globally, methanol industry is expected to witness excess capacity in the future
due to a spate of capacity additions in gas rich countries such as Middle East and
Russia. In China itself, 20 million tons of methanol capacity is expected to be
coming upstream by 2010.
0
0.1
0.2
FY10 FY11 FY12 FY13 FY14
97
98
99
100
Demand Supply Operating rate
Phenol Market Outlook
RHS
Demand & Supply (Mn tons)
LHS
Operating rate (%)
Source: Crisil report, Tata Strategic analysis
-
7/27/2019 Roland Berger India Chem 20101109
24/235
2010
Handbook on Indian Chemical Industry 19
Methanol capacity additions
2009 China (delayed) 20
2010 Egypt, Russia 1.6
2011 Middle East, South East Asia 4
South America
Year Regions Capacity (Mn tons)
Source: Crisil report, Tata Strategic analysis
4. Low capacity utilization: Due to oversupply in global markets, prices of major
organic chemicals have taken a steep decline, thereby forcing the domestic
companies to under utilize their plants operating levels. The average capacity
utilization has fallen from > 90% in FY04 to 65% in FY09. Though, post the global
economic crisis in FY09, utilization levels have improved, but are still far behind
the utilization levels of more than 90%.
1. Consolidation: Since most of the Indian manufacturers operate on a small scale
compared to global peers, there is a room for consolidation in Indian organic
chemicals industry. Domestic players can take advantage of economies of scale
arising from consolidation and become more competitive thereby preventing
cheaper global imports.
2. Improved feedstock supply: Domestic organic chemicals players don't have theadvantages of backward integration and hence, they lack pricing flexibility.
However, given the new finds of natural gas reserves in the country, domestic
manufacturers will be able to get supply of feedstock at stable prices.
3. Wider product portfolio: Commodity chemicals companies can improve their
product portfolio by adding specialty chemicals such as polymers additives, water
treatment chemicals, lubricating additives, etc. This will help in improving their
margins but requires significant R&D efforts.
4. Forward integration: Petrochemical companies producing benzene and
propylene can look for forward integration opportunity given the demand-supply
deficit in phenol market. Similarly, an opportunity exists for companies withbetter access to natural gas supply to venture into the methanol market facing
continuous supply deficit.
5. Outbound approach: Even successful companies from west are shifting their base
to resource rich nations like Saudi Arabia, Qatar, Russia, etc. Indian organic
chemical companies may also explore opportunities outside the country either
through greenfield or brownfield projects.
Key Opportunities
-
7/27/2019 Roland Berger India Chem 20101109
25/235
2010
Handbook on Indian Chemical Industry20
References
1. Annual Report 2009-10, Department of Chemicals & Petrochemicals
2. Performance of Chemical & Petrochemical Industry at a Glance (2001 - 2007),Department of Chemicals & Petrochemicals
3. Working Group on Indian chemical industry for formulation of the 11th Five Year
Plan, Planning Commission, Government of India
4. Commodity Chemicals: Industry Profile, Crisil Research, January 2010
5. Industry: Market Size & Shares, Centre for Monitoring Indian Economy, April 2010
6. GNFC Analyst Report, ICRA Research, June 2010
This report has been authored by:
Pratik Kadakia ([email protected]) and Chirag Surana
-
7/27/2019 Roland Berger India Chem 20101109
26/235
Petrochemicals
-
7/27/2019 Roland Berger India Chem 20101109
27/235
-
7/27/2019 Roland Berger India Chem 20101109
28/235
2010
Handbook on Indian Chemical Industry 23
Introduction
Global Petrochemicals Industry
Petrochemicals are chemicals made from petroleum and natural gas. Currently
naphtha and natural gas are the main feedstock as they are most easily processed
into basic petrochemicals. Olefins such as ethylene, propylene, butadiene and
aromatics such as benzene and toluene are basic petrochemicals and their further
derivatives are known as end products petrochemicals such as polymers, synthetic
fibers, elastomers and surfactants.
Size of the petrochemical industry is determined by the size of ethylene and
propylene capacity built. Both constitute almost 70% of global basic petrochemicals
market. Global ethylene capacity was estimated at 130 million tons in 2009 and is
expected to achieve a CAGR of 3% to reach 155 million tons in 2014. Whereas, global
propylene capacity, estimated at 90 million tons in 2009, is expected to achieve a
CAGR of 5% to reach 115 million tons in 2014. Based on their cumulative capacity and
overall market share, the market size of basic petrochemicals was USD 320 billion in
2009 and is expected to reach USD 385 billion in 2014.
320
385
2009 2014
4%
Global Market Size(USD Bn)
Source: Crisil research, Tata Strategic analysis
Major countries are North America, Western Europe and East Asia and majorpetrochemical companies are Lyondell-Basel, Dow, Sinopec, Exxon and Ineos.
As a downstream industry of exploration and refining business, the petrochemicals
industry is a significant industry for the Indian economy. The Indian basic
petrochemicals market grew at a rate of 5% from USD 5 billion in FY2005 to an
estimated USD 6.5 billion in FY2010. Considering end products market which includes
Indian Petrochemicals Industry
Industry Overview
-
7/27/2019 Roland Berger India Chem 20101109
29/235
2010
Handbook on Indian Chemical Industry24
polymers, synthetic fibers, elastomers and surfactants, the total petrochemical
market has grown at a CAGR of 8% from USD 6.8 billion in FY2005 to USD 10 billion in
FY2010.
India is the fifth largest consumer of polymers in the world after China, United States,Japan and Germany.
By global standards, its contribution is not very large, primary reason being low per
capita consumption of polymers in India, only 5 kgs, compared to world average of 25
kgs.
The Indian petrochemicals market is influenced by international demand and supply
forces as the domestic market is oversupplied. The total installed capacity of major
basic petrochemicals (ethylene, propylene, butadiene, benzene & toluene) in FY2005
was 5.97 million metric tons per annum (mmtpa) against the total demand of 5
mmtpa, leading to a surplus of 0.97 mmtpa. This surplus got further increased to 1.59
mmtpa by FY2010 as capacity additions grew at faster pace than demand.
5,970
8,120
5,000
6,530
FY05 FY10
Capacity Demand
Basic petrochemicals installed capacity and demand ('000 tons)
Source: Crisil research, Tata Strategic analysis
Even in the end products petrochemicals market (polymers, elastomers, synthetics
fibers and surfactants), the oversupply gap has increased from 0.74 mmtpa in FY2005
to 1.76 mmtpa in Fy2010
-
7/27/2019 Roland Berger India Chem 20101109
30/235
2010
Handbook on Indian Chemical Industry 25
7,540
11,840
6,800
10,080
FY05 FY10
Capacity Demand
End products petrochemicals installed capacity and demand ('000 tons)
Source: Crisil research, Tata Strategic analysis
Polymers: Polymers are popularly known as plastics, Polyethylene, polystyrene,
polypropylene and polyvinyl chloride are major types of polymers. Consumption of
polymers has increased from 61% to 69% of total volume of major end products
petrochemicals between the period FY2005 and Fy2010.
61%69%
28%23%
4%2%
6% 6%
FY05 FY10
Polymers Synthetic Fibers Elastomers Surfactants
Source: Industry Report, Tata Strategic Estimates
End product petrochemicals market: share (% of total)
Synthetic Fibers: Synthetic fibers account for about half of all fiber usage, with
applications in every field of fiber and textile technology. The market share of
synthetic fibers has decreased from 28% in FY2005 to 23% in FY2010.
Elastomers: Elastomers are polymers with elastic properties. They find applications in
manufacturing of various types of tyres and non-tyre goods. Share of elastomers have
declined from 6% in FY2005 to 2% in FY2010.
Key Segments
-
7/27/2019 Roland Berger India Chem 20101109
31/235
2010
Handbook on Indian Chemical Industry26
Surfactants: Surfactants stabilize mixtures of oil and water and find application in
detergents, emulsifiers, etc. Its share has remained same in overall market at 6%.
Segment Major Products Main Applications
Polymers Polyethylene, polystyrene
polypropylene, polyvinyl coating
chloride (PVC)
Synthetic fibers Polyester, nylon, acrylic fiber Fiber and textile technology
purified terephthalic acid
Elastomers Styrene butadiene rubber Tyres, toys, consumer items
poly butadiene rubber
plasticized PVC
Surfactants Linear alkyl benzene and Detergents, emulsifiers, foaming
ethylene oxide & conditioning agents
Packaging, Carrier bags, extrusion
Competitive Landscape - Polymers IndustryPolymers constitute 70% of end products petrochemicals market in India. Indian
polymers industry is oligopolistic in nature with only 3 large producers - Reliance
Industries Ltd. (RIL), Haldia Petrochem Ltd (HPL) and Gas Authority of India Ltd (GAIL).
Market entry barriers are high with high start-up costs and raw material costs. Post
acquisition of IPCL, RIL has obtained majority of the market share (70%) of total
polymers market followed by HPL and GAIL (11% respectively). RIL produces all forms
of polymers namely Polyethylene (PE), Polypropylene (PP) and Poly vinyl chloride
(PVC). HPL and GAIL produce PE and PP but don't produce PVC. Other domestic
players are Finolex Industries, DCW, Chemplast and DCM Shriram. All of them
produce only Poly vinyl chloride (PVC).
Auriya
(0.51 )Haldia
(1.04)
Patalganga
(0.29)
Nagothane
(0.47)
Gandhar
(0.47)
Ha
(1.20)
zira
Jamnagar
(1.93)
Baroda
(0.38)
Capacity in mmtpa
Existingplants
RIL
IPCL
&
HPL
GAIL NaturalGas
Naphtha
NaturalGas/
Naphtha
PE, PPPVC
PE, PP
PE
Company
Feedstock
Focus
Capacity
4.74
1.04
0.51
Major polymers facilities in India (FLY10)
Finolex
Chemplast
Naphtha
NaturalGas
PVC
PVC
0.26
0.24
DCW
Naphtha PVC 0.09
DCM Naphtha PVC 0.07
Ratnagiri
(0.26)
Source: Crisil Report, Tata Strategic
Mettur
(0.24)
Tuticorin
(0.09)
Kota
(0.07)
-
7/27/2019 Roland Berger India Chem 20101109
32/235
2010
Handbook on Indian Chemical Industry 27
Key Trends
Growth Forecast & Drivers
Market Trends
Technology Trends
Regulatory Trends
Increase in global demand: Global demand for ethylene is forecasted to grow at a
CAGR of 4.5% and that of propylene to grow at a CAGR of 5.5% between period
2010 and 2014. Ethylene and propylene will continue to have major share (80%) of
total petrochemicals demand
Capacity expansion: Between 2010 and 2014 ethylene capacity additions is
expected to grow by 22 million tonnes. Major capacity build up is happening in
China, large demand centre and Middle East, ethane rich region towards the end
of 2010.
Depressed margins: With oversupply hinging in the global petrochemicals market,
margins will increasingly come under pressure in early 2011.
Low utilization levels: Global capacity utilization levels are expected to be at all
time lows of 80% in 2011 as compared to 90% now.
Product switch: Linear low density polyethylene is increasingly replacing the usage
of low density polyethylene in India. Only 1 ton of ethylene is required to produce
1 ton of LLDPE whereas > 1 ton of ethylene is required to produce 1 ton of LDPE
Change in feedstock mix: With increase availability of natural gas and new gas
finds, the dependency on naphtha as major feedstock for petrochemicals
complexes have reduced. In Middle East, substantial capacity additions will be
based on ethane as a feedstock.
Loss of duty protection: Government's protection cover is getting eroded gradually
with import duties on feedstock naphtha increased from 0% to 5% in Union Budget
2007-2008. Also on final products, import duties have been reduced over the years
from high of 70% in early 1990s to 5% (basic duty) in 2006.
Reduced fiscal benefits: As India is fast becoming a refining and petrochemical
surplus nation, Government has also taken away the income tax holidays and
other fiscal benefits from the industry. Only oil exploration companies now enjoy
the benefits based on the profit-sharing mechanism with the government.
The demand for basic petrochemicals is expected to grow at a CAGR of 9% to reach
10.27 mmtpa by FY2015. However, market will still be oversupplied to the tune of 1.7
mmtpa in FY2015. The demand growth will be driven by olefins segment including
ethylene, propylene and butadiene. Demand as well as capacity growth in aromatics
such as benzene and toluene will be marginal compared to overall market size.
Indian end products petrochemicals market is also expected to grow at a CAGR of 9%
to reach 15.1 mn
-
7/27/2019 Roland Berger India Chem 20101109
33/235
2010
Handbook on Indian Chemical Industry28
tons by FY2015. The surplus capacity is also expected to grow from 1.76 mmtpa in
FY2010 to 3.28 mmtpa in FY2015. The major drivers for demand growth are:
3,040
5,460
3,300
4,300
FY10 FY15
2,900
4,850
2,780
4,300
FY10 FY15
Ethylene Propylene Butadiene Benzene Toulene
Basic petrochemicals: Demand and supply forecastCapacity ('000 tons) Demand ('000 tons)
Total 11,970 Total 10,270
Source: Crisil Report, Department of Chemicals & Petrochemicals (GoI), Tata Strategic analysis
8,1206,530
7,240
11,0403,800
4,500
FY10 FY15FY10 FY15
Polymers Synthetics Elastomers Surfactants
End products petrochemicals: Demand and supply forecastDemand ('000 tons)
Total 18,440 Total 15,160
Source: Crisil Report, Department of Chemicals & Petrochemicals (GoI), Tata Strategic analysis
6,980
2,290
11,260
2,800
Capacity ('000 tons)
11,840 10,080
1. Low per capita consumption: Consumption pattern in India varies from that of
the world. Per capita consumption of polyolefins in India was 6 kgs. in 2009
compared to global average of 25 kgs With the economic growth expected to
continue, this gap is also expected to narrow down significantly.
2. Rise in polymers demand: The demand of polymers is expected to grow at a
CAGR of 10% from 6.98 mmtpa in FY2010 to reach 11.26 mmtpa in FY2015. The
high growth in demand is primarily driven by growth in packaging, infrastructure,
agriculture, healthcare and consumer sectors. As per a Goldman Sachs report, the
packaging sector itself will constitute 6.2 mmtpa of polymers demand by FY2012.
-
7/27/2019 Roland Berger India Chem 20101109
34/235
2010
Handbook on Indian Chemical Industry 29
3. Development of PCPIRs: Development of Petroleum, Chemicals & Petrochemicals
Investment Regions across India is also expected to induce development of
industries consuming petrochemicals as major raw material. Till now PCPIRs have
been approved in states of Andhra Pradesh, Gujarat, West Bengal and Orissa.
PCPIR project in Orissa alone is expected to invite Rs. 2.3 lakh crore worth of
investment from petroleum and petrochemicals sectors. Similar scale of
investments is envisaged in other approved projects.
1. Volatility in raw material prices: More than 50% of global petrochemical
capacities are based on naphtha, a crude oil derived product. The prices of crude
oil products have witnessed significant volatility, thereby making petrochemicals
prices highly volatile.
2. Increased competition: Large capacity additions taking place in ethane richMiddle East and demand rich China. Out of the 22 million tons of ethylene
capacity additions expected during period 2010 and 2014, 9 million tons is
expected in Middle East alone. Since, ethane based petrochem products are
cheaper than petrochem products in India, domestic producers are expected to
witness margins pressure.
3. High entry barriers: Given the capital intensive nature of the petrochemical plant
and tariff barriers, new entrants and small and medium size companies are
prohibited from easily entering into the market.
4. Low capacity utilization: Due to oversupply in global markets, prices of
petrochemicals have taken a steep decline, thereby forcing the domesticcompanies to under utilize their plants operating levels. The average capacity
utilization has fallen from 95% levels before global economic crisis to 80% in
2009. Even post crisis, the capacity utilization rates are below 90%.
1. Backward & forward integration: Given the volatility of crude oil prices and
India's heavy dependency on oil imports, there is opportunity for oil and oil
related companies to reap benefits of increase in presence across the value chain.
For e.g Reliance Industries Ltd. successfully backward integrated from refining
and petrochemical company to oil and gas exploration. IOC which is primarily a
refining PSU has ventured into exploration in the past and currently building
greenfield petrochemical projects.
2. Improved feedstock supply: Availability of feedstock dictates the location of the
plant. Domestic products are uncompetitive due to high costs of naphtha when
compared with ethane based products from Middle East. One means to improve
the competitiveness of the domestic products is by improving the infrastructure
support as is the case in Middle East, China and Singapore. Also going forward, as
more natural gas becomes available in India, the domestic players are likely to
shift from naphtha to cheaper natural gas thereby increasing their
competitiveness in the market.
Key Challenges
Key Opportunities
-
7/27/2019 Roland Berger India Chem 20101109
35/235
2010
Handbook on Indian Chemical Industry30
3. More value-add products in portfolio: Demand for performance plastics such as
biodegradable polymers is expected to be on rise across the world including
India. Given the environment concerns with traditional plastics, companies
should look at expanding their portfolio and include more value add products.
4. Increased geographical presence: Given the capital intensive nature of the
project and high costs associated in India (due to no duty waivers, no/ very less
tax exemptions and high interest costs), the domestic companies may also look
outside for organic and inorganic opportunities. Many western companies such as
Dow, Shell, etc are increasing their presence in energy rich countries like Saudi
Arabia, Kuwait, Qatar, etc. and setting up manufacturing facilities.
1. Annual Report 2009-10, Department of Chemicals & Petrochemicals
2. Performance of Chemical & Petrochemical Industry at a Glance (2001 - 2007),
Department of Chemicals & Petrochemicals
3. Working Group on Indian chemical industry for formulation of the 11th Five Year
Plan, Planning Commission, Government of India
4. Petrochemicals: Industry Profile, Crisil Research, August 2010
5. Petrochemicals: Opinion, Crisil Research, August 2010
6. PCPIR Orissa Article, Business Standard, August 14 2010
References
This report has been authored by:
Pratik Kadakia ([email protected]) and Chirag Surana
-
7/27/2019 Roland Berger India Chem 20101109
36/235
Fertilizers
-
7/27/2019 Roland Berger India Chem 20101109
37/235
-
7/27/2019 Roland Berger India Chem 20101109
38/235
2010
Handbook on Indian Chemical Industry 33
Global Fertilizer Industry
Fertilizer consumption in FY09 had declined by 7% from FY08 to reach 156.7 million
tons nutrients. Because of the highly fluctuating crop and fertilizer prices during the
financial crisis, farmers in most countries (India being an exception) reduced or
postponed investments in agricultural inputs.
The improved economic and financial situation is expected to have a positive effect
on fertilizer demand. Stable commodity prices make it less risky for the farmers to
invest in fertilizer.
Global fertilizer industry is expected to grow at 3% CAGR till 2015.
3%
162.5
170.4
174.7179.1
183.7
188.3
FY10 FY11 FY12 FY13 FY14 FY15
Global(Mn ton nutrients)
fertilizer demand
Source: IFA
Factors affecting fertilizer demand1. Increasing food grain consumption is a major demand driver for fertilizers.
According to Food and Agriculture Organization of the United Nations (FAO) the 2010
world cereal output is expected to reach 2.28 billion tons. This would be 2%
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2002 2004 2006 2008 2010
Production Utilization
World Cereal Production and Utilization
(Mn tons)
Source: FAO
-
7/27/2019 Roland Berger India Chem 20101109
39/235
2010
Handbook on Indian Chemical Industry34
increase over the previous year. World cereal utilization, currently at 2.25 billion tons,
has been rising at 2.0-2.5% over last 8 years.
2. Scope for expanding cultivated land in the next five years is limited. The per capita
land availability is expected to go down to 0.15 Hectare by 2015. Hence yield gainsare expected to contribute to most of the output growth. This will lead to increased
usage of fertilizer per hectare of land.
0.27
0.15
1998 2015E
World - Available arable land per capita
(Hectare)
Source: Yara fertilizer handbook, PotashCorp
3. Biofuel production using cereals, sugar cane and oilseeds as feedstock is another
major driver for fertilizer demand. About one-third of US maize, 55% of Brazilian
cane and two-thirds of EU rapeseed were used as feedstock for biofuel in 2009.
Increased demand for biofuels would require higher production of these
feedstocks. Biofuel production also influences the prices of these feedstocks
which has a larger indirect impact on fertilizer demand.
The evolution of current economic situation poses a major uncertainty for fertilizer
demand. If the economic situation in some of the major economies does not
improve, it could lead to increased speculation in agricultural commodities which
directly affects fertilizer demand. Some other uncertainties include evolution of policy
priorities in China, the fertilizer scheme in India (two large fertilizer consuming
countries) and bio-fuel consumption which will be affected by governments' priorities
on climate change.
The forecast for fertilizer demand is subject to major
uncertainties
-
7/27/2019 Roland Berger India Chem 20101109
40/235
2010
Handbook on Indian Chemical Industry 35
Fertilizer consumption in India
30.9 31.4
9.2 9.7 10.2 10.9 11.8 11.9 12.1
7.0 6.8 7.2 8.6 9.4 9.7 10.1
7.4 7.0 7.1 8.2 8.6 8.8 9.0
26.6 27.9 29.126.5 29.9
FY09 FY10 FY11 FY12 FY13 FY14 FY15
Urea DAP Other complex OtherSource: Crisil, IFA
Fertilizer Product Consumption: India
(Mn tons)
India is one of the major regions contributing to the rising fertilizer demand. A better
monsoon and higher prices of farm goods are expected to increase fertilizer
consumption in FY11 compared to FY10. Monsoon rains in June-September this year,
a key factor in fertilizer demand, was 2% above the normal.
The fertilizer demand in India is expected to grow at 4% CAGR from FY09 to reach 63Mn tons in FY15, higher than the global growth rate of 3% during the same period.
Urea is a widely consumed fertilizer product. It contains the nutrient N only. Of all
nutrients, application of N was the least affected during the recent crisis. N-fertilizers
need to be applied through the life cycle of crop and demand for it is mainly inelastic.
Global Urea Outlook
151.2158.4 163.5
169.7 174.5
155.6 162.9 169.9
179.1193.4
2010 2011 2012 2013 2014
Global Urea demand-supply
(Mn tons)
Demand SupplySource: IFA
-
7/27/2019 Roland Berger India Chem 20101109
41/235
2010
Handbook on Indian Chemical Industry36
Global urea demand is expected to grow by 4% CAGR, to reach 174.5 Mn tons by
2014. The growth rate is expected to be higher in the case of South Asia driven
primarily by India.
The growth in capacity addition, however, will outpace the demand. According to TheInternational Fertilizer Association (IFA), global urea capacity is expected to grow by
6% CAGR to reach 222 Mn tons in 2014. This would result in a supply of 193.4 Mn
tons in 2014. Between 2009 and 2014, about 55 new plants are planned to come on
stream. East Asia will contribute 32% of net increase in capacity.
Natural gas is the most efficient feedstock for Urea production; most of the global
capacities are based on natural gas. West Asia with vast natural gas availability has
become a major hub for urea manufacturing. It is also a major exporter of urea. Coalis used as a feedstock in China due to its easy availability.
China has world's largest urea capacities but it mostly caters to domestic
requirement. Hence incremental capacities which would be important from trade
point of view are those which would come from low consumption regions i.e. West
Asia and Africa.
Urea capacity in low-cost feedstock regions to meet world
demand
18
5 5
3 34
14
10
0.5
32
12
0.50
2
4
6
8
10
12
14
16
18
20
Incremental capacities
Incremental consumption
EAsia
SAsia
WAsia
EEC
A
NAmer
ica
Africa
LAmer
ica
Region wise incremental capacity and consumption of urea
(2015 over 2009, Mn tons)
Source: Crisil, IFA
North America, Western and Central Europe are expected to add limited capacities
due to high cost of natural gas in these regions. Increase in demand is expected to
outpace the increase in capacity in South Asia.
The incremental capacity in West Asia and Africa is expected to meet the demand of
the deficit regions.
-
7/27/2019 Roland Berger India Chem 20101109
42/235
2010
Handbook on Indian Chemical Industry 37
India Urea Outlook
India currently relies heavily on import to fulfill its urea demand. India imported 5.7
Mn tons of urea in FY09 to meet its demand of 26.2 Mn tons.
2726
2829
3031
5.7
4.5
5.8
6.2 6.36.6
0
5
10
15
20
25
30
35
FY09 FY10 FY11 FY12 FY13 FY142
3
4
5
6
7
8
9
production consumption import
Trend in Urea demand-supply scenario
(Mn tons)
Source: Tata Strategic analysis, FAI
This dependence on import is expected to continue in near future since urea capacity
is not expected to increase enough to meet the 4% annual increase in demand.
India's urea demand is expected to reach 31 Mn tons in FY14 whereas domestic
capacity is only expected to supply 24 Mn tons.
In India approximately 85% of urea production is based on captive ammonia
production while ammonia is procured externally only for the remaining 15%. Major
feedstocks used for urea manufacturing are natural gas, naptha, coal, fuel oil or LSHS.
Of all the feedstock mentioned here, natural gas is most cost effective and resultant
urea manufacturing cost is lowest. But traditionally majority of urea manufacturing in
India were naptha based. Retention pricing scheme (RPS), introduced in 1977,
assured 12% return on net worth of fertilizer plant and hence there was no clear
incentive for cost cutting.
Urea production in India
-
7/27/2019 Roland Berger India Chem 20101109
43/235
2010
Handbook on Indian Chemical Industry38
Naptha
17%
Caprolactum
1%
Natural
Gas, 72%
Fuel oil
9%
Coke oven
gas, 1%
Source: Crisil, FAI
Feedstock wise share of captive ammonia capacity
(% of total)
Recent policy developments in India:
Nutrient based subsidy scheme (NBS)
Greenfield projects at IPP-linked prices
The NBS scheme, in effect from April1 2010, is an attempt by the government to
encourage balanced fertilizer consumption in India. As per the policy, subsidy on
complex fertilizers would be calculated based on nutrient level and not at the product
level. Through this, govt. has changed the subsidy from constant farm gate prices to
constant subsidy. Producers now have the freedom to charge retail prices. Followingthe policy announcement, players hiked DAP prices by around Rs. 600 per ton. Prices
of other complex fertilizers were also raised.
Urea has been kept out of this policy, but its maximum retail price was increased by
10% from Rs. 4,830 to Rs. 5,310 per ton with effect from April 1.
The result has not been very encouraging in the limited time frame with most farmers
still preferring to use urea, the cheapest fertilizer. The sale of urea in kharif 2010
season, up to July 31, rose to 7.4 Mn tons from 6.8 Mn tons in the same period last
year.
Govt. of India introduced an investment policy in 2008 to overhaul production of urea
in the country and reduce dependence on import. As a part of this policy revamping
of existing urea unit plants and brownfield projects were encouraged through IPP-
linked prices.
However, for Greenfield projects the govt. decided prices based on competitive
bidding. As per the policy the govt. decides the location and potential investors bid
for the project. Whoever agrees to sell it by taking lowest amount of subsidy from the
govt. wins the bid. This policy failed in its attempt at putting up new Greenfield urea
plants in India.
-
7/27/2019 Roland Berger India Chem 20101109
44/235
2010
Handbook on Indian Chemical Industry 39
The New Urea Investment Policy 2010, to be released by the end of this year, is
expected to make the policy more investor friendly. All Greenfield projects would be
assured a price which is 95% of IPP. The policy is also planned to provide additional
benefits for reviving the sick units under the Fertilizer Corporation of India (FCI) and
Hindustan Fertilizer Corp Ltd.
It is estimated that nearly Rs. 30,000 crore investments would come up in next 3-4
years if the policy is made truly investor-friendly and sufficient gas is made available.
Rock phosphate is the key raw material for manufacturing of DAP, MAP, TSP and other
NPK fertilizers. Almost all of rock phosphate is converted into phosphoric acid and
85% of phosphoric acid is converted to phosphatic fertilizers.
Global rock phosphate capacity is expected to increase by 4% CAGR to reach 228 Mn
tons by 2014.
Global Phosphatic Fertilizer Outlook
190196
205211
220228
0
50
100
150
200
250
2009 2010 2011 2012 2013 2014
4%
Source: IFA
Global Phosphate Rock Capacity
(Mn tons)
Rock phosphate reserves are mainly concentrated in China, Morocco and US. Top 5
rock-phosphate producing countries account for about 80% of world production.
China is the largest producer and consumes almost all its production. The US is the
second largest producer and consumer. Morocco is the third largest producer and
largest exporter of phosphate rocks.
-
7/27/2019 Roland Berger India Chem 20101109
45/235
-
7/27/2019 Roland Berger India Chem 20101109
46/235
2010
Handbook on Indian Chemical Industry 41
Region 2010 2011 2012 2013
China 2,680 1,500 1,020
Morocco 730 450 900
Brazil 240 2,900 2,000
Tunisia 360
Jordan 500
Saudi Arabia 1,800
Venezuela 320
Vietnam 325
Egypt 600
Source: IFA
P O capacity addition ('000 tons)2 5
Global DAP demand to rebound
Di-ammonium phosphate (DAP) contains both N and P type nutrients with higher P
percentage. It is applied mainly to meet the P requirement of the soil. DAP is the most
consumed amongst all phosphatic fertilizers.
DAP demand is mostly elastic unlike Urea demand. It is mainly used during sowing
and its reduced application does not result in immediate adverse effect on yield. The
global DAP demand declined by 8% in 2008 over 2007 during the economic crisis.
7.210.6 14.0
4.6
3.1 4.12.0
2.1 2.9
5.63.7 5.2
7.5 8.56.2
2004 2009 2014
E Asia S Asia N America L America ROW
Global DAP Consumption
(Mn tons)
Source: IFA, Crisil
5 year CAGR
of 6.3%
26.9 25.6 33.0
-
7/27/2019 Roland Berger India Chem 20101109
47/235
2010
Handbook on Indian Chemical Industry42
Going forward DAP demand is expected to be strong, primarily driven by India
(Largest importer of DAP), China and North America. It is expected increase by 6%
CAGR to reach 33 Mn tons by 2014.
Global DAP/MAP capacity is expected to rise by 4% CAGR to reach 42.5 Mn tons by
2014. Bulk of this incremental capacity is coming up in reserve rich regions of East
Asia, North America and Africa.
Major capacity expansions for DAP
India Phosphatic Fertilizer Outlook
9.29.7
10.210.9
11.8 12
6.2
5.24.6
5.9
7
8
0
2
4
6
8
10
12
14
FY09 FY10 FY11 FY12 FY13 FY14
Production Demand ImportSource: IFA
Trend in DAP demand-
(Mn tons)
supply scenario
Indian DAP demand is expected to increase by 5% CAGR and reach 11.9 Mn tons by
2014.
Domestic DAP production declined in FY09 as there was a fall in international prices
of DAP without a similar fall in the prices of raw material. The rise in DAP
consumption was met by increasing imports. India is currently the largest importer of
DAP in the world.
Import of DAP is expected to rise from 6.2 Mn tons in FY09 to ~8 Mn tons in Fy14.
DAP and other complex fertilizers can be manufactured in same unit. The availability
of other complex fertilizers is very limited in the international market compared to
DAP availability. Hence, producers are expected to manufacture greater quantities of
other complex fertilizers in the unit and meet DAP deficit through imports.
-
7/27/2019 Roland Berger India Chem 20101109
48/235
2010
Handbook on Indian Chemical Industry 43
Fall in DAP price made imports sustainable
Rock phosphate, ammonia and sulphur are the main feedstock for manufacturing
DAP/MAP. Of these three, rock phosphate is the most critical feedstock and is not
available in India.
When DAP price peaked in 2008 the subsidy bill increased for Govt. of India (GoI).
This led the govt. to promote Indian DAP manufacturers to scout for rock phosphate
reserves globally. Syria, with high phosphate rock reserves was looked as a good
investment opportunity. India's Oswal chemicals and fertilizer limited has plans to
operate a phosphate-refining plan in Syria, it has signed an MOU with the Syrian govt.
450 470540
610
331
1,128
400
541
430
0
200
400
600
800
1,000
1,200
2006
2007
2008
2009
2010P
2011P
2012P
2013P
2014P
International DAP Prices
($/ton)
Source: Crisil, Fertecon
International DAP prices have moderated after reaching its peak in 2008. This has
made import of DAP more sustainable.
Muriate of Potash (MOP) contains potassium nutrient. Like DAP its demand is mostlyelastic. Potash fertilizer demand in 2009 was down by 8.6% over 2008. Farmers rather
opted to mine their soils to utilize the accumulated nutrient reserve in the soil.
Global Potash Outlook
-
7/27/2019 Roland Berger India Chem 20101109
49/235
2010
Handbook on Indian Chemical Industry44
29.932
33.534.7
35.8
3839.2
41.442.9
45.8
0
10
20
30
40
50
2010 2011 2012 2013 2014
Demand Supply
Global Potash Supply/Demand Balance
(Mn tons)
Source: IFA
4.6%
Global Potash demand is expected to grow at 4.6% CAGR to reach 35.8 Mn tons by
2014. Demand will be primarily driven by East Asia (mainly China), Latin America,
North America and South Asia (mainly India).
Global potash capacity is expected to increase from 41.6 Mn tons in 2009 to 54.7 Mn
tons in 2012. This would mean a supply of 47.1 Mn tons in 2014. The additional
capacity is expected to come mainly from Canada and Russia.
BHP Bilton is trying to acquire Potash Corporation which controls 18% of world
market for Potash. Earlier this year, two Russian major companies Urakali and Silvinit
announced that they are being merged and the combined company would control
10% of global Potassium market.
The global Potash trade is heavily cartelized with two companies Canpotex and
Belarussian Potash Company controlling 70% of the global capacity and influencing
the prices. Canpotex represents North American producers Potash Corp, Mosaic and
Agrium, whereas Belarussian Potash Company represents Russian producer Uralkali
and Belaruskali of Belarus. BHP has mentioned that if it becomes successful in
purchasing Potash Corp, it would eventually sell potash through its own channel and
not through Canpotex. The acquisition of Potash Corp is also likely to have an effect
on supply levels, as the company has curtailed production to support prices during
times of weak demand, while BHP is inclined to run operations at their full capacity.
M&A in global potash industry
-
7/27/2019 Roland Berger India Chem 20101109
50/235
2010
Handbook on Indian Chemical Industry 45
India Potash Outlook
Consumption of 'K' nutrient declined from 3.3 Mn tons in FY09 to 3 Mn tons in FY10.
The demand for 'K' nutrient in India is expected to grow at ~4.5% CAGR from FY09 toFY14 to reach 4.1 Mn tons (nutrient) by FY14.
The demand for complex fertilizers is expected to increase by ~7% CAGR and reach
~9.7 Mn tons (product) by FY14.
7.0 6.87.2
8.6 9.3
9.7
0
2
4
6
8
10
12
FY09 FY10 FY11 FY12 FY13 FY14
Production Consumption
7%
Complex fertilizer (excluding DAP) demand-supply
(Mn tons)
Source: Crisil, FAI
Going forward, the domestic production of other complex fertilizers is expected to
meet the domestic demand.
BHP Bilton's acquisition of Potash Corp. may upset the two existing potash cartels and
could lead to a change in industry dynamics.
With no domestic potash reserves, India imports potash largely as potassium chloride
at around Rs. 17,000/ ton. It offers a large subsidy on this and sells it to farmers for
Rs. 4,000/ ton. Due to India's large dependence on imports, a significant change in
global industry dynamics could impact Indian govt.'s subsidy bill. India could still try
to use its big buyer advantage and get favorable terms in changing industry scenario.
Potash Corp. acquisition could impact Indian govt.'s subsidy
bill
-
7/27/2019 Roland Berger India Chem 20101109
51/235
2010
Handbook on Indian Chemical Industry46
Co-
operative
26%
Public
sector
29%
Private
sector
45%
Share of capacity of nitrogenous fertilizer
(% share, Nov' 09)
Source: FAI
Publicsector, 8%
Co-
operative
35%
Private
sector
57%
Share of capacity of phosphatic fertilizer
(% share, Nov' 09)
Source: FAI
Concentration
Due to the capital intensive nature of the fertilizer manufacturing projects, the
industry is relatively concentrated, where a few player capture large chunk of the
market.The share of top 5 companies in total urea production in India is ~65% and in
case of DAP it is ~84%.
Fertilizer sector % share of top 5 companies(2009)
Urea ~65%
DAP ~84%
Complex (excluding DAP) ~80%
Source: FAI
FERTILIZER INDUSTRY STRUCTURE IN INDIA
The fertilizer industry in India is mainly characterized by govt. control. Since the
fertilizer sector is of national importance, traditionally GoI has controlled the sectorby regulating the investment, production, distribution and pricing. The most distinct
characteristic of Indian fertilizer sector is partial dependence on monsoons for
demand.
The private sector leads in capacities in urea as well as phosphatic fertilizer sectors.
As of Nov. 2009, out of 37 plants in India with a nitrogenous fertilizer capacity of 13.1
Mn tons, 23 were in the private sector with a total capacity of 5.9 Mn tons. In case of
phosphatic fertilizers, 57% of total capacity was held by private sector.
Ownership structure
-
7/27/2019 Roland Berger India Chem 20101109
52/235
2010
Handbook on Indian Chemical Industry 47
Major Companies
IFFCO is India's largest urea manufacturing company producing ~3.2 Mn tons of urea
annually. It has urea plants in UP and Gujarat and achieved net sales of ~Rs. 5,876
crore in FY '09 for its urea division. Other prominent companies in the Indian urea
industry are National Fertilizers, RCFL, KRIBHCO, Chambal Fertilizers etc.
Company Name Capacity ('000 TPA) Sales (Rs. Cr, 2009) Location
IFFCO 4,242 5,876 Aonla, Phulpur (UP),
Kalol (Gujarat)
NFL 3,231 5,006 Vijaypur (MP), Bhatinda
(Punjab), Panipat (Haryana)
KRIBHCO 2,594 2,597 Hazira (Gujarat)
RCFL 2,037 - Trombay, Thal (Maharashtra)
CFCL 1,729 2,240 Kota (Rajasthan)
NFCL 1,195 1,800 Kakinada (AP)
Urea Manufacturing Companies
Source: Crisil, Capital Line
The production, sales and location of 6 major urea manufacturers is provided in the
table above.
IFFCO is India's largest DAP manufacturer as well. It has an annual capacity of ~3.7 Mn
tons capacity. Other leading manufacturers are Godavari Fertilizers, GSFC, Tata
Chemicals etc.
Govt. of India (GoI) is trying to shift all the urea manufacturing units to natural gas
based units by 2013. With the advent of RIL's KG basin natural gas and the increasing
supplies of LNG, the availability of natural gas is expected to improve.
The Govt. has allocated the initial 40 Mn metric standard cu. m per day (mmscmd) of
RIL KG basin natural gas to various units on the basis of a gas utilisation policy. The
priority has been given to fertilizer sector so as to meet their gas demand.
Other developments
Natural Gas allocation
-
7/27/2019 Roland Berger India Chem 20101109
53/235
2010
Handbook on Indian Chemical Industry48
Oman has agreed to invest $ 3 Billion in India
Oman has agreed to invest around $3 Bn for revival of closed plants of Fertilizer
Corporation of India and Hindustan Fertilizer Corporation and expansion of Rashtriya
Chemicals and Fertilizers through Oman Oil Company.
In addition to this, both countries are also looking at ways to expand the existing
capacity of the 16.5 lakh tons urea project of the Oman India Fertilizer Company
(OMIFCO) to 25 lakh tons.
End users Initial Allocation
(mmscmd) (mmscmd)
Actual Allocation
Fertilizer plants Meet demand 15.33
Power plants 18 (Maximum) 18
City Gas Distribution 5 (Maximum) 0.87 (3.75 to steel plants)
projects
LPG making units 3 (Maximum) 3
Total 40 40.9
Gas Allocation
Source: Gas utilization policy
Subsequently, the govt. has allocated an additional 50 mmscmd gas, of which 20
mmscmd is on firm basis and additional 30 mmscmd is on fallback basis. With the
new allocation, the govt. has tried to meet the demand of the power sector.
End users Firm allocation
(mmscmd) (mmscmd)
Fallback allocation
Power 12.08 12.0
Fertilizer 0.18 -
Steel 0.44 -
Refineries 5.38 6.0
Captive power plants - 10.0
CGD projects - 2.0
Additional Allocation
Source: Gas utilization policy
-
7/27/2019 Roland Berger India Chem 20101109
54/235
2010
Handbook on Indian Chemical Industry 49
Aditya Birla Nuvo Limited (ABNL) gets preliminary nod for
capacity expansion
Outlook on Indian Fertilizer Industry
ABNL, earlier known as Indo Gulf Fertilizers, has received first stage environmentapproval for its urea expansion project. The project envisages setting up a 2,200 tons
per day (tpd) ammonia unit and a 3,850 tpd urea unit at its Jagdishpur complex in
Utter Pradesh. The complex currently has 1,910 tpd ammonia capacity and two urea
units, each of 1,625 tpd.
Sale of urea at IPP linked price even for Greenfield projects is expected to promote
fresh investments for Greenfield projects. The Investment Policy of 2008 has already
provided incentives for brownfield expansion and improvement in facility for existing
plants by linking the prices to IPP. In a way, GoI has rewarded all the existing Indianurea manufacturers and also encouraged new companies to invest in the market.
Indian companies are also encouraged to invest in natural resource rich countries
overseas. The Indian govt. is ready to enter into firm offtake agreements at prices
decided by mutual consultation for such projects abroad. There is already a trend of
some Indian companies forming joint ventures abroad, like Oswal chemical and
fertilizers in Syria, and this trend will catch up with other Indian companies as well.
Availability of feedstock has been an issue for Indian fertilizer industry. Against the
industry's demand of 42 mmscmd of natural gas in FY09 , according to Fertilizer
Association of India, only 28 mscmd was available to it. That may change as big new
gas discoveries go into production. The govt. has given priority to gas based ureaplants and and these plants would be supplied gas so as to make them run at full
capacity. The govt. allocated 15.33 mmscmd of gas in this regard from RIL KG basin. In
2009, fertilizer companies started receiving natural gas supplies from the Krishna-
Godavari basin. With availability of natural gas fertilizer production is expected to
improve in India.
-
7/27/2019 Roland Berger India Chem 20101109
55/235
2010
Handbook on Indian Chemical Industry50
References
1. Fertilizer policies, The Fertilizer Association of India (FAI), retrieved on
September 13, 2010
2. Fertilizer production, consumption and import statistics, FAI, retrieved on
September 13, 2010
3. Fertilizer Outlook 2010-2014, International Fertilizer Industry Association
(IFA), Annual conference, June 2010
4. Phosphate Outlook, TFI Outlook Conference, Oct 2009
5. Fertecon Phosphate report, August 2010
6. Global Supply and Demand Outlook for Fertilizers, IFA, December 2009
7. Global Fertilizers and Agricultural Chemicals, Datamonitor, February 2010
8. Newspaper articles: The Hindu, Mint, Business Standard
9. Fertilizer Annual Review , Crisil Research, January 2010
10. Gas utilization policy, Ministry of Petroleum & Natural Gas, Govt. of India
11. Annual Report 2009-10, Department of Fertilizer
12. Yara fertilizer handbook
13. PotashCorp Industry report
This report has been authored by:
Pratik Kadakia ([email protected]), Anshul Saxena ([email protected]) and Binay Agrawal
-
7/27/2019 Roland Berger India Chem 20101109
56/235
Chlor Alkali
-
7/27/2019 Roland Berger India Chem 20101109
57/235
-
7/27/2019 Roland Berger India Chem 20101109
58/235
2010
Handbook on Indian Chemical Industry 53
Introduction
l
l
l
Caustic Soda & Chlorine
Alkali chemicals is the oldest and the largest segment of the chemical industry. These
chemicals serve as key inputs for a number of industries such as aluminium, soap,
detergent, glass, tyre, rubber, pulp and paper, pharmaceutical, water treatment,
textiles, leather, fibre etc. The key chemicals in the chlor alkali industry are
Caustic soda
Chlorine (including liquid chlorine)
Soda ash
Caustic Soda (chemically known as sodium hydroxide) and chlorine are produced
together through the electrolysis of common salt solution (sodium chloride or brine).
Caustic soda and chlorine are generated in the ratio of 1:0.89. Demand for chlorine
drives caustic soda production globally, but in India the industry has developed in line
with the demand-supply balance of caustic soda.
There are three alternative technologies used to manufacture caustic soda from
brine. These are mercury cell, membrane cell and diaphragm technologies.
1. The membrane cell technology involves lower power costs compared to the other
two. It is also the most environmental friendly as it does not use any hazardous
materials as compared to mercury cell and diaphragm technologies which usemercury and asbestos respectively.
2. The diaphragm technology involves higher capital and power costs. The quality of
caustic soda is also of inferior quality. However, it is popular as the purity of
chlorine from this method is highest and chlorine demand is major driver for
caustic soda production globally.
3. Mercury cell technology involves lower capital costs compared to membrane and
diaphragm technologies. However, it is not so popular because of related pollution
hazards due to use of asbestos.
Globally the diaphragm technology is the most widely used while in India the
membrane cell technology accounts for more than 90% of the total capacity.
Globally the total capacity of caustic soda is estimated to be around 78.6 Mn tons in
2009. China has the highest caustic soda capacity at 27 Mn tons, accounting for 34%
of world capacity. North America has a capacity of 15.5 Mn tons. India has a capacity
of 2.9 Mn tons and accounts for 4% of the global caustic soda capacity.
Introduction
Global Scenario
-
7/27/2019 Roland Berger India Chem 20101109
59/235
2010
Handbook on Indian Chemical Industry54
Europe
21%
North
America
20%
Others
0.08
India
0.04
Asia
(excluding
India
China)
0.13
China
34%
Global caustic soda capacity(78.6 Mn tons)
Source: Crisil
China and Middle East are fast emerging as key production hubs for caustic soda. It is
expected that there would not be any significant capacity additions in developed
countries like North America and Western Europe primarily due to unattractive cost
structures and flat demand.
Global consumption of caustic soda in 2009 is estimated at 63.6 Mn tons. Asia is the
largest consumer of caustic soda and is expected to remain the same in near future.
Majority of caustic soda is exported from North America, the Middle East and Asia.
Australia and Latin America are the leading importers.
Consumption Mix
Inorganics
15%
Pulp &
Paper
15%
Others
26%
Water
treatment
4%
Alumina
8%
Soaps/det
ergents/tex
tiles, 13%
Organics
19%
Caustic Soda: Global Consumption
(63.6 Mn tons, 2009)
Source: Crisil
The majority of caustic soda is used in the chemicals and paper industry. Aluminium,
textiles, soaps & detergents and water treatment are other major areas consuming
caustic soda.
-
7/27/2019 Roland Berger India Chem 20101109
60/235
-
7/27/2019 Roland Berger India Chem 20101109
61/235
2010
Handbook on Indian Chemical Industry56
Western region accounted for approximately 47% of the estimated capacity of 2.76
Mn tons in FY09 because of its proximity to salt which is one of the key raw materials.The southern regions accounts for 25% of the total capacity. The northern and
eastern regions have a share of 15% and 13% respectively.
South
25%
East
13%
North
15%
West
47%
Caustic Soda: regional capacity distribution
(2.98 Mn tons, FY10)
Source: AMAI, Crisil
54.9 58.3
140.7155
185.1
370.2
62
17.630.9
39 37.859
FY05 FY06 FY07 FY08 FY09 FY10
Import Export
Large
spike in
import
Caustic Soda import/export
('000 tons)
Source: AMAI, Crisil
Large increase in caustic soda import in Fy10
Imports grew rapidly at CAGR of 46.5% from 54.6 thousand tons in FY05 to 370.2
thousand tons in FY10. In FY07 and FY10 a sharp rise in import was seen. Exports
increased at a CAGR of 28.6% from 17.6 thousand tons in FY05 to 62 thousand tons in
FY10.
-
7/27/2019 Roland Berger India Chem 20101109
62/235
2010
Handbook on Indian Chemical Industry 57
DCM Shriram9%
KanoriaChemicals
5%
Others39%
ABNL4%
ABCL4%
Grasim9%
ChemplastSanmar, 5%
AndhraSugars, 4%
PunjabAlkalies, 5%
GACL16%
Caustic Soda: Market share of companies
(Rs. 4,560 Cr., FY09)
Source: Capitaline, Crisil
Major Companies
Gujarat Alkalies and Chemicals Ltd. (GACL) is the market leader in caustic soda
segment in India accounting for 16% of the total domestic sales value in FY09.
The Aditya Birla Group, through its companies such as Aditya Birla Chemicals Ltd
(ABCL), Grasim industries Ltd and Aditya Birla Nuvo Ltd (ABNL) capture around 16% of
domestic market. Other major companies are DCM Sriram, Grasim Industries, Punjab
Alkalies, Kanoria Chemicals and Andhra Sugars. The top five companies account for
almost 45% of the total domestic sales of caustic soda in India.
Pulp &Paper16%
Soaps/detergents
9%
Pharma6%
Textiles13%
Alumina
17%
Others40%
Caustic Soda: India Consumption(2.3 Mn tons, FY09)
Source: AMAI, Crisil
Key Applications
The key end user industries of caustic soda in India are textiles, paper, soaps and
detergents and aluminium. Alumina is the largest end-use industry accounting for
17% of the total caustic soda consumption in FY09. Caustic soda is used in processing
of bauxite ore in the aluminium industry. The processing of bauxite ore gives alumina
which is in turn used in the manufacturing of aluminium. Paper and textiles
-
7/27/2019 Roland Berger India Chem 20101109
63/235
2010
Handbook on Indian Chemical Industry58
accounted for 16% and 13% respectively of total caustic soda consumption in FY09. In
the paper industry it is used in water treatment, de-inking of waste paper and as a
raw material in pulping and bleaching processes. In the textile industry, caustic soda is
used in processing of cotton fibers and bleaching of fabrics.
Global consumption of chlorine in 2009 is estimated at 55.4 Mn tons. Chlorine is used
in manufacture of paper and pulp, ethylene dichloride (EDC), which is used for
producing polyvinyl chloride (PVC), manufacture of chlorinated paraffin wax,
fertilizers and pesticides.
Chlorine Consumption
Global Scenario
Chlorine: Global Consumption(55.4 Mn tons, 2009)
Others
30% Chlor.Inter
6%
Water
treatment
4%
Vinyls
36%
Pulp and
Paper, 2%
Inorganics
2%
Organics
20%
Source: Crisil
Chlorine: India Consumption(1.9 Mn tons, FY09)
Pesticides
5%
Others
13%
Chlor.Inter
11%
Water
treatment
2%
Vinyls
18%
Pulp and
Paper, 8% Inorganics
23%
Organics
20%
Source: AMAI, Crisil
Indian Scenario
Consumption of chlorine in India in FY09 is estimated at 1.9 Mn tons. The key end-
user industries of chlorine in India are PVC, inorganic and organic chemicals. Vinyl, a
key determinant of chlorine demand in India, accounted for 18% of total chlorine
demand.
Since caustic soda and chlorine are co-products capacities and production of caustic
soda and chlorine are correlated. Chlorine production has been growing in line with
the growth of caustic soda manufacturing and has not been determined by the
growth of the chlorine-based downstream industries. There is more chlorineproduced in India than there is demand.
Like caustic soda, chlorine capacity also increased at a CAGR of 7.5% from 1.9 Mn
tons in FY05 to 2.7 Mn tons in Fy10. Production also increased at 4.4% CAGR from 1.6
thousand tons in FY05 to 2 Mn tons in Fy10.
Caustic soda and chlorine capacity are correlated
-
7/27/2019 Roland Berger India Chem 20101109
64/235
2010
Handbook on Indian Chemical Industry 59
Industry CAGR over next 5 years
Alumina 17-18
Paper 4-5
Soaps/detergents 3-4
Textiles 4-5
Demand for caustic soda from end-use industry
Source: Crisil, Tata Strategic Analysis
Industry Outlook
Demand for caustic soda is expected to be driven mainly by growth in end use
industry i.e. alumina, paper, detergent and textiles. Domestic alumina production is
likely to more than double to 10.5 Mn tons from current production of 4 Mn tons.
Strong growth in industrial, infrastructure, automobile, transportation and power
sectors would drive the demand for alumina. Demand for caustic soda from bothpaper and textile industry is expected to grow at ~5% whereas demand from
detergent industry is expected to grow at ~4% in next 5 years.
Driven by end use industry growth, demand for caustic soda is projected to grow at a
rate of 7.3% from 2.55 Mn tons in FY10 to 3.6 Mn tons in FY15.
Imports are projected to reach 611.2 thousand tons in FY15 from 370 thousand tons
in FY10. This is due to the projected demand-supply gap in the industry.
The increase in capacity is expected to be driven by companies like GACL, which is
slated to add caustic soda capacity of about 200 thousand tons at its Dahej facility.
Demand supply forecast
2,5502,663
2,901
3,3023,499
3,631
370 392
471
565588
611
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY10 FY11 FY12 FY13 FY14 FY15
0
100
200
300
400
500
600
700
800
900
1000
production consumption import (RHS)
Trend in caustic soda demand-supply scenario
('000 Tons)
Source: Crisil, Tata Strategic
-
7/27/2019 Roland Berger India Chem 20101109
65/235
2010
Handbook on Indian Chemical Industry60
Other expansions coming up are of about 112.5 thousand tons by Reliance Industries
Ltd. and 75 thousand tons by Kanoria Chemicals. Aditya Birla Chemicals Ltd. is setting
up two Greenfield projects with a combined capacity of ~90 thousand tons.
Soda ash is chemically known as sodium carbonate. Broadly there are two ways in
which soda ash is produced; it is eit