|
India has witnessed almost 15% growth of PVC in
2001. In fact, India has become a net importer of PVC from 2001.
Yet no suppliers are seriously considering expansion of PVC resin
capacity. Of course some capacity build up are being discussed in
the corridors of resin producers. However, no expansion plans are
likely to be implemented for another 1-2 years. The PVC converting
industry must be wondering about the lack of interest on the part
of PVC resin producers. We thought of finding out some of the reasons
for the lukewarm approach by the Indian suppliers.
First of all PVC resin has grown from 300KT in 1990 to almost 800KT
in 2001giving an average growth of about 9% over the entire decade.
The average growth of 9% as such can not be considered to be too
bad. However, the growth of about 11%seen between 1990 and 1998
when the demand almost touched 735KT faltered badly in 1999 and
2000. In fact, the average growth of just below 3% observed between
1998 and 2001 was a big let down. The growth of PVC resin in India
is driven essentially by PVC pipes, which in turn basically depend
upon the ability of the Government funding. Another segment of wire
and cable also depends upon the Government's funding. These two
sectors alone contribute more than 55-60% of the total demand of
PVC in India. The erratic growth in these two sectors at micro level
causes a lack of confidence in the suppliers for further investment.
Finolex, the last entrant in the PVC field in India has been vexing
on the decision of developing additional capacity of 120 KT for
the last several years. Similarly, Chemplast has been evaluating
its 100KT project for the last few years.
PVC requires chlorine in addition to Ethylene. The availability
and cost of Chlorine are quite erratic. In fact, with the exception
of IPCL, all other suppliers have based their plants either on imported
VCM or EDC. While the overall prices of EDC/VCM over the entire
cycle of the decade of 90s have remained quite satisfactory, the
last 1-2 years have been very volatile. In fact, RIL that considered
setting up of 400KT EDC project about 2 years ago for its existing
300 KT PVC plant, dropped it when the availability of EDC/VCM became
better. Perhaps, the decision on acquisition of IPCL also must have
played a part in the cancellation of this project. While it may
be feasible to set up a new project on imported feedstock, particularly
when they can be sourced from the Middle East, the long term viability
of a new project over the life span of 10-15 years is better protected
with an integrated facility of EDC/VCM. IPCL with its integrated
facility at Dahej, is possibly better equipped to set up another
project of PVC. No wonder the recent announcement for 150KT PVC
plant by IPCL reflects this view. In fact, the Western region particularly
of Gujarat is more suitable to set up EDC/VCM/PVC project due to
easy availability of salt, the basic material needed to produce
Chlorine. What is not yet being pursued in India, is an independent
EDC/VCM supplier that fulfills requirement of the entire PVC industry.
Can such a project that is quite common in USA as well as in the
Middle Eastern regions, be viable in India?
India possibly needs additional PVC requirement of about 100-120
KT every year during the forthcoming decade, even if we consider
that PVC would grow at an average growth of 9-10% from 2001 until
2010. The minimum economic size PVC plant is 150KT. Even if IPCL
proposed project of 150KT be implemented possibly by the end of
2003, the Indian PVC capacity would almost remain in balance. It
would therefore be desirable to consider another plant of 150 KT
capacity. Alternatively, IPCL could consider a 300 KT capacity plant
instead of 150 KT. The larger capacity plant would obviously provide
better earning power to the manufacturer. Some of the smaller PVC
producers if do not plan for further expansion may find very difficult
to run their plants profitably and eventually may have to close
their uneconomic sized plants.
The volatile feedstock situations coupled with the erratic market
growth may prevent the PVC producers to develop additional capacity.
In such a case, the imports of PVC at least to the range of 100KT/year
would be required in the near future. Fortunately, the converting
industry would be able to source the material predominantly from
the Middle East and the Asian regions since these regions have been
building up more capacity to meet the growing demand in the Asian
region. In fact almost 40% of the present global capacity of 30.5
million tonnes exists in these two regions. Some of the major regional
suppliers are:
 |
Formosa Plastics, Taiwan |
|
Hanwa Chemical, Korea |
|
L G Chemical, Korea |
|
PT Asahimas Chemical, Indonesia |
|
Sabic, Saudi Arabia |
|
Shinetsu, Japan |
|
Thai Plastics & Chemicals, Thailand |
|
Vinythai, Thailand |
The combined capacity of the above regional producers is more than
4 million tonnes. It would therefore be not too difficult to source
about 100KT of PVC resin at a competitive price in case the Indian
producers continue to remain indecisive about developing more capacity.
|