Maharashtra drought may curtail India petchems ops/demand

28 January 2013 07:06  [Source: ICIS news]

By Pearl Bantillo and Prema Viswanathan

SINGAPORE (ICIS)--India’s production of petrochemicals may be curtailed by the drought afflicting its major industrialised state of Maharashtra, which is also the biggest sugarcane producer in the country, industry sources said on Monday.

The state in western India is home to several petrochemicals, specialty chemicals, fertilizers and agrochemical projects/plants. India’s financial capital of Mumbai is located in the state.

Among the companies with petrochemicals production in Maharashtra include conglomerate Reliance Industries Ltd (RIL), polymer maker Supreme Petrochem and polyvinyl chloride (PVC) producer Finolex.

The state also accounts for much of India’s polymer demand given its large number of converters and other downstream manufacturing facilities, including those of the automotive sector.

However, Maharashtra is grappling with its worst drought in decades, according to media reports.

Adverse weather conditions will likely see the state’s sugarcane production falling this year, leading to lower feedstock supply for ethanol production, market sources said.

Supply of ethanol in India is expected to be tightened in 2013 by lower sugarcane output, following below-average precipitation and delayed rainfall during last year’s monsoon.

This year's ethanol production season may end as early as March, compared with April or May in previous years.

Maharashtra’s worsening water shortage is having a broader impact on industrial output, said a downstream ethyl acetate (etac) producer in India.

Some industrial estates, including distilleries, have been asked to curtail water usage and cap plant operating rates. This may further tighten the availability of ethanol for etac production, in addition to keeping feedstock ethanol costs at a high level, the producer said.

Etac is typically made from ethanol in combination with acetic acid.

In the polyethylene (PE) sector, the full impact of the drought has yet to be felt, said a major PE pipe producer.

“If the drought prolongs, it could have a negative impact on the economy which will delay government projects, and therefore, have a negative impact on polymer demand,” said the producer.

In the short term, however, demand for PVC and PE pipes may get a boost, as a drought requires borewells to be dug deeper into the ground. 

PVC is used in the outer casing of borewells, while PE is used for the inner layer of the pipe.

Demand for irrigation pipes may be adversely affected because of the drought, but the next three to four months may see strong demand for PVC pipe for the government’s infrastructure projects, said a source from Finolex.

The government’s PVC purchases, expected in January-March – the last quarter of India’s fiscal year – should offset much of the negative impact of the drought, the Finolex source said.

Meanwhile, steps are being taken to ease the water shortage in parts of Maharashtra.

“Water has been diverted from dams supplying to Pune [second largest metropolis in the state] to supply to these areas… [but] if it doesn’t rain again this year, then we are headed for trouble,” the source from Finolex said.

Additional reporting by Veena Pathare and Trisha Huang

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Pearl Bantillo
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