By Malini Hariharan
The outlook for polyvinyl chloride (PVC) in India is bright was the conclusion at the end of last week's Vinyls-India 2011 conference in Mumbai.
Plenty of indicators were put up to justify this conclusion. India's per-capita consumption of PVC is only 1.7kg as against 13.4 kg in the US, 9.2kg in China, 6.5kg in Malaysia and 4.5kg in Brazil, pointed out S Gopal, managing director of Chemplast Sanmar in his presentation.
The key drivers will be agriculture, healthcare, housing and water management.
The infrastructure sector is estimated to draw in nearly $100bn in investment in 2011. Additionally, the government plans to spend $16bn in the agricultural sector in 2011 while $15bn has been allocated for rural and urban housing development, he said.
Pipes and fittings, which accounts for 71% of India's PVC consumption of 1.87m tonnes, will continue to be the major end-user for this polymer. The Indian pipe market is estimated at 4.7m tonnes of which plastics accounts for 1.7m tonnes with the rest being steel, cement and iron.
Among the different plastic pipes, PVC has a dominant share of 86%, followed by PE (12%).
But India's PVC pipes sector is cluttered with a number of small processors many of whom are not particulary quality conscious. But Gopal believed that the sector will see changes in the coming years.
"I see consolidation; large players are growing faster than small players. I see advanced high productivity machinese being installed," he said.
So what does this mean for PVC demand which grew by 5% in 2010-11.
Gopal estimated that the country will need 200,000-250,000 tonnes of new capacity every year to keep pace with demand.
However, new projects have yet to announced.
Companies that are working on new ethylene capacity have not shortlisted PVC either because profitability for other ethylene derivatives has been stronger or an investment in chlor-alkali unit has been difficult to justify given India's high power costs. Other companies that are building new chlor-alkali plants have found it difficult to integrate to PVC in the absence of a secured source of ethylene. The only alternative is to import ethylene dichloride (EDC) or vinyl chloride monomer (VCM).
So it looks like India will continue to import large volumes of PVC for the next few years. Nearly 650,000 tonnes of suspension grade was imported during 2010-11; about 35% of total demand.
And Gopal predicted that the share of imports would rise to more than 50% of the local market.