OUTLOOK’ 18: India on track to ramp up PE exports in 2018

SINGAPORE (ICIS)–India is poised to become a regular exporter of polyethylene (PE) early 2018 onwards as capacity addition in the country out paces demand growth.

India welcomed more than 2m tonnes of additional PE capacity in 2017 alone, causing supply to outgrow its total PE demand.

“With all the PE plants in the country up and running since November 2017, India is well on track to becoming a PE exporting nation 2018 onwards,” an Indian producer said.

Major PE producer Reliance Industries Ltd (RIL) established on-spec production and began dispatches from its 400,000 tonne/year low density PE (LDPE) facility in Jamnagar, Gujarat, in November this year.

Prior to starting this unit, the supplier had already begun commercial operations and exports out of its 550,000 tonne/year linear low density PE (LLDPE)/high density PE (HDPE) unit also based in Jamnagar in October.

A new entrant in the Indian polymer manufacturing space, ONGC Petroadditions Ltd (OPaL) started producing PE at its two 360,000 tonne/year LLDPE/HDPE swing facilities and a 340,000 tonne/year HDPE unit in Dahej, Gujarat early this year and has begun to place volumes in China and southeast Asia since late this year.

Besides these two regions, Turkey, Africa and countries in the Indian sub-continent are markets Indian producers are keen to foray into as operations and exports grow to full-scale.

India’s PE production also increased in Q2 2016, following the startup of GAIL India Limited (GAIL)’s 400,000 tonne/year LLDPE/HDPE swing unit in Pata commissioned in March 2016.

Indian PE demand growth stays strong, with robust high single-digit growth figures realised in the recent years.

With India’s domestic PE production increasing, imports particularly for HDPE and LLDPE grades have reduced significantly.

The 2.01m tonne increase in India’s overall PE capacity in 2017 is higher than its recorded total PE imports of 1.5m tonnes in the fiscal year ending March 2017.

At the same time, exports of Indian PE have increased immensely, netting an increase of 49.9% in FY 2016-17 from the year before.

India began to ramp up PE exports in late 2016, when a domestic cash crunch brought on by the government’s move to demonetise currency notes prompted Indian producers to export to offload inventories.

Indian PE exports in the first half of the current fiscal year stand at over 127,000 tonnes, netting a whopping 124.6% increase from the same time last year.

The Indian trading community previously involved in importing PE has begun to foray into exports. Several traders have partnered with PE producers to distribute material in designated markets.

India has been one of the lowest-price markets since October this year, as producers maintained domestic prices at levels that would make imports unattractive.

Furthermore, ample availability of LLDPE film resulted in a price war among domestic suppliers, curtailing prices for the grade at levels significantly below international markets.

It is likely that with reduced dependence on imports, workable prices for imported cargoes would be influenced by the prevailing prices of domestic material.

Moreover, the rise in shale-based PE production in the US is set to come into markets 2018 onwards, resulting in a massive price drop for PE across different markets.

“We are all set to see PE prices in three digits, down from the current four-digit levels irrespective of markets,” an Indian importer said.

A number of the shale-based PE plants are due for a start up in end- 2017 and early 2018, so the commercial impact is expected to emerge from June onwards, when commercial production at these facilities is established, according to market sources.

Outlook article by Veena Pathare