India petrochemical trades stalled; force majeure in place at ports amid lockdown

Author: Pearl Bantillo

2020/03/25

SINGAPORE (ICIS)--Petrochemical trades in India were disrupted with plants shutting down and ports declaring a force majeure amid a three-week nationwide lockdown meant to contain the spread of the novel coronavirus in the world’s second most populous country.

“Supply chains are a major risk for a country such as India,” ICIS senior Asia analyst John Richardson said.

“For example, as both its ports and petrochemical plants shut down, it may run short of the resins it needs to package food and other daily necessities. Despite big recent capacity expansions, it is still a net polyethylene [PE] importer,” he added.

Buyers in the country have mostly cancelled import orders for some petrochemicals such as styrene monomer and styrene butadiene rubber (SBR).

India is a major importer of acetone, isopropanol (IPA), linear alkylbenzene (LAB), polyvinyl chloride (PVC), synthetic rubbers and ethanolamines.

Restrictions were put in place at ports, with Mumbai requiring a 14-day quarantine for vessels coming from China, Iran, Italy, South Korea, Japan, Singapore, Vietnam, Hong Kong, Macau, Thailand and Indonesia – all of which have rising levels of confirmed coronavirus cases.

Polyolefin producers have halted domestic dispatches on request from processors due to manpower shortage following the government’s stay-home order, which will inevitably lead to shutdown of factories.

Those that manufacture packaging for fertilizers and pharmaceuticals have reached out to suppliers seeking shipments, to which polyolefin producers could not respond immediately amid the lockdown.

A government clearance will need to be sought for any exemption, industry sources said.

Styrene butadiene rubber (SBR) plants, as well as downstream tyre manufacturing facilities and auto makers, have all stopped production this week, grounding trades to a halt.

Major automakers including Maruti Suzuki, Mahindra & Mahindra, Daimler Mercedes Benz, Fiat, Bajaj Auto and top bike maker Hero MotoCorp have all shut down their plants until 31 March, market sources said.

For PVC, some buyers have been forced to cancel or request delays for shipments of previous bookings on slow-functioning logistics and reduction of operating rates at processors’ facilities.

Epoxy resins producer Grasim Industries shut its 123,000 tonne/year plant in Bharuch from 23 March with no definite restart date, in compliance with the lockdown, and declared a force majeure on supply.

An import tender for around 1m tonnes of urea by Rashtriya Chemicals and Fertilizer Limited (RCF) due to close on 20 March is likely to be delayed.

Even if the urea tender goes through, suppliers would need additional assurances to participate in the tender given the force majeure at ports and 14-day quarantine for vessels.

Indian Prime Minister Narendra Modi announced the extension of the lockdown on Tuesday night, shortly after it started. It was initially thought that it would last only up to the end of March.

The slowdown in the second-biggest emerging economy in Asia with a population of 1.3bn is likely to be aggravated by the prolonged nationwide lockdown amid the coronavirus pandemic.

In the December quarter of 2019, which is India’s third quarter, its economic growth has slowed down substantially to 4.7%.

The country has 519 cases, with a total of nine deaths as of 24 March.

The global tally of infections to date stood at more than 375,000 with the death toll at above 16,000, according to the World Health Organisation (WHO).

The virus outbreak emerged late last year in China’s central city of Wuhan and has since spread to more than 190 countries/areas/territories.

In China, the government’s outbreak-containment measures resulted in sharp contractions in its manufacturing and services sectors.

Focus article by Pearl Bantillo

Additional reporting by Veena Pathare, Helen Yan, Deepika Thapiyal, Trixie Yap, Yaw Min Jie, Ai Teng Lim, Jonathan Chou and Zhi Xuan Ho

Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

(Image: Mundra-Port-in-Gujarat-India.-Source-BASF2)