India bent on seeking alternative to China for petrochemical imports

Author: Pearl Bantillo

2020/07/16

SINGAPORE (ICIS)--Indian petrochemical importers are seeking alternative sources of cargoes to China, on what appears to be a government-led campaign to reduce heavy reliance on imports from the northeast Asian economic giant.

A boycott on Chinese imports, however, would be detrimental to Indian automotive and pharmaceutical industries that rely on imported material for production.

Boycotting Chinese products would have a minimal impact on China since India is not a major market for its products, ICIS analyst Rachel Qian said.

“India is not a main buyer to China, but China is one of the most important suppliers for India,” she said.

In the first 11 months of India’s fiscal year ending March 2020, China was its biggest source of imports with a share of 14.3%.

For acetic acid, China accounted for about 38% of India’s total imports in 2019.

But in February 2020, the monthly volume from China had shrunk to 102 tonnes, with the bulk of imports sourced from Malaysia, according to ICIS Supply and Demand Database.

For methylene chloride, imports from China had more than a 60% share of the total in 2019, but had declined to about 40% in the first two months of the current year, the data showed.

For maleic anhydride (MA), its share to the total dipped to 29% from in January-February 2020, from about 33% for the whole of 2019.

Industry associations in the south Asian country had lobbied against recent move by the customs authorities to conduct full physical checks on all cargoes coming from China that caused significant delays in release of consignments.

Indian customs then relented after implementing the checks not sanctioned by the central government for about 10 days from 22 June, industry sources said.

Nonetheless, government efforts have recently heightened to wean India away from huge Chinese imports following the deadly border clash between the two Asian giants' troops in Ladakh.

Anti-dumping investigations are underway on more than 100 Chinese products being imported by India.

Suppliers of China-origin acetic acid, as well as vinyl acetate monomer (VAM) have grown cautious in offering to India after recent delays in cargo clearance at Indian ports.

China accounted for around 21% of India’s total VAM import volumes of 147,767 tonnes, followed by Singapore and Saudi Arabia.

Demand has recently picked up in India, prompting some VAM-based adhesives producers to continue ramping up production.

Run rates at these plants are projected to inch up to 30-55% in July, from 30-50% in June, while other downstream producers are operating their plants at 50-70% of capacity.

Some market players said that the hold-up of cargoes at ports should be temporary and partly due to large-scale misdeclaration of goods for duty benefit and other issues uncovered during India’s stepped-up inspections.

Improved buying interest from India is helping to keep regional MA pricing sentiment on an even keel, making up to some extent for the slower-than-expected demand recovery in southeast Asia.

Asia-origin MA cargoes were generally indicated at around $800/tonne for July/August delivery to southeast Asia or India.

Some China-origin materials are possibly available at prices that are lower by as much $50-60/tonne compared with other Asia-origin cargoes, but Indian buyers are not biting, market sources said.

Despite the pricing gulf, Indian buyers are steering away from China-origin cargoes on fears that shipment or delivery of these may be unduly disrupted or delayed if there is any unforeseen turn in macro-level Sino-Indian developments.

The same reluctance is prevalent among importers of Chinese methylene chloride amid the heightened Sino-Indian border tensions, although no formal restrictions on imports have been imposed, a trader said.

China-origin methylene chloride is currently subject to high antidumping duties (ADD) of more than $100/tonne in India, while duty-free alternatives are available from South Korea and Taiwan.

Reduced import demand from India, meanwhile, had hit Chinese producers in late June as more availability in the domestic market had exerted downward pressure on prices.

India's overall merchandise imports in April-June 2020 slumped 52.4% year on year to $60.4bn, while exports (including re-exports) for the period declined 36.7% to $51.3bn, official data released on Thursday showed.

In June alone, imports tumbled 47.6% year on year against a more moderate 12.4% fall in exports, resulting in India’s first trade surplus in 18 years at $790m, according to its Ministry of Commerce.

The data reflected the impact of India's prolonged lockdown to contain the novel coronavirus pandemic.

The country now has the third highest number of confirmed cases globally, at nearly 1m.

Additional reporting by Ai Teng Lim, Helen Lee and Kite Chong

Interactive by Pearl Bantillo and Nurluqman Suratman

Focus article by Pearl Bantillo

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