India may turn into net PE exporter in H2 as new plants start up

SINGAPORE (ICIS)–India may turn into a net exporter of polyethylene (PE) in the second half of 2017, as the country will welcome hefty new capacities in the western state of Gujarat, market sources said on Thursday.

The possible target export markets are China, Turkey, Africa and southeast Asia as India’s domestic PE capacity will increase by 2.01m tonnes by mid-year, they said.

Reliance Industries Ltd (RIL) is expected to start up a low density PE (LDPE) unit and a linear low density PE (LLDPE)/high density PE (HDPE) swing plant in Jamnagar by the end of the first quarter; while ONGC Petro additions Ltd (OPaL) is due to commence production at its two LLDPE/HDPE swing plants in Dahej in the first half of the year.

OPaL’s stand-alone 340,000 tonne/year HDPE unit in Dahej had an initial start-up in December 2016, with on-spec production achieved in January.

The expected increase in India’s overall PE capacity is higher than its recorded total PE imports of 1.88m tonnes in the fiscal year ending March 2016.

The country, which has a current PE capacity of more than 3m tonnes/year has always been an importer of the polymer until late last year, when a domestic cash crunch prompted PE producers to tap the export market to offload inventory.

By the second half of the year, however, India’s PE capacity will have outpaced domestic demand, making exports necessary for its local producers, market sources said.

PE products would most likely be marketed into Asia, particularly China, which has a strong demand for the material, the Indian producers had sounded off at the Plastivision 2017 held in Mumbai in January.

“We are looking to export PE into Asia, as the production that is slated to come up in the first half of the year is more than what the Indian market can absorb at this point in time,” a source at a key Indian producer said.

In December 2016, major Indian producer RIL spearheaded the PE exports due to a severely weakened domestic demand after the government’s surprise demonetisation of the rupee (Rs) 500 and Rs1,000 notes, which accounted for more than 80% of the money in circulation at that time.

Weak local demand presented a good opportunity to venture into global markets to establish a customer base for PE when its new facilities start commercial production in 2017, company sources said.

RIL sent in December PE product from its existing facilities for customers in different markets to try out, so that exports can start as soon as on-spec production is achieved at the new units, they said.

Another local PE producer, GAIL India Ltd (GAIL), had also forayed into exports for the first time late last year, with a few consignments sent to southeast Asia, where netbacks are better, market sources said.

The company’s 400,000 tonne/year LLDPE/HDPE swing facility resumed operations in January 2017, after more than a month of shutdown following technical issues at the unit’s reactor. The plant was commissioned in March last year.

Meanwhile, new PE producer OPaL is also keen to export to China and southeast Asia when it is able to establish distribution channels sometime in the second half of 2017, a company source said.

Buyers in India have turned cautious about imports, particularly for HDPE and LLDPE grades.

In April to November 2016 – the first eight months of India’s current fiscal year – total LLDPE imports stood at 326,400 tonnes, while HDPE imports were at 469,700 tonnes, based on data from the India’s Department of Commerce.

LLDPE imports for the period had fallen 26% from the same period in 2015, based on data from India’s Department of Commerce.

There is a strong likelihood that imports of these polymers will substantially fall when the new domestic capacities start up, market sources said.

In recent weeks, LLDPE and HDPE import prices into India increased modestly as supply is ample in the domestic market.

Moreover, additional price discounts for bulk bookings and cash purchases also rendered domestic product attractive amid the ongoing cash crunch, market sources said.

Indian traders that were previously involved in importing PE into India and selling locally are now eyeing other markets.

“I am very keen to get into PE exports since HDPE and LLDPE imports will become virtually non-existent,” an Indian trader said.

Focus article by Veena Pathare

Top photo: A port in Gujarat state in western India. (Source: Sipa Press/REX/Shutterstock)