According to projections, India will contribute one-third of the world’s new petrochemical capacity increase by 2030. Given that more than half of China’s and India’s present chemical imports come from Asia, the change may be detrimental to regional exporters.
With a projected capital investment of USD 37 billion to increase self-sufficiency, India is set to emerge as the next big player in the global petrochemicals market, according to a new research from S&P Global Ratings.
The paper, “First China, Now India: Self-Sufficiency Goals would Add To Petrochemicals Supply,” cautions that oversupply pressures in Asia’s petrochemical industry would worsen as a result of India’s rapid capacity building, which follows China’s comparable actions.
India has long depended on imports to fulfill local demand, making it the third-largest user of petrochemicals in the world, after the US and China. However, a transition to self-sufficiency is under progress, and by 2030, S&P projects that India will provide one-third of the world’s capacity expansions.
The research from S&P Global Ratings predicts that India will continue to implement significant investment plans to lessen reliance on chemicals imported for common items like plastic bags and car components.
Asia-Pacific petrochemical overcapacity is unlikely to deter India from making significant investments in domestic capacity additions, with USD 12 billion coming from private sector capital expenditures that may be more flexible and USD 25 billion coming from public sector projects connected to refinery expansions.
According to projections, India will contribute one-third of the world’s new petrochemical capacity increase by 2030. Given that more than half of China’s and India’s present chemical imports come from Asia, the change may be detrimental to regional exporters.
According to Ker Liang Chan, a credit analyst at S&P Global Ratings, “India’s petrochemical capacity increases, which come after those of China, will enhance competitiveness within the larger Asian market over the next years.”
India’s strong domestic demand, particularly for essential materials like polyethylene, is anticipated to sustain local companies’ profits despite overcapacity, even while global players deal with pressure on prices and possible consolidation.
“Without mitigating measures to diversify sales and optimize capital investment, increasing self-sufficiency in China and India presents a challenge for Asia-Pacific petrochemical exporters,” Chan said.
Asian exporters’ choices are restricted since US goods are subject to tariffs. S&P cautions that this may put pressure on profits and lead to industry consolidation.
However, robust local demand is expected to protect Indian manufacturers. India will surpass the United States as the world’s second-largest user of polyethylene, one of the most frequently used petrochemicals, according to S&P.
Analyst Shawn Park went on to say, “China and India’s self-sufficiency aspirations worsen structural overcapacity in the sector, especially during a lackluster rebound in global demand and continuing trade concerns.”
Throughout the next years, China will continue to build a significant amount of capacity. S&P predicted that by 2030, India will take up that role, accounting for one-third of all new additions worldwide.
Exporters of petrochemicals from Asia will probably suffer from the change. Asia is the source of almost half of China’s and India’s chemical imports. It could be challenging for Asian chemical businesses who export a significant amount of their production to shift export volumes away from two of the top three nations that use petrochemicals.
However, because of tariffs, it could not be profitable to increase shipments to the US, one of the three biggest markets for petrochemicals. According to our analysis, this might further hurt profits and encourage sector consolidation.
However, S&P thinks that strong local demand would preserve the profitability of Indian petrochemical operators to some extent.