OVERVIEW OF INDIAN CHEMICAL INDUSTRY

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OVERVIEW OF INDIAN CHEMICAL INDUSTRY - S. R. Lohokare

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OVERVIEW OF INDIAN CHEMICAL INDUSTRY

  1. 1. 1Presentation onOverview of Chemicals Industry in India(12th October 2011)S. R. LOHOKAREChairman – Western Region &Chairman – Technical & Energy Expert Committee ofINDIAN CHEMICAL COUNCILUK TRADE & INVESTMENT (UKTI)andINDIAN CHEMICAL INDUSTRY
  2. 2. 2INDIAN ECONOMY
  3. 3. 3INDIAN ECONOMY INDIA’S GDP – US $ 1.53 TRILLION 10TH LARGEST IN TERMS OF MARKET EXCHANGE RATE IN TERMS OF PURCHASING POWER PARITY (PPP) 4TH LARGEST US $ 4.06 TRILLION AGRICULTURE – 16.1% OF GDPINDUSTRY – 28.6% OF GDPSERVICE SECTOR – 55.3% OF GDP 2010 PER CAPITA INCOME US $ 1,265 IN TERMS OF MARKET EXCHANGE RATE US $ 3,339 IN TERMS OF PPP GDP GROWTH 8.8% DURING 2003 – 08 GDP GROWTH 8.5% (2010-11)
  4. 4. 4INDEX OF INDUSTRIAL PRODUCTION(BASE 93-94 = 100)Source : CSO, MOSPI100.0150.0200.0250.0300.0350.0400.0YearIndicesChemicals 105.3 117.1 122.7 140.4 149.7 164.6 176.6 185.0 191.8 208.4 241.9 261.6 286.1 315.2 332.4 361.8 370.2Mining & Quarrying 109.8 120.5 118.2 126.4 125.4 126.7 130.3 131.9 139.6 146.9 153.4 154.9 163.2 171.6 176.0 193.4 204.9Manufacturing 109.1 124.5 133.6 142.5 148.8 159.4 167.9 172.7 183.1 196.6 222.5 242.3 273.5 298.6 308.6 342.5 370.6Electricity 108.5 117.3 122.0 130.0 138.4 148.5 154.4 159.2 164.3 172.6 181.5 190.9 204.7 217.7 223.7 237.1 250.5General Index 109.1 123.3 130.8 139.5 145.2 154.9 162.6 167.0 176.6 189.0 211.1 227.9 255.0 277.1 286.1 316.2 341.01994-951995-961996-971997-981998-991999-002000-012001-022002-032003-042004-052005-062006-072007-082008-092009-102010-11
  5. 5. 5
  6. 6. 6INDIAN CHEMICAL INDUSTRY
  7. 7. 7SIZE OF INDIAN CHEMICAL INDUSTRY 12TH LARGEST – VOLUME 3RD LARGEST IN ASIA INDUSTRY SIZE - US $ 76 BN IN 2009-2010 5% OF INDIA’S GDP EXPECTED TO GROW AT 10% - DOUBLE THE GROWTHRATE OF THE GLOBAL INDUSTRY
  8. 8. 8Chemical clusters in IndiaCHEMICAL CLUSTERS ARE CONCENTRATED IN THE WESTStates Share ofproductionGujarat 53%Maharashtra 9%MadhyaPradesh5%Uttar Pradesh 6%Tamil Nadu 6%Punjab 4%Others 17%Jamnagar,Thane, Pune , ChiplunAhmedabadHyderabadVadodaraCochinHaldiaBangaloreNCRChennaiBharuch, Hazira, VapiBaddiDera BassiPanipatNagdaVishakhapatnam,KakinadaCuddalore, PondicherryMangaloreSource: Working Group of Chemicals, PlanningCommission (11th Five Year Plan)
  9. 9. 9CHARACTERISTICS OF INDIAN CHEMICAL INDUSTRY HIGH DOMESTIC DEMAND POTENTIAL, AS THE INDIANMARKETS DEVELOP AND PER CAPITA CONSUMPTION LEVELSINCREASE; HIGH DEGREE OF FRAGMENTATION AND SMALL SCALE OFOPERATIONS; LIMITED EMPHASIS ON EXPORTS DUE TO DOMESTIC MARKETFOCUS AND SMALLER SCALE OF OPERATIONS; LOW COST COMPETITIVENESS AS COMPARED TO OTHERCOUNTRIES DUE TO HIGH COST OF FEEDSTOCK & POWER,TAXATION STRUCTURE AND COST OF CAPITAL; LOW FOCUS ON R&D DESPITE INITIATIVES TO INNOVATEPROCESSES TO SYNTHESISE PRODUCTS COST EFFECTIVELY
  10. 10. 10TRANSFORMING INDIAN CHEMICAL INDUSTRY LARGE PETROCHEMICAL CAPACITIES TREND TOWARDS OUTSOURCING OF DIFFERENTCHEMICAL INTERMEDIATES TO INDIA DOMESTIC COMPANIES MOVING UP THE VALUE CHAIN STRINGENT ENVIRONMENTAL LAWS AND PRACTICESLEADING TO SHIFTING OF PLANTS TO INDIA
  11. 11. 11SIZE OF CHEMICAL INDUSTRY IN INDIAUS $ BN %BASIC CHEMICALSInorganic Chemicals 2.00 2.64Fertilizers 18.51 24.45Organic Chemicals 0.77 1.02Petrochemicals 14.94 19.74Total Basic Chemicals 36.22 47.84SPECIALITY CHEMICALS 16.25 21.47KNOWLEDGE CHEMICALS 23.23 30.6975.70 100.00
  12. 12. 12SEGMENTS OF INDIAN CHEMICAL INDUSTRYSpeciality21.47%Knowledge30.69%Basic47.84%BasicSpecialityKnowledge
  13. 13. 13Segment Share ofmarketMarketgrowthMarket segmentsOrganic Chemicals Inorganic ChemicalsBasic 48% 8.82% Petrochemicals – Basic(Ethylene, Propylene etc) Fertilizers Petrochemicals – Polymers  Chlor Alkali Other organic chemicals –Benzene based, alcoholbased, others Other inorganicchemicalsSpecialty 21% 10.00%  Paints and varnishes Dyes and Intermediates Textile Chemicals OthersKnowledge 31% 11.60%  Pharmaceuticals Biotechnology AgrochemicalsTHE INDIAN CHEMICAL INDUSTRY - THREE KEY SEGMENTS
  14. 14. 14OrganicchemicalsBasicchemicals(48%) InorganicchemicalsSUB SEGMENTS ACROSS THE CHEMICALS VALUE CHAIN AREEXPECTED TO RECORD DOUBLE DIGIT GROWTHSpecialtychemicals(21%)PaintsTextile ChemicalsKnowledgechemicals(31%)PharmaAgrochemicalsBiotechGrowth – FY 10 to 1215%4%3%3%11%6%12%29%8%PolymersSoda AshCaustic SodaFertilizers
  15. 15. 15GovernmentInitiativesGOVERNMENT OF INDIA IS PROMOTING GROWTH THROUGHINVESTMENTS FROM BOTH DOMESTIC AND FOREIGN PLAYERSR&DFDI13PCPIRsInternationaltrade42► Breaks on R&D► Weighted average deduction of 200% to chemicalcompanies► Setting up of PCPIRs to promote investment► Each PCPIR will contain petrochemical units,associated logistics and infrastructure► 100% FDI in the chemicals sector allowed► Delicensed the manufacture of most chemical products► Incentives to boost chemical exports include:► Duty exemptions► Special duty-free zones for manufacturing units► Export-promotion zones► Advanced Licensing Scheme for procurementof raw materialsSources: Ernst & Young TP report on General ChemicalsPetroleum, Chemicalsand Petro chemicalInvestment Regions
  16. 16. 16BASIC CHEMICALS
  17. 17. 17Source : Annual Report of respective Companies.LEADING INDIAN COMPANIES IN BASIC CHEMICAL SECTOR - 2010-11SNNAME OF THECOMPANYSALES(net ofExcise)EBIDTA PATFIXEDASSETS(GrossBlock)US $ Bn US $ Bn % US $ Bn % US $ Bn1 Reliance Industries 52.79 8.76 16.60 4.32 8.18 47.072 IFFCO 3.58 0.38 10.65 0.09 2.39 1.943 Tata Chemicals 1.32 0.20 15.37 0.09 6.55 0.844 National Fertilizers Ltd. 1.23 0.06 5.22 0.03 2.40 0.625 RCF 1.17 0.11 9.68 0.05 4.45 0.696 JBF Industries 0.76 0.09 12.03 0.03 3.68 0.337 Indo Rama Synthetics 0.59 0.09 15.06 0.03 5.01 0.658 Finolex Industries 0.42 0.05 11.53 0.02 3.84 0.339 Aarti Industries 0.31 0.04 13.57 0.01 4.61 0.1610 Guj Alkalies & Chemicals 0.30 0.06 19.68 0.02 8.01 0.61
  18. 18. 18PETROCHEMICALSPRODUCER - FEEDSTOCK SOURCESCompany Unit FeedstockEthylene Capacity (KTPA) Propylene Capacity (KTPA)AdditionByExisting Additions Total Existing Additions TotalRIL –Jamnagar,Hazira,Nagothane,Gandhar,VadodaraCracker /PRURefineryNaphtha /Gas (C2-C3,Propane)1883* - 1883 2800 - 2800 -OPaL,DahejCracker Naphtha - 1100** 1100 - 340** 340 2013IOC,PanipatCracker /PRURefineryNaphtha 857 - 857 600 - 600 -Haldia Cracker Naphtha 700 - 700 320 - 320 -Others –GAIL,BPCL,HMEL,MRPLCracker /PRURefinery /FCCURefineryNatural Gas(C2-C3)/PRU-Propylene410 290 700 16 1240 956 2012/14TotalCapacity3850 1390 5240 3736 1580 5016* RIL, Jamnagar is expected to set up a Cracker of 1.5 MT capacity using Refinery Gas by 2014-15** OPaL’s 40% of production is required to be exported as it is a SEZ unit.
  19. 19. 19INDIAN POLYMER DEMAND05001000150020002500300035004000YearKTAHDPE 1279 1800 2152 2540LLDPE 1252 1509 1730 1990LDPE 323 358 378 398PP 2212 2679 3143 3621PVC 1707 1875 2065 22712009 2010 2011 201218%10%26%17%7%Growth RatePPPVCHDPELLDPELDPE
  20. 20. 20FUTURE DEMAND SUPPLY SCENARIO : POLYMERS(in kT)DEMAND CAPACITY REQUIREDCAPACITYYEAR 2010 2012 2010 2012POLYMERS 8221 10820 7794 3079LDPE 358 398 205 193LLDPE 1509 19902663 1890HDPE 1800 2540PP 2679 3621 3605 16PVC 1875 2271 1321 950
  21. 21. 21FUTURE DEMAND SUPPLY SCENARIO : FIBRE(in kT)DEMAND CAPACITYYEAR 2010 2012 2012FIBRE 3525 4624 6540PSF 941 1180 1429PFY 2106 2848 4400VSF 275 345 419OTHERS 203 251 292
  22. 22. 22FUTURE DEMAND SUPPLY SCENARIO : CHEMICALS(in kT)DEMAND DEMANDCAGRCAPACITY REQUIREDCAPACITYYEAR 2010 2012 2012/2010 2012 2012CHEMICALS 588 657 5.7% 670 -LAB 432 478 5.2% 530 -EO 156 179 7.1% 140 39
  23. 23. 23INORGANIC CHEMICALS
  24. 24. 24FERTILIZER INDUSTRYSNAPSHOTINVESTMENT US $ 5.53 BNNUMBER OF PLANTS TOTAL 128 OF WHICHUREA – 31 (28 OPERATIONAL)COMPLEX FERTILIZERS – 19(INCLUDING 11 DAP PLANTS)SSP – 66OTHERS (AMM. SULPHATE ETC) -12CAPACITY (2009-10) N – 12.05 MILLION TONNESP – 5.63 MILLION TONNESPRODUCTION OF FERTILIZERNUTRIENTS (2009-10)N – 11.90 MILLION TONNESP – 4.32 MILLION TONNESK – IMPORTED STAGNATION IN INDIGENOUS CAPACITY, PRODUCTION STEEP RISE IN COSTS OF IMPORTED RAW MATERIALS AND INTERMEDIATESSource for Tonnage : Annual Report 2009-10, Department of Fertilizers, Government of India
  25. 25. 25PRODUCTION, CONSUMPTION AND IMPORT / GAP OF UREA AND DAP2008-09 TO 2009-10 (ACTUAL)(in MMT)YEAR PRODUCTION CONSUMPTION IMPORTUREA DAP UREA DAP UREA DAPActual2008-09 19.92 2.99 26.65 9.23 5.67 6.192009-10 21.12 4.24 26.45 10.15 5.21 5.77Source : Fertilizer Association of India (FAI)
  26. 26. 26TURNOVER OF FERTILIZER SECTORYEAR US $ BN2006-2007 11.142007-2008 13.232008-2009 28.492009-2010 18.51Source : Fertilizer Association of India (FAI)
  27. 27. 27CAUSTIC SODA INDUSTRY IN INDIAFY 10MMTPACAPACITY 3.20PRODUCTION 2.31DEMAND 2.57 DEMAND GROWTH IN ALUMINA IS EXPECTED TO DRIVE CAUSTICSODA DEMAND 35 UNITS SIZE OF CAUSTIC / CHLORINE INDUSTRY IN FY 10 - US $ 0.79 BN
  28. 28. 28MAJOR PRODUCERS OF CAUSTIC SODA IN INDIAPRODUCERS INSTALLEDCAPACITY(As on31.03.2010)PRODUCTIONIN 2009-10SALESIN 2009-10KTPA KTPA KTPAADITYA BIRLA GROUP 454 418 340GUJARAT ALKALIES &CHEMICALS429 414 382DCM SHRIRAMCONSOLIDATED275 182 182Source : Annual Report 2009-10 of Respective Companies
  29. 29. 29SODA ASH INDUSTRY IN INDIAFY 10MMTPACAPACITY (GROSS) 2.99PRODUCTION (GROSS) 2.09DEMAND 2.32 FLAT GLASS AND DETERGENT SECTORS WILL REMAIN KEYDEMAND DRIVERS SIZE IN FY 10 – US $ 0.64 BN
  30. 30. 30STATISTICS OF SODA ASH INDUSTRY(in KT)PRODUCER ANNUALCAPACITYPRODFY 10SALESFY 10GROSS GROSSNIRMA +SAUKEM 1015 602 529TATA CHEMICALS 918 696 675GUJARAT HEAVYCHEMICALS850 676 657OTHERS 211 113 103TOTAL 2,994 2,087 1,964IMPORTS 643EXPORTS (290)DEMAND 2,317Source : Annual Report of respective Companies.
  31. 31. 31OTHER INORGANIC CHEMICALS – 2009-10KT % byVolumeUS $ BN % byValueCARBON BLACK 419 80.81 0.44 77.19TITANIUM DIOXIDE 61 11.78 0.10 17.54OTHERS 38 7.34 0.03 5.26TOTAL 518 100.00 0.57 100.00Source for Tonnage : Annual Report 2009-10, Department of Chemicals and Petrochemicals,Government of India
  32. 32. 32SPECIALITY CHEMICALS
  33. 33. 33Source : Annual Report of respective Companies.LEADING INDIAN COMPANIES INSPECIALITY CHEMICALS SECTOR- 2010-11SNNAME OF THECOMPANYSALES(net ofExcise)EBIDTA PATFIXEDASSETS(GrossBlock)US $ Bn US $ Bn % US $ Bn % US $ Bn1 Asian Paints 1.41 0.26 18.68 0.16 11.73 0.342 Pidilite Industries 0.50 0.10 20.03 0.06 12.90 0.193 Atul Industries 0.33 0.04 13.11 0.02 6.20 0.21
  34. 34. 34KEY SEGMENTS – OPPORTUNITIES & CHALLENGESSource : Tata Strategic Management Group, ISP EstimatesSEGMENTS OPPORTUNITIES CHALLENGESConstructionChemicals•Increase in infrastructure &Construction•Highly Competitive;•Low value product technologies;•Limited margins;•Exports are limited and have tocomply with REACH RegulationsPaints &CoatingsChemicals•Quality upgrade to movecloser to internationalstandards;•Increased per capita paintconsumption•Competition from Chineseingredient imports;•Highly fragmented &unorganized sectorsWater TreatmentChemicals•Rapid industrializationleading to huge demand foreffluent treatment;•Increasing awareness ofrecycling water;•Stricter Governmentregulations in industrialand institutional domains -scope for increased usage•Current lack of stricterregulations which will beimplemented;•Commodity technologies highlyprevalentContd…
  35. 35. 35KEY SEGMENTS – OPPORTUNITIES & CHALLENGESSource : Tata Strategic Management Group, ISP EstimatesSEGMENTS OPPORTUNITIES CHALLENGESTextileChemicals•Established manufacturinghub based on low costmanpower;•Equipments and availabilityof rich pool of scientists•High input costs; Raw materialsensitive;•Low profit margins;•Competition from other low costlocations (Bangladesh, Vietnametc.)Personal CareIngredients•Rising consumer awareness;•Increasing middle classdisposable incomes;•Growth of local formulating& import replacement;•Huge export potential due toIndias vast experience inproducing natural products•Stiff competition from Chineseingredients;•Limited affordability forsophisticated formulations.
  36. 36. 36INDIAN SPECIALITY CHEMICALS : OVERVIEWSource : Tata Strategic Management Group, ISP EstimatesAt an estimated $16.25 Bn India’s Specialty Chemicals Marketrepresented roughly 4% of the Global Market in 2008
  37. 37. 37KNOWLEDGE CHEMICALS
  38. 38. 38Source : Annual Report of respective Companies.LEADING INDIAN COMPANIES INKNOWLEDGE CHEMICALS SECTOR- 2010-11SN NAME OF THECOMPANYSALES(net ofExcise)EBIDTA PATFIXEDASSETS(GrossBlock)US $ Bn US $ Bn % US $ Bn % US $ Bn1 Cipla 1.31 0.29 22.58 0.20 15.65 0.842 Ranbaxy Laboratories 1.20 0.39 32.47 0.24 20.35 0.613 Dr. Reddys Laboratories 1.10 0.28 25.77 0.19 17.21 0.644 Lupin Labs 0.95 0.21 22.31 0.17 18.05 0.405 Aurobindo Pharma 0.88 0.21 23.85 0.13 14.38 0.426 United Phosphorus 0.65 0.10 15.32 0.03 5.20 0.357 Cadila Healthcare 0.46 0.16 35.52 0.13 27.99 0.378 Bayer CropScience 0.46 0.05 11.22 0.03 6.17 0.129 Glaxo Smithkline 0.45 0.19 41.51 0.12 26.54 0.0710 Sun Pharmaceuticals 0.41 0.32 78.58 0.29 71.60 0.27
  39. 39. 39PHARMACEUTICAL INDUSTRY IN INDIA SIZE OF PHARMACEUTICAL INDUSTRY IN INDIA PROJECTED GROWTH - 11.6% PER ANNUM US $ 20 BN DOMESTIC MARKET BY 2015 US $ 30 BN DOMESTIC MARKET BY 2020 ACUTE THERAPY VALUE CONTRIBUTION – 71% GROWTH - 16.3% CHRONIC THERAPY - 18.7% GROWTHSource : Dept of Pharmaceuticals, Govt. of IndiaRs. Crores US $ BNDOMESTIC 62,055 8.79EXPORTS 42,154 12.94TOTAL 1,04,209 21.73
  40. 40. 40INDIAN AGROCHEMICALS INDUSTRY DOMESTIC MARKET : > US $ 1 BILLION EXPORTS :> US $ 0.5 BILLION MARKET SHARE OF MNCs : 50% + THE BALANCE IS SHARED BETWEEN BASIC MANUFACTURING COMPANY FORMULATORS / REPACKERS / MARKETING COMPANIESSource : The Third India Chemical Industry Outlook Conference
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