Impact of falling prices on India PVC market & a general update 2016

Impact Of Low Crude Oil Prices On
Indian PVC Market –
An Update
Mr. Sukhdeep Sethi
Director – AVI Global Plast Pvt. Ltd.
Chemorbis Asia 7th Petrochemicals Conference
June 24, 2016

2© AVI Global Plast Pvt. Ltd., 2016
Overview
•  Impact of Oil Prices
²  Oil Crash of 2014/2015
o  Impact on PVC Prices in India
o  Impact on Demand
•  Overall PVC Market in India
²  Domestic Producer-wise Capacity
²  Consumption Data
²  Sector-wise PVC Usage
•  Export Champions to India
•  China PVC Market scenario
•  Conclusion
•  About AVI Global

The Oil Crash of 2014/2015
•  Crude Oil prices had a steep fall over the
past 18 months starting Q4-2014
•  Experts predict that prices will remain low
for the next few years
•  Effect of slowdown in production in the US,
etc. expected to show results by Q2 of 2016
•  This resulted in a price fall across all
polymers around the world
o Varying timing & extent of fall influenced by a
different set of supply chain & market factors
o Difference between ethylene & propylene
feedstock due to use of natural gas
o Thus, supply/demand dynamics affected by
factors besides crude oil prices
•  Tremendous impact on overall industry
sentiment, demand & earnings of producers
& processors of resins
Source: Report by Advanced Purchasing Dynamics

Movement of Oil prices vis-à-vis PVC & key inputs
0
20
40
60
80
100
120
0
200
400
600
800
1000
1200
1400
1600
Ethylene (SEA) EDC (SEA) VCM (SEA) PVC (CIF Ind) Crude Oil (Nymex)

Impact on PVC Prices in India
Factor 2008-09 2014-16
High Low High Low
Crude Oil (WTI) $145.18 $46.27 $100.07 $28.50
Ethylene $1500+ $500 $1451 $760
Intl. PVC Prices/ MT $1400 $550 $1070 $760
USD/ INR 48.90 39.28 58.36 68.80
RIL Price/ MT Rs. 66000 Rs. 37000 Rs. 77000 Rs. 62000
Analysis •  In 2008, price of crude oil fell more than US
$ 100 in just a few months
•  Ethylene prices dropped proportionately to
drop in crude prices
o  Crash in global PVC resin prices
•  Drop in PVC got arrested to Rs 37000/MT
because of a steep depreciation in the INR
•  Crude oil dropped to below $30
•  Ethylene did not drop as much as crude oil
mainly due to limited availability owing to
various plant shutdowns/maintenance
o  This limited the drop in PVC prices
•  The drop in pvc prices has pushed demand
by 10.6%

Period
2015-16
Consumption
(KT)
Domestic
Supplies
(KT)
Domestic
Price
(USD)
Imports
(KT)
Import Price
(USD)
WTI Oil
(USD)
USD/INR
April 290 109 $ 950 181 $ 950 $ 59.74 62.35
May 237 111 $ 945 126 $ 970 $ 60.07 63.38
June 210 110 $ 898 100 $ 920 $ 59.12 64.00
July 185 112 $ 884 73 $ 900 $ 46.83 63.53
August 172 97 $ 867 75 $ 910 $ 45.40 65.13
September 200 112 $ 828 88 $ 830 $ 44.87 66.37
October 223 107 $ 862 116 $ 850 $ 43.26 64.76
November 218 100 $ 829 118 $ 850 $ 41.64 66.10
December 235 105 $ 782 130 $ 790 $ 37.11 66.82
January 247 136 $ 761 111 $ 760 $ 33.65 67.77
February 237 130 $ 778 107 $ 770 $ 33.87 68.17
March 245 135 $ 831 110 $ 810 $ 38.04 67.41
Impact on PVC Demand in India

PVC MARKET IN INDIA

Producer wise capacity in India (KTA)
750
260 245
150
80
0
100
200
300
400
500
600
700
800
RIL Finolex Chemplast DCW Shriram
  Total: 1485KT in 2016   *To ADD: DCW= 80KT | RIL= 100KT
Source: Industry estimates

Sector-wise PVC usage
Finolex gets people together
PVC Sector wise Usage
Source – Industry estimates
70%
8%
5%
4%
3% 3%
3% 2% 1% 1%
Pipes Calendering W & C Films
Compound Fittings Profiles Footwear
Sheets Others
Pipes &
Fittings
43%
Profiles
19%
Films &
Sheets
17%
Wire &
Cables
8%
Bottles
2%
Floorings
3%
Others
8%
Global Scenario
25
Indian Scenario

EXPORT CHAMPIONS TO
INDIA

Imports vis-à-vis Consumption in India
Period
Consumption
(KT)
Domestic Supplies
(KT)
Imports
(KT)
Growth
(%)
2013-2014 2,333 1,305 1,028 2%
2014-2015 2,440 1,305 1,135 8%
2015-2016 2,699 1,364 1,335 10.6%
2016-2017*
2,968 1,450 1,518 10%
2017-2018*
3,205 1,450 1,755 8%
2018-2019*
3,398 1,450 1,948 6%
* Projections

Changes in Anti-Dumping duty in April 2014
Country Before April-2014 After April-2014
USD / MT USD / MT
Korea Nil Nil
Taiwan
Highest - 20
Lowest - Nil
Highest – 33.62
Lowest - Nil
US 43
Highest - 115.54
Lowest- 29.99
China
Highest - 45
Lowest - 10
Highest - 147.96
Lowest - 91.27
Japan 65 15
Russia Nil Nil
Latin America Nil Nil*
* Mexichem Mexico – US$ 88.10/MT

Where is India importing from? (KT)
2013-14 2014-15 2015-16 2016-17 (E) 2017-18 (E)
Taiwan 371 335 395 400 410
Korea 257 282 290 300 320
China 177 293 146 200 240
L. America 10 13 77 85 100
Japan 0.1 35 220 250 300
Russia 0 5 12 20 35
Iran 31 45 77 80 90
Norway 5 26 25 30 40
Others 176 177 103 204 275
0
50
100
150
200
250
300
350
400
450
FiguresinKT

Future Export Champions
Japan
•  Anti Dumping Duty on PVC imports
from Japan was reduced to USD
15/MT in April 2014
•  Due to the FTA between India &
Japan, the basic import duty would
be brought down from 4.8% in
2014-15 to 2.7% in 2017-18
(currently @3.4%)
•  The net benefit between standard
duty and concessional will be 3.2%
by 2017
•  Japanese producers will have a
better netback & will continue to
focus on maximizing their exports
to India
Latin America/ Russia
•  Slowdown in economies in Brazil,
Argentina, Venezuela & Colombia
has resulted in reduction in
domestic consumption
•  Spare capacities available for
export to countries offering
maximum netbacks
•  Currency depreciation
•  Reduced freight rates
•  Result has been focus on countries
like India which have seen a huge
influx of PVC resin from these
markets
•  We estimate sustained exports to
India for at least the next 3years
Iran
•  Lifting of trade sanctions will result
in Iran’s emergence as a major
PVC resin exporter
•  Increase in local demand from
construction, infrastructure
projects, etc. will restrict the
quantity available for export
•  Focus on export to markets with
the highest netback
o  Europe & Turkey may be favored
markets
•  We estimate that Iran’s exports to
India will see nominal growth
because of the above factors

China PVC Market
Scenario

China - Ethylene vs. Carbide Supply Trend and overall outlook
•  China’s PVC capacity stands at 30 MMT with a spare capacity of 13 MMT
o  83% is Carbide based
o  Overall operating rate @ 55%
•  Demand is 16.2 MMT with meagre growth of 1.2% during the year
•  India raised ADD on Chinese PVC resin from $8-$45/MT to $91-$148/MT
o  In 2015-16, the Chinese still managed to sell 146 KTA to India
•  Chinese carbide PVC will continue to find opportunities to sell into India when
the ethylene PVC prices increase to over USD 900
•  We expect that the Chinese will be able to export to India 3 to 4 months in a
year depending on the above pricing

•  India’s PVC demand will cross 3 MMT in FY 2016-17
•  India’s PVC imports are expected to cross 2 million tons by FY 2018-19
•  Low prices will drive consumption growth rates in India above world average
•  The rain forecast for 2016 is 105% with normal, this will drive higher increase
consumption
•  Better netbacks from India & slowdown in other economies will continue to
attract producers from across the globe
•  Taiwan & Korea will continue to be the leading exporters to India
•  The new champions in the export market are expected to be Japan, Iran,
Latin America & Russia
o  Japan exports are expected to increase up to 320 KTA by 2018
Conclusion

About AVI Global
AVI Global Plast is India’s largest manufacturer of :
o  PVC Rigid Films
o  PET Sheets (APET/GAG PET/RPET)
o  Laminated barrier and high barrier films for MAP packaging.
o  Thermoformed products
o  Garment packing accessories

THANK YOU
Mr. Sukhdeep Sethi
AVI Global Plast Pvt. Ltd.
Mumbai, India
Email: sethi@avigloplast.com
Web: www.avigloplast.com

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