Fiscal year 2001 and has not been very favourable for the petrochemical sector. Both polyester and polymer recorded disappointing growth rates. The fragmented industry structure and downturn in demand could ring the death knell for many players.
In polyesters, the production of PFY is estimated at 817,600 metric tonnes per annum (MTPA) for FY01 a marginal growth of 3% YoY. Production of PFY has registered a 7% compounded growth (CAGR) over the last three years. However, there has been a YoY decline in growth over this period. PSF production for fiscal '01 is estimated at 566,500 MTPA. PSF has recorded an even lower growth of 2.7% YoY. However, the three-year CAGR stands at a higher 8.9%. The growth in PSF has also come down sharply over the last two years.
In polymers, HDPE production declined by a staggering 17.7% YoY to an estimated 321,890 MTPA. The polymer has registered a negative CAGR of 3.6% over the past three years. LDPE production also suffered in the current fiscal but not to the same extent as HDPE. The production dipped by 1.7% YoY to an estimated 315,000 MTPA as compared a rise of 7.1% in FY00. The three-year CAGR for LDPE is a marginal 2.4%. PVC is the only key polymer to have recorded positive growth in FY01. Production of PVC rose by 4.5% YoY to an estimated 803,340 MTPA. However, the growth was much lower as compared to 30.6% registered in FY00. The three-year CAGR for PVC stands at 13.5%.
The last couple of year has seen new polymer capacity come onstream. IPCL's gas cracker at Gandhar came onstream in FY98 followed by GAIL's 300,000 MTPA gas cracker at Pata, U.P in FY00. Haldia Petrochemicals Ltd. commissioned its 420,000 MTPA naphtha cracker in FY01. The strong growth in PVC production in FY00 could be due to commissioning of GAIL's gas cracker plant and stabilisation of phase -I & II of the Gandhar unit.
The consumption growth, which drives production, also remained flat for FY01. The demand supply position for polyesters remained fairly equated at approximately 1.5 MMTPA. Demand for polymers, however, is estimated to have grown by 11% YoY.
With demand for polyester lacklustre the prices also platued. Prices for POY remained at last year's level of approximately Rs 60.9 / kg while prices of PSF increased by an estimated 2.1% to Rs 53.5 / kg. Polyester intermediates, PTA and MEG, registered an estimated rise of 17.5% and 8% in prices to Rs 33.1 / kg and Rs 34.4 / kg respectively. Polymer intermediate -- polyethylene (PE) & polypropylene (PP) -- prices rose by an estimated 10% and 9.4% to Rs 46.9 / kg and Rs 41.1 / kg respectively. PVC price for FY01 was approximately Rs 41.2 / kg a growth of 8.3%. However, polymer prices weakened in 4QFY01.
The rise in oil prices led to a substantial increase in naphtha prices, which is the key feedstock for downstream petrochemical products. Naphtha prices for FY01 is estimated at Rs 13,000 / MT. With oil prices skyrocketing, naphtha prices had touched Rs 16,000 / MT during the concerned period. However, with downstream product prices not registering a corresponding increase the operating margins of the industry came under pressure. The decline in oil prices and subsequently naphtha prices in 4QFY01 did provide some respite to the margins at the end of the fiscal.
Structural weaknesses continue to dog the industry also fiscal '02 has not started on a good note as industrial production declined YoY. However, IPCL's disinvestment could be amongst the major event in the current fiscal.