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Will the numbers fructify… - Views on News from Equitymaster
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  • Dec 5, 2000

    Will the numbers fructify…

    Reliance Industries (RIL) and Indian Petrochemical Corporation (IPCL) dominate the upstream petrochemical sector, which involves the cracking of the hydrocarbon molecule into the building blocks of downstream petrochemical products.

    Naphtha or natural gas is the feedstock for manufacturing the basic building blocks of downstream petrochemical products, which consist of olefins and aromatics. Ethylene, Propylene and Butadiene constitute olefins, which are used for the manufacturing of polymers and polyester. Aromatics consist of Benzene, Toluene, Orthoxylene and Paraxylene, which are used in manufacturing of downstream industrial chemicals.

    Projected demand for Olefins
    (MT) FY00 FY05 CAGR Capacity controlled
    by RIL & IPCL
    Ethylene 1,669,068 5,464,469 27% 95%
    Propylene 819,620 2,156,676 22% 72%
    Butadiene 210,870 570,119 22% 124%

    Projected demand for Aromatics
    (MT) FY00 FY05 CAGR Capacity controlled
    by RIL & IPCL
    Benzene 446,763 637,149 7% 70%
    Toluene 164,801 275,832 11% 120%
    Orthoxylene 64,815 75,342 3% 74%
    Paraxylene 891,796 2,313,212 21% 190%

    Both RIL and IPCL are the key players in manufacturing of olefins and aromatics. These companies are also dominating the downstream petrochemical sector and a large percentage of the upstream products are consumed in-house.

    GAIL has set up ethylene capacity of 300,000 TPA. This took the production of ethylene to 1.9 MMTPA in FY00, resulting in a slight over supply of the commodity. However, olefins and paraxylene are expected to clock strong growth rates, as the per capita consumption of downstream petrochemical products increase in the country.

    Prepared for growth…
      RIL IPCL
      Installed Licensed Installed Licensed
    Ethylene 750,000 1,550,000 830,000 830,000
    Propylene 365,000 755,000 225,460 235,460
    Butadiene 225,000 465,000 36,000 36,000
    Benzene 291,000 291,000 23,600 23,600
    Toluene 197,000 197,000 - -
    Orthoxylene - - 47,900 47,900
    Paraxylene 1,646,000 1,646,000 48,600 48,600

    RIL has significantly covered the future demand of paraxylene by setting up a new 1.4 MMTPA plant at the Jamnagar complex. Additional capacity of 200,000 MMTPA is expected to come up with Haldia Petrochemicals going on stream. However, this project has run into financial difficulty resulting in delay in completion of the project.

    The licensed capacity of RIL is twice that of its installed capacity with respect to olefins. Consequently, RIL is well equipped to capitalize on the strong growth rates in the olefins segment. However, with no new plants or major capacity expansion the imports of olefins are anticipated to grow in the coming years to bridge the demand-supply gap.



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