INDIAN PETROCHEMICAL INDUSTRY

Transcription

1 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY COUNTRY PAPER FROM INDIA ASIA PETROCHEMICAL INDUSTRY CONFERENCE COEX CONVENTION CENTER, SEOUL, KOREA MAY 2015

2 INDIAN PETROCHEMICAL INDUSTRY COUNTRY PAPER FROM INDIA Review of & Outlook for Chemicals & Petrochemicals Manufacturers Association, India 708, 7th Floor, Kailash Building 26, Kasturba Gandhi Marg, New Delhi , INDIA Phone: , Fax : cpmai@airtelmail.in Web: cpmaindia.com

3 S O U T H K O R E A Gyeonggi Gangwon Incheon Seoul North Chungcheong South Chungcheong Sejong Daejeon North Gyeongsang North Jeolla Daegu Ulsan Gwangju South Gyeongsang Busan South Jeolla Asia Petrochemical Industry Conference Asia Petrochemical Industry Conference COEX Convention Centre, Seoul, Korea. Jeju

4 INDIAN PETROCHEMICAL INDUSTRY CONTENTS PART 1 SECTION 1 THE INDIAN ECONOMY: REVIEW OF & OUTLOOK FOR THE INDIAN ECONOMY REVIEW OF SNAPSHOT OF KEY INDICATORS 2 I. IIP INDEX OF INDUSTRIAL PRODUCTION 6 II. CORE INDUSTRIES PERFORMANCE 8 III. BALANCE OF PAYMENTS 9 IV. FDI 9 V. FOREX RESERVES 10 VI. FII FLOW AND STOCK MARKET 11 VII. CURRENT ACCOUNT DEFICIT 12 VIII. INFLATION 13 IX. RUPEE ( ) 14 OUTLOOK FOR : INDIA 15 SECTION 2 PETROCHEMICAL INDUSTRY IN INDIA 19 PETROCHEMICAL INDUSTRY REVIEW OF 2014 & OUTLOOK FOR POLYMERS 19 POLYOLEFINS 21 VINYL S: PVC 22 STYRENICS 22 A. POLYSTYRENE 22 B. ACRYLONITRILE-BUTADIENE-STYRENE (ABS) 23 C. STYRENE-ACRYLONITRILE (SAN) 23 OLEFINS (INCLUDING BUTADIEN, STYRENE, EDC &VCM) 23 A. ETHYLENE & PROPYLENE 23 B. BUTADIENE 24 C. STYRENE 25 D. EDC & VCM 25 FIBRE INTERMEDIATES 26 SYNTHETIC FIBRES 27 AROMATICS PARAXYLENE 29 SURFACTANTS 30 SYNTHETIC RUBBER 30 CARBON BLACK FEEDSTOCK & CARBON BLACK 32 OTHER KEY PETROCHEMICALS 32 OUTLOOK FOR THE OVERALL INDIAN PETROCHEMICAL INDUSTRY May 2015, Seoul, Korea Asia Petrochemical Industry Conference 2015

5 INDIAN PETROCHEMICAL INDUSTRY CONTENTS SECTION 3 ((STATISTICAL APPENDIX) 35 DEMAND SUPPLY BALANCE: POLYMERS (KT) 37 DEMAND SUPPLY BALANCE: OLEFINS (KT) 39 DEMAND SUPPLY BALANCE: ABS, SAN, PX & SURFACTANTS (KT) 40 DEMAND SUPPLY BALANCE: FIBRE INTERMEDIATES (KT) 41 DEMAND SUPPLY BALANCE: SYNTHETIC FIBRES (KT) 42 DEMAND SUPPLY BALANCE: ELASTOMERS (KT) 44 DEMAND SUPPLY BALANCE: CARBON BLACK & CBFS (KT) 45 DEMAND SUPPLY BALANCE: OTHER KEY PETROCHEMICALS (KT) 45 TABLES TABLE 1: USED BASED CLASSIFICATION OF (IIP) 07 TABLE 2: CORE INDUSTRIES GROWTH RATE (IN PERCENT) 08 TABLE 3: INDIA S GDP GROWTH PROJECTION TABLE 4: POLYMER DEMAND SUPPLY 20 TABLE 5: POLYOLEFIN DEMAND IN INDIA ACTUAL & PROJECTED 21 TABLE 6: PVC DEMAND SUPPLY 22 TABLE 7: POLYSTYRENE DEMAND SUPPLY 22 TABLE 8: ABS DEMAND SUPPLY 23 TABLE 9: SAN DEMAND SUPPLY 23 TABLE 10: ETHYLENE & PROPYLENE NET AVAILABILITY 24 TABLE 11: BUTADIENE DEMAND SUPPLY 25 TABLE 12: STYRENE DEMAND SUPPLY 25 TABLE 13: EDC & VCM IMPORT INTO INDIA 25 TABLE 14 : FIBRE INTERMEDIATE DEMAND SUPPLY 26 TABLE 15: DEMAND SUPPLY BALANCE OF SYNTHETIC FIBRE 28 TABLE 16: PARAXYLENE DEMAND SUPPLY 29 TABLE 17: DEMAND & SUPPLY OF LAB & EO 30 TABLE 18: DEMAND SUPPLY BALANCE OF PBR, SBR, NBR & EPDM 31 TABLE 19: DEMAND SUPPLY BALANCE OF CBFS & CARBON BLACK 32 TABLE 20: DEMAND SUPPLY BALANCE OF BENZENE, TOLUENE, MXS & OX 33 FIGURE FIGURE 1: NEW GDP NUMBERS (YEAR-ON-YEAR IN PER CENT) 3 FIGURE 2: QUARTERLY ESTIMATE OF GDP GROWTH (IN PER CENT) 4 FIGURE 3: SECTORAL GROWTH IN AT CONSTANT PRICES (%) 5 FIGURE 4: ESTIMATED GROWTH IN SECTORS IN FIGURE 5: SHARE OF SECTORS IN GDP (%) 6 FIGURE 6: INDEX OF INDUSTRIAL PRODUCTION (IIP) 7 FIGURE 7: FDI INFLOWS 9

6 INDIAN PETROCHEMICAL INDUSTRY CONTENTS FIGURE 8: FOREX RESERVES INCREASE TO $333.2 BILLION 10 FIGURE 9: FII FLOW IN FIGURE 10: STOCK MARKET PERFORMANCE 11 FIGURE 11: Q3 CAD AT 1.6% OF GDP AT $8.2 BILLION 12 FIGURE 12: TRADE DEFICIT AT $8.32 BILLION 13 FIGURE 13: RATE OF INFLATION (IN PERCENT) 13 FIGURE 14: RUPEE MOVEMENT IN LAST ONE YEAR 14 FIGURE 15: PER CAPITA POLYMER CONSUMPTION VS PER CAPITA GDP ~ FIGURE 16: AGGREGATE PETROCHEMICAL DEMAND (ALL KEY SEGMENTS MMT) 34 PART 2 INDIAN COUNTRY REPORT PRESENTATIONS FOR COMMITTEE MEETINGS-APIC-2015 INDIAN PETROCHEMICAL INDUSTRY REVIEW & OUTLOOK OF INDIAN ECONOMY 49 REVIEW & OUTLOOK OF PETROCHEMICAL INDUSTRY 61 POLYOLEFINS REVIEW OF POLYOLEFINS SECTOR 67 OUTLOOK FOR POLYOLEFINS SECTOR 71 PVC (VINYL) REVIEW OF VINYL SECTOR 75 OUTLOOK FOR VINYL SECTOR 79 STYRENICS REVIEW OF STYRENICS SECTOR 83 OUTLOOK OF STYRENICS SECTOR 85 SYNTHETIC RUBBER (ELASTOMERS) REVIEW OF ELASTOMERS 89 OUTLOOK FOR ELASTOMERS 93 SYNTHETIC FIBER RAW MATERIALS REVIEW OF FIBRE INTERMEDIATES SECTOR 97 OUTLOOK FOR FIBRE INTERMEDIATE SECTOR 101

7 Retail & MANUFACTURING AGRICULTURE & ALLIED Industries TRANSPORT & COMMUNICATION International TRADE & BUSINESS SERVICES CONSTRUCTION & Real Estate COMMUNITY, SOCIAL & PERSONAL SERVICES Consumer Durables & Electronics ELECTRICITY GAS & WATER Alternative Energy & Sustainability Solar Power RealEstate Health & Finance MINING & QUARRYING

8 Asia Petrochemical Industry Conference SECTION 1 The Indian Economy Review of & Outlook for May 2015, Seoul, Korea Asia Petrochemical Industry Conference

9 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY The Indian Economy: Review of & Outlook for The Indian Economy Review of The last year has been a fortuitously good one for the Indian economy with a sea change in the macroeconomic parameters and a sustainable turnaround on the cards. At a time when concerns have been raised about global growth prospects, the Indian economy has marched on and has in fact entered a sweet spot. As a start, Gross Domestic Product (GDP) growth, which had plummeted to sub 5% levels in past two fiscal years, finally seems to have picked up on the back of a cyclical rebound and some genuine improvement. Growth in the current year, while not spectacular, has moved up firmly into the 5%+ handle. This improvement has come on the back of improved performance in the industrial sector, stable growth in the services sector and a surprisingly resilient agriculture sector. Further, policy action on the environmental clearances and mining licenses has helped prop up sentiment while a push to some stuck projects have aided growth prospects. Encouragingly, the pick-up in growth seems to be taking place at a time when inflation is on the downtrend as effects of the past slowdown and the massive fall in global commodity prices is filtering through the economy. Inflation levels have continued to surprise on the downside and have printed comfortably under the Central Bank s comfort zone. Price levels have seen an across the board moderation as food, fuel and service price inflation has come down. This moderation in inflation has also had an impact on interest rates as the Reserve Bank of India (RBI) has finally started its rate cutting cycle with its first rate cut in January earlier this year. The RBI had established targets for inflation under its new policy regime and as such those targets have been met comfortably and set the stage for a further easing of policy in the coming months. That said, the RBI continues to remain vigilant on the external front and the possible threat of capital outflows in response to the normalization of monetary policy in the US. The situation is further being buttressed by a perceptible improvement in the external account metrics with the current account deficit coming under control despite the government lifting most of the import restrictions from the last year. Imports have fallen sharply in response to the halving of global crude oil prices and while exports have suffered too, service exports have held up as growth in the US has rebounded in the current year. FIIs have invested a net of $43.5 billion so far in expected to be their highest investment in any fiscal year. Of this, a huge chunk $26.3 billion was invested in debt and it is their record investment in the asset class, while equities absorbed $17.2 billion. BSE's benchmark Sensex witnessed a consistent rise in 2014 with a growth of around 40% and has already risen 29.2% so far in fiscal year 2015, and if this sustains, it would be its best performance since financial year The more important and stable flows through the Foreign Direct Investment (FDI) route have also picked up to touch highest inflow in last 29 months $4.48 billion in January as the government increased the level of permissible investments into some sectors. The Indian rupee has fallen a mere 4.9% in fiscal year 2015, compared with a 30.1% decline in Brazil s real and a 43.5% fall in Russian rouble. India has been a relatively stable currency compared with other emerging markets in Making it attractive to invest in Indian debt. The capital markets have continued to scale record levels as euphoria has built up on the possible trajectory of the BSE's benchmark Sensex. The markets seem to have priced in a favourable policy environment and a consequent increase in corporate performance in the coming years. 02 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

10 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Overall there is a real sense that a new set of reforms and the enthusiasm in the markets can lead India towards another prosperous era of high growth. A good monsoon season in is expected to further increase purchasing power in rural India which has been the silver lining in the Indian growth story. Snapshot of Key Indicators The much awaited first full budget from the new government was presented on the last day of month of February It extended the fiscal consolidation roadmap to 3 years from 2 years but this came with an effort to raise investment spend. Other incentives included staggered rate cut for corporate, merging of FDI/FII ownership limit and some minor tax breaks for individual investors. Further, clarity was given on GST and GAAR and there was significant emphasis on the socio-economic programs. The backdrop to the Budget has been the improving macro-economic situation for India at a time when many economies are in turmoil. The change in the base year of measuring national accounts showed that India's economy had fared much better than previously thought and it likely that India would exceed previous estimates of growth in FY16. India has been one of the principal beneficiaries of low crude oil and energy prices. In addition the government's resolve to curtail subsidies as well as focus them on the needy means that the government finally has some fiscal room. There seems to be a significant emphasis on providing stimulus to 'Make in India' vision (as per budget document) as indicated by tweak in taxes, laying down measures which could address ease of doing business and encouraging domestic and foreign direct investment. The government also changed the methodology for calculation of GDP data, which included revision in the base year for national accounts from FY05 to FY12, transition to international practice of stating headline GDP at market prices from GDP at factor cost, and also incorporating new data sets. India has now moved from the base of to as the new base year for GDP computation. India s headline GDP will now also refer to GDP at market prices, which is in line with international practices, as opposed to GDP at factor cost. The Central Statistics Organization (CSO) has subsequently also made accounting changes in line with the System of National Accounts (SNA), and included new and more comprehensive data sources. This change has resulted in real GDP growth being revised upwards to 6.9%Y-o-Y for FY14, as against 4.7% Y-o-Y declared earlier under the old series. Figure 1: New GDP Numbers (year-on-year in per cent) GDP Growth (year-on-year in per cent) GDP Growth rate (New series) (%) GDP Growth rate (Old series) (%) Source : CSO May 2015, Seoul, Korea Asia Petrochemical Industry Conference

11 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Similarly, GDP growth for FY13 has been revised upwards to 5.1% Y-o-Y from 4.5% earlier. However, nominal GDP under the new series remains largely unchanged at trillion for FY14, and therefore is likely to have minimal impact on key ratios like fiscal deficit, current account deficit etc. The upward revisions have primarily come from higher consumption expenditure and weaker imports under the new series. Further, there are improvements in the way data is collected as there is a more comprehensive coverage of the corporate sector (for both manufacturing and services) through the use of the annual accounts of companies filed with the Ministry of Corporate Affair (in the MCA 21 database). Two, until now, the manufacturing data was compiled factorywise. Now, activity at the enterprise-level is taken. This means selling and marketing expenses are also reckoned, instead of just production costs. The change - The manufacturing sector, in particular, has shown a far better performance. The change in measuring the value addition in the manufacturing sector is one of the main reasons for the bump-up in growth numbers. Data on manufacturing and services now comes from almost the universe of approximately 5 lakh companies as compared to only 2500 earlier. Figure 2: Quarterly Estimate of GDP Growth (in per cent) Quarterly Estimate of GDP Growth (in per cent) 7.2 Real GDP ( ) Real GVA basic ( ) Source : CSO Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Quarterly estimates have also been released under the new methodology where the government has used tax data for collecting information on services while private corporate performance has been included for compiling industrial estimates. Growth of GVA at basic prices (at constant prices) rose from 7.0% in Q1FY15 (5.7% growth of GDP at factor cost on series) to 7.8% in Q2FY15 (5.3% growth of GDP at factor cost on series), before easing to 7.5% in Q3FY15 in y-o-y terms. A careful look at the disaggregated data would suggest that the higher growth would be driven by domestic demand while government final expenditure and investments are also expected to grow. The new series shows agriculture growth nearly one point lower at 3.7% (4.7% in old series) but with a larger share in aggregate output an average 4.3 percentage points in last 3 years. 04 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

12 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Figure 3: Sectoral Growth in at constant prices (%) Growth in at constant prices (%) series series Agriculture & Allied Mining & Quarrying Manufacturing Electricity, Gas and Water Construction Trade, Repair and restaurants Transport, Storage, Communication Financial, Real estate & business Services Community, Social & Personal Services Total GVA Source : CSO Construction rebounded in FY14 at 2.5% over a minus 4.4% contraction in FY13; this is again buttressed by RBI s Industry wise deployment of bank credit data that shows outstanding credit to construction rose 17.7% against 7.3% in FY13. Figure 4: Estimated Growth in Sectors in Source : CSO 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

13 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY While the manufacturing segment is expected to expand 6.8% (5.3% in ), electricity and related sectors are estimated to expand 9.6%, against 4.8% in Growth in mining and quarrying, however, is expected to fall to 2.3% from 5.4% in FY14, while growth in the construction sector is estimated at 4.5%, against 2.5% during the previous year. In , the services sector is estimated to grow a stellar 8.9%. In terms of share agriculture show a reduction from 18.2% to 18% as per new series. Mining s share has also been increased with industry now accounting for 30.7% of GDP from 24.7% estimated earlier. The service sector s share has reduced to 51.1% from 57% earlier led by a smaller share of the Trade, hotels & restaurants component. Figure 5: Share of Sectors in GDP (%) (Based on gross value added at current prices) Source : CSO Agriculture Industry Services In short the service sector continues to lead growth, manufacturing shows a revival, while agriculture has once again slowed down. One can conclude that a higher growth rate in is expected to help the government achieve a better fiscal deficit and current account deficit ratios calculated as a percentage of GDP. The government has set a fiscal deficit target of 4.1% of GDP for the year to March. Despite crossing the limit in value terms, a favourable base due to higher GDP growth may help the government achieve the target. Similarly, the current account balance, which is expected to turn positive anyway by the fourth quarter of , may get a boost from a higher GDP base. i. IIP Index of Industrial Production Industrial production grew 2.6% in January2015 mainly on account of improvement in manufacturing activity and better offtake of capital goods. The growth in factory output, as measured by the Index of Industrial Production (IIP), was 1.1% in January For the April-January period of , IIP grew 2.5% as against a meagre rise of 0.1% in same period of the last fiscal as per the data released by CSO. The growth in factory output, as measured by the IIP, was 1.1% in Jan 14. For the April-January period of , IIP grew 2.5% as against a meagre rise of 0.1% in same period of the last fiscal as per the data released by CSO. Meanwhile, the December IIP has been revised upwards to 3.23% from the provisional estimates of 1.7% released last month. As per government data, manufacturing output, which constitutes over 75% to the index, grew by 3.3% in January compared to a meagre growth of 0.3% in the same month a year ago. 06 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

14 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Figure 6: Index of Industrial Production (IIP) Index of Industrial Production April 2013 Jan Source: CSO For April-January period, the sector saw an output growth of 1.7%, compared to a contraction of 0.3% in the year-ago period. The production of capital goods, a barometer of demand, grew by 12.8% in January as against a contraction of 3.9% in same month of last year. During the April-January period, capital goods output grew by 5.7% as against a dip of 0.8%. Fourteen out of the twenty two industry groups in the manufacturing sector have shown positive growth during the month of January year-on-year. According to the IIP data, the power generation grew by 2.7% in January compared to 6.5% in the same month last year. Table 1: Used based Classification of (IIP) Trend in IIP Growth Weight Month Dec-13 Jan-13 Basic 45.68% 3.0% 2.8% Use-Based Classification Capital 8.83% -2.5% -3.9% Intermediate 15.69% 8.46% 5.2% 4.3% Durables -16.4% -8.3% Non Durables 21.35% 2.8% 4.5% Dec-14 Jan % 4.5% 5.3% 12.8% 1.0% -0.8% -8.9% -5.3% 5.1% -0.1% April-Jan FY14 April-Jan FY15 1.6% 7.4% -0.8% 5.7% 3.2% 1.5% -12.5% -14.2% 5.7% 1.9% Source :CSO During April-January period, electricity production grew by 9.3% compared to a growth of 5.7% in the corresponding period last fiscal. 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

15 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY However the output in the mining sector contracted by 2.8% in January, compared to a growth of 2.7% in the same month last year. During April-January period, output has grown by 1.3% compared to a contraction of 1.1% y-o-y. The overall consumer goods output has declined by 1.9% in January compared to a dip of 0.5% in the same month last year. During April-January, the output of these goods contracted by 4.7% compared to a dip of 2.7% in the corresponding period last fiscal. Similarly, consumer durables output also contracted by 5.3% compared to a decline in production by 8.3% in the same month last year. In April-January the output declined by 14.2% compared to a dip of 12.5% in the same period last fiscal. The consumer non-durable production also contracted by 0.1% in January compared to a growth of 4.5% in same month last year. During April-January the output grew by 1.9% compared to a growth of 5.7%. The intermediate goods also saw decline in production by 0.8% in January compared to a growth of 4.3% in same month last year. However the basic goods output grew by 4.5% in January compared a growth of 2.8% in same month last year. Some of the important items showing high positive growth during January over the same month in previous year include Polythene bags, Woollen Carpets, Conductor Aluminium, Stainless/alloy steel, Gems and Jewellery, Plastic Machinery including Moulding Machinery, PVC Pipes and Tubes, Cable, Rubber Insulated, Carbon Steel, Rice, Air Conditioner (Room) and Boilers. With the release of the new GVA series, IIP data released each month with fiscal 2005 as the base year will now be a poor representative of industrial growth. A government press release has said the revised IIP series taking fiscal 2012 as the base year will only be released in March ii. Core Industries Performance The core sector contributes 38% to the overall industrial production, a parameter that RBI takes into account while framing its monetary policy. Growth in eight core industries slowed in 1.8% in January 2015, the lowest in 13 months. Negative growth in crude oil and natural gas and low growth in steel, cement and electricity have led to the dip in the overall growth rate of core industries. The eight core sector industries coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity had expanded by 3.7% in January, The growth was 2.4% in Dec 14. Table 2: Core Industries Growth Rate (in percent) Growth in Index of Core Industries Index of Core Industries Coal Crude Oil Natural Gas Refinery Products Fertilizers Steel Cement Electricity Weight Month 37.98% 4.4% 5.2% 1.7% 5.9% 1.2% 6.7% 2.4% 10.3% Nov-13 Dec-13 Jan % 4.0% 3.7% 3.3% 1.1% 1.2% 1.2% 1.6% 3.0% -11.2% -9.9% -5.2% -5.2% -1.9% -4.2% 0.6% 4.1% 1.2% 10.1% 10.4% 10.8% 3.9% 1.2% 2.0% 6.3% 7.6% 6.5% Nov-14 Dec-14 Jan % 2.4% 1.8% 14.5% 7.5% 1.7% -0.1% -1.4% -2.3% -2.9% -3.5% -6.6% 8.1% 6.1% 4.7% -2.8% -1.6% 7.1% 1.3% 3.8% 0.5% 11.3% 3.8% 0.5% 10.2% 3.7% 2.7% April-Jan April-Jan % 4.1% 1.5% 8.1% -0.2% -1.0% -14.0% -5.2% 1.2% 0.7% 2.5% -0.5% 11.4% 1.6% 3.5% 7.1% 5.6% 8.9% Source : Index of Eight Core Industries, Ministry of Commerce and Industry, Office of the Economic Advisior Production of crude oil and natural gas contracted by 2.3% and 6.6% respectively, according to the data released by the Commerce and Industry Ministry. Output in steel, cement and electricity registered growth during the month under review, but the expansion is lower as compared to that in January Asia Petrochemical Industry Conference May 2015, Seoul, Korea

16 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference However, coal and refinery products output grew by 1.7% and 4.7% respectively against 1.2% and contraction of 4.2% in the year ago period. During April-January period, the eight sectors grew by 4.1% as against 4% in the same period of the previous fiscal. iii. Balance of Payments On a quarter-over-quarter basis, India s current account deficit (CAD) narrowed to US$ 8.2 billion (1.6% of GDP) in Q3 of from US$ 10.1 billion (2.0% of GDP) in Q2; on a year-on-year basis, however, the CAD doubled (from US$ 4.2 billion or 0.9% of GDP in Q3 of ). The merchandise trade deficit (US$ 39.2 billion during Q ) widened on a q-o-q basis on account of a larger decline in merchandise exports (7.3%) than in merchandise imports (4.5%); in terms of y-o-y changes too, the trade deficit in Q widened due to a decline in exports (1.0%), while imports increased (4.5%). Thus, the reduction in the CAD in Q was primarily on account of net exports of services which picked up in q-oq terms on the back of an improvement in net earnings through travel and software services, and lower net outflows under primary income (profit, dividend and interest). Gross private transfer receipts, representing remittances by Indians employed overseas, amounted to US $ 17.5 billion and provided sustained support to the BoP with a share of 12.6% of current receipts, broadly the same level as in the preceding quarter and a year ago. On a BoP basis, there was a net accretion of US$ 13.2 billion to India s foreign exchange reserves in Q3 of , almost double the accretion in the preceding quarter, but lower than in Q3 of which was bolstered by special non-resident and banks overseas borrowings. iv. FDI Foreign Direct Investment (FDI) inflows have picked up this year and have been much more consistent over the last seven quarters. Inflows have barely fluctuated in the first three quarters with funds of US$ 8.3 billion in Q1, US$ 8.5 billion in Q2 and US$ 8.4 billion in Q3 of coming in respectively. In terms of the sector specific flow, at US$ 2.5 billion the telecommunications sector received the highest FDI inflows with a percentage share of 13%. Factors such as the 3G and 4G spectrum auction as well as investment in network rollout have led to this growth in investment. This is followed by the services sector with FDI inflows to the tune of US$ 1.8 billion. Figure 7: FDI Inflows Foreign Direct Investment Inflows (US$ billion) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Q1 Q2 Q Source: RBI 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

17 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Net FDI inflows to India shot up to a record level of USD 5.5 billion in January from USD 3.97 billion in the preceding month. The government s cabinet has recently cleared a proposal which allows 100% FDI into railway infrastructure. The government has further initiated easier FDI norms for the construction sectors which allow 100% overseas investment. Another major decision has been to further open up the defense sector with foreign investment cap of 49%. Further, the Union Cabinet cleared a bill, to further open up the insurance sector by increasing the foreign investment cap from 26% to 49%. All these reforms have further given a boost to the investor sentiment and higher foreign investment in critical sector can be expected in the coming months giving a boost to the overall growth prospects of the economy. v. Forex Reserves The foreign exchange reserves as on 13 February 2015 stood at $333.2 billion as against $304.2 billion till March end and $292.1 billion till March 2013-end. The lower trade and current account deficit, coupled with buoyant capital inflows, resulted in increase in foreign exchange reserves in and Figure 8: Forex Reserves increase to $333.2 billion Forex Reserves Forex Reserve in ($Bn) RBI buys dollars, reserves up, dollar rupee down Exchange Rate (INR/USD) Source: RBI *Feb'15 reserve denote data till 13th Feb'15 and Exchange rate for 15th Feb' Apr'01 Jul'01 Oct'01 Jan'02 Apr'02 Jul'02 Oct'02 Jan'03 Apr'03 Jul'03 Oct'03 Jan'04 Apr'04 Jul'04 Oct'04 Jan'05 Apr'05 Jul'05 Oct'05 Jan'06 Apr'06 Jul'06 Oct'06 Jan'07 Apr'07 Jul'07 Oct'07 Jan'08 Apr;08 Jul'08 Oct'08 Jan'09 Apr'09 Jul'09 Oct'09 Jan'10 Apr'10 Jul'10 Oct'10 Jan'11 Apr'11 Jul'11 Oct'11 Jan'12 Apr'12 Jul'12 Oct'12 Jan'13 Apr'13 Jul'13 Oct'13 Jan'14 Apr'14 Jul'14 Oct'14 Jan'15 The forex reserves in were $294.4 billion. The most recent accumulation to the reserves can help India cover its import bill for nearly ten months now according to trade and market analysts. vi. FII Flow and Stock Market Net foreign investment inflows to India increased sharply in January They rose to an eight-month high of USD billion in the month from USD 3.01 billion in the preceding month. 10 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

18 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Figure 9: FII Flow in FII inflows in Equity (US$ billion) Debt (US$ billion) Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Source : SEBI & NSDL This was more-than-double the average monthly level of inflows of USD 6.04 billion that were seen during the first nine months of Foreign investment inflows to India shot up to USD billion during the first ten months of from USD billion in the same period a year ago. A turnaround in portfolio investments flows and a rise in net FDI inflows led to the sharp increase in foreign investment inflows. India witnessed net inflows of portfolio investments amounting to USD billion during April 2014-January 2015 as against net outflows of USD 1.91 billion in the same period a year ago. Net FDI inflows to India rose by 51.1% to USD billion. India witnessed net inflows of portfolio investments amounting to USD 6.63 billion as compared to outflows of USD 0.38 billion in the preceding month. This was the highest amount of portfolio investment inflows in the last eight months. The Sensex witnessed a consistent rise in 2014 with a growth of around 40%. Indian markets scaled new heights on slowing inflation and a surge in FII in-flows due to improving macro data and election optimism. Figure 10: Stock Market Performance Movement of Sensex (Apr'13-Mar'15) Touched all time high on 4th March' Note : Sensex values denote the high of the day and data for March'15 till 4th March'15 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Source : BSE 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

19 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Indian equity markets started 2015 on a buoyant note and touched an all-time high of 30, on 3rd March 2015 driven by favourable macroeconomic indicators which included: an uptick in IIP, significant drop in trade deficit, both CPI & WPI inflation within the comfort zone (despite rising on a month on-month basis) and substantial foreign inflows Further, a surprise rate cut by RBI, IMF's indication (as per world economic outlook released recently) that India will grow at a faster pace than China in 2016 and a massive monetary stimulus by ECB (which could add to inflows in emerging markets) kept the sentiments upbeat and supported the rally. vii. Current Account Deficit India s current account deficit (CAD) narrowed to 1.6% of gross domestic product (GDP) in the quarter ended 31 December, compared with 2% of GDP in the previous quarter, as net services exports rose and capital outflows fell. However, on a year-on-year basis, the CAD doubled (from $4.2 billion or 0.9% of GDP in Oct-Dec of ). The merchandise trade deficit widened in the December quarter to $39.2 billion from $38.6 billion in the September quarter on account of a sharper decline in merchandise exports (7.3%) than in merchandise imports (4.5%). Many analysts are of the opinion that the continuing decline in crude prices will see the country posting a current account surplus in the current March quarter, which would be the first surplus since the March quarter of On a cumulative basis, the overall balance of payments showed considerable improvement on a y-o-y basis on the back of a higher growth in merchandise exports and a marginal rise in merchandise imports, with a sizeable increase in net financial flows financing the CAD and enabling a large build-up of reserves, a statement by Reserve Bank of India. Figure 11: Q3 CAD at 1.6% of GDP at $8.2 billion India s trade deficit hit an 11-month low in January to $8.3 billion as its merchandise exports as well as imports contracted for the second month in a row on the back of easing global crude oil prices. While increasing non-oil imports was comforting, a double-digit fall in goods exports by 11.2% to $23.9 billion may put pressure on the government to announce more measures to protect export-driven industries. Merchandise imports in January fell 11.4% to $32.2 billion while non-oil imports rose 3.45% to $24 billion. 12 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

20 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Gold imports rose 8.13% to $1.6 billion in January; also, while petroleum exports declined 48.7% to $2.4 billion, petroleum imports fell 37.5% to $8.2 billion compared with the same month a year ago. Figure 12: Trade Deficit at $8.32 billion viii. Inflation Inflation based on the wholesale price index (WPI) declined for the fourth consecutive month at -2.06% in February 2015 from -0.39% in January, mainly due to a drop in fuel prices even as food prices rose. Fall in global crude prices have helped India, a major crude oil importer, reduce its import bill and curtail inflation. However, rising food prices, particularly those of vegetables, are likely to exert an upward pressure on prices. While fuel and power prices fell 14.72% in February, food prices rose 7.74%, according to data released by the commerce ministry. Like GDP, the Consumer Price Index (CPI) has been reformatted. The new index carries a higher weight for education and health services, but has a lower weight for food and fuel items, which authorities say better reflects changing consumption patterns. The new series of CPI is based on the base year of 2012 changed from Retail inflation accelerated to 5.37% in February lower than 7.88% in February last year but higher from 5.19% in the previous month because of higher food and fuel prices. The inflation figure for December was revised to 4.28% from 5%. Figure 13: Rate of Inflation (in percent) WPI WPI Food CPI CPI Food 2.04 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-14 Feb 15 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-14 Feb 15 Source : CSO In the new CPI series Food and Beverages now has a combined weight of as compared to earlier. Clothing and Footwear combined weight also got a boost to 6.53 compared to 4.73 earlier, while Fuel and Light combined weight fell to 6.84 from The Reserve Bank of India expects inflation to be around the target level of 6% by next January. 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

21 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY The wedge between headline CPI inflation and headline WPI inflation has widened for the fourth consecutive month, partly reflecting the different composition of these two indices. The disinflation displayed by the WPI Index since Nov 14 is primarily on account of the global trend of softening prices of various tradable commodities, which dominate this Index. In contrast, the CPI has a higher weightage of non-tradable services as well as food items, the prices for which reflect domestic demand-supply trends. Notwithstanding the divergence in headline inflation, food inflation in Feb 15 was elevated in terms of both the CPI (6.8%) and WPI (7.7%), which remains a cause of concern. While food prices underwent an m-o-m correction in Feb 15 led by vegetables, this trend may reverse in the ongoing month, following the crop damage caused by unseasonably heavy rainfall as well as the rise in retail prices of diesel and petrol in early-march Nevertheless, crude oil and retail fuel prices are considerably lower than the year-ago period, which would limit the uptick in y-o-y WPI inflation in March ix. Rupee ( ) 2014 has been a stable year for the Indian Rupee [ ], after a very volatile The rupee has held up relatively well so far (it was the among the best YTD performers among global currencies). According to Bloomberg, the rupee has gained 1.4% against the dollar since the start of This places it near the top of the rankings for emerging market currencies. The resurgent Russian Rouble leads the table with a 1.6% gain. Figure 14: Rupee Movement in last one year Rupee Movement Source : RBI Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 The rupee s performance compares very favourably with currencies such as the Brazilian Real (down 12.3%), Turkish Lira (down 9.7%) and the Indonesian Rupiah (down 4.5%). According to the Survey, a $10 reduction in the price of oil improves the current account balance by $9.4 billion. While currencies of crude exporters have taken a hit, the rupee has thrived this year. The other point in the rupee s favour is the positive real rates of interest in India. The risk-free real rate of interest currently stands at 2.6%. This compares favourably with most other countries. For instance, the corresponding rate for the US is 2% and Indonesia, 1.2%. It is perhaps these attractive yields on debt instruments and the soaring stock market that have made foreign portfolio investors pump close to $11 billion into equity and debt, double the amount in the yearago period. The threat, however, stems from four factors: volatility in the currency market if the US hikes rates; turbulence from a Grexit; exports getting derailed by a slowing global economy; crude rates spiking on geopolitical tensions. In 2015, Rupee is expected to benefit from (i) pick-up in economic growth, leading to higher capital inflows, and (ii) better trade balance due to lower commodity prices, especially crude oil. The medium-term bearish outlook remains intact for the rupee. Its key resistance is at 61 and a fall to 63.6 and even 64 looks likely in the medium term. 14 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

22 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Outlook for : India India currently stands at the threshold of a new exciting phase of transformation. Despite the relatively slower growth recently, the Indian economy is poised to cross the US$ 2 trillion mark in FY15. The installation of a new majority Government at the Centre has unleashed a wave of optimism about India's economic prospects. There are some early positive signs that the government will prioritize employment, infrastructure and growth. While expectations are running high, the government has also signalled that the pace of change and reform would be modulated. In this context, the first budget of the government has served to provide a sense of direction, with the hope that reform and growth push will continue incrementally over the next few months. In fact, GDP growth is expected to recover towards the second half of FY15 and gather significant pace by FY16. The increment in GDP growth will naturally lead to higher disposable incomes. Improvement in macro-economic variables which includes encouraging GDP number (the FY15 advance estimate ahead of expectations), revised GDP projection by IMF for India, an uptick in IIP, substantial drop in trade deficit, supportive figures for CPI & WPI inflation and robust foreign inflows all are supporting the uptrend at a time when many economies are in turmoil. Broadly speaking, the revived optimism in the economy bodes well for the future. Optimists point out that GDP grew by 7.5% year on year in the fourth quarter of 2014, outpacing even China. Far more important is that the economy seems to be on an increasingly stable footing. Inflation has fallen by half after floating above 10% for years. The current-account deficit has shrunk; the rupee is firm; the stock market has boomed; and the slump in commodity prices is a blessing for a country that imports four-fifths of its oil. When the IMF cut its forecasts for the world economy, it largely spared India. Table 3: India s GDP Growth Projection Agencies CSO 8-8.5% ADB 7.8% Crisil 6.0% DBS 6.5% S&P 7.9% Goldman Sachs 6.3% IMF 7.5%* OECD 7.7%* UN 5.9%* World Bank 6.4%* figures represent calendar year 2015 The dynamics in India are changing fast, and even though the impact on the economy has been limited to date, the government s efforts to revive the economy are improving the long-term outlook. This is evident from the recent upward revision of India s growth forecast for FY by the IMF, ADB and the OECD, as well as an outlook upgrade by some of the rating agencies. The prime minister s strong leadership, the recent reforms and initiatives, and the RBI s prudent monetary policies are building up confidence among investors. While credit conditions are expected to remain tight for some time, improved business sentiment may drive up investment, which will likely be the growth engine in coming quarters. As said earlier, it takes time for an economy to reach a threshold where it can take off, and there are clear signs that energy is gradually building up. 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

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24 Asia Petrochemical Industry Conference SECTION 2 Petrochemical Industry in India Review of & Outlook for May 2015, Seoul, Korea Asia Petrochemical Industry Conference

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26 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Petrochemical Industry in India Petrochemicals play a vital role in the functioning of virtually all key sectors of economy which includes agriculture, infrastructure, healthcare, textiles and consumer durables. Polymers provide critical inputs which enable other sector to grow. Petrochemical products cover the entire spectrum of daily use items ranging from clothing, housing, construction, furniture, automobiles, household items, toys, agriculture, horticulture, irrigation, and packaging to medical appliances. Per capita consumption of polymer has reached saturation level in US. India has the advantage of high population and expected to maintain high economic growth. This should propel India s polymer consumption to new levels in coming year. Figure 15: Per capita Polymer Consumption Vs per capita GDP ~ 2013 Per capita demand Kg Thailand China Indonesia India Malaysia Korea GDP Per Capita ($) Taiwan Japan WE US Singapore Petrochemical Industry Review of 2014 & Outlook for 2015 Polymers The sharp fall in crude oil prices cast a shadow on petrochemical markets across all regions in The final quarter of 2014 was especially difficult for petrochemical producers as buyers held back purchases and inventories had to be managed. The dramatic slump in petrochemical prices in the fourth quarter also had an impact on overall profitability for the year. Cracker operators and derivative producers in the US had enjoyed very high margins in the first half of 2014 but saw their relative competitiveness eroded in the second half and particularly in the fourth quarter. US chemicals growth in 2014 was fairly robust, and industry economists remain positive for the sector in terms of output and demand. In Asia, the focus continues to be on China where a slowing economy has affected growth in petrochemical demand and this is expected to continue in (Source- ICIS) The Indian domestic polymer industry (like global industry) is dominated by Polyolefin s (PE & PP), representing about 73% of all commodity resins consumed in Polymers registered a demand growth of 1.3% in against modest growth of 9.3% in Domestic demand is expected to outpace domestic production. Indian petrochemical industry has unrealized potential. Polymer demand is expected to grow by 7% in with a healthy growth in the relevant industries such as clothing, automobiles etc. Government and the industry players will have to work in tandem to achieve ambitious targets for the industry. 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

27 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Petrochemicals industry got a taste of what could be a potential shift in petrochemical profitability during 2014 as crude prices and, in turn, naphtha prices tumbled Given the historic lows in crude, and still falling, crude prices have impacted all petrochemical products, including PX, MEG and PTA, and PET/Polyester. The new government's aim is to meet the expectations of the country's young and upwardly mobile consumers and improve the living standards of the large rural population. The government has pledged to build 100 modern cities and to invest $1.0 trillion in infrastructure, including the construction of new ports and almost 20,000 kilometers (km) of roads. The government is also planning a high-speed rail network, including 25,000 km of new track; high-speed bullet trains; and hundreds of stations. A particular boon for the plastics industry is the Swachha Bharat program, which calls for an end to open defecation by This will require constructing individual cluster and community toilets, cleaning up villages through solid and liquid waste management, and laying pipelines to connect all villages to water supplies by Plastics producers estimate that this program could add 250,000 m.t./year to polymers demand at just 50% of the program's achievement. The opportunities are huge, and the chemical industry stands to benefit in a big way. These proposals and the focus to support the start-ups will also go a long way in encouraging domestic manufacturing. A number of Indian state-owned energy companies are making major investments to boost their petrochemical activities and are expected to become significant players in the sector. Capacity expansions by several other manufacturers are moving ahead and gradually filling the gap between domestic demand and supply. Overall, the outlook for the petrochemical industry in India is somewhat more positive than it has been recently, as growth in GDP and industrial output is expected to be higher in than in the prior year, and key end-use industries like automotive, packaging, and consumer durables reflect this outlook. After clocking a decent growth in the polymer growth in India was subdued at 1.3% in mainly because of economic slowdown and delays in infrastructure spending by the government. The main drivers of polymer demand in India remain to be packaging, automobiles, construction, health care, etc. The packaging industry is estimated to be growing at an annual rate of more than 15% annually. Plastics raffia or the woven sack sector is dependent on end-use consumers for packaging applications viz. cement, fertilizers, food grains, sugar, sand etc. Table 4: POLYMER Demand Supply POLYMERS (KT) A A E E Capacity Production Op Rate (%) 89% 90% 93% 88% Import Exports Net Trade Demand Demand Growth % 9.3% 1.3% 7.0% 10.7% Source: Industry Estimates. A: Actual, E: Estimate 20 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

28 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Import dependency remained high at 29% in and is expected to come down in next two years to ~26%. PP exports was around 893 KT in PE imports in stood at 1109 KT and PVC imports were at 1026 KT in the same period. In net trade deficit of total polymers stood at 1612 KT. Trade deficit is expected to rise to 2506 KT in and come down to 1833 KT in However, the demand for polymers is expected to grow at 7% in and see a double digit growth of 10.7% in India s petrochemical industry, like the overall economy, faces near-term challenges, but the long-term growth outlook for the industry remains positive. Capacity expansions by several other manufacturers are moving ahead. Polyolefins All PE registered a negative demand growth of 0.5% in It is expected that PE will see growth in demand to 7% in and again bounce back to clock a double digit growth of 10.7% in PP registered a demand growth of 4% in and growth is expected to witness a slow-down to touch 8% in Polyolefins registered demand growth of 2% in It is expected to improve to 8% in and 9% in Table 5: POLYOLEFIN Demand in India Actual & Projected (KT) Actual Projected % Change year on year A A E E A E E LDPE+EVA % 12.9% 8.4% LLDPE % 8.8% 12.0% HDPE % 3.9% 10.2% PP % 8.0% 8.9% Total PO % 7.5% 9.7% Source: Industry Estimates. A: Actual, E: Estimate ONGC Petro additions Ltd. (OPaL), a JV among ONGC, Gail, and Gujarat State Petroleum Corp., is building a grassroots petrochemical complex at the Dahej PCPIR. The complex s' ethylene plant will be a dual-feed cracker with capacity for 1.1 million m.t./year of ethylene and 400,000 m.t./year of propylene. The downstream units will include two 360,000- m.t./year Swing PE units capable of producing high-density PE (I-IDPE) and/or LLDPE. OPaL also is building a 340,000-m.t./year dedicated HOPE plant and a 340,000-m.t/year PP unit. The Dahej project, which has been delayed by several years is expected to go on-stream in MRPL is building a 440,000-m.t./year PP plant at the Mangalore SEZ in southwestern India and is also expected onstream in Meanwhile in Assam State, in the far northeast of the country, Brahmaputra Cracker and Polymer Ltd. (BCPL), 70%.owned by Gail, is building a complex based around a 220,000- m.t./year ethylene and 60,000-m.t.lyear propylene plant. The complex will also produce 226,000 m.t./year of LLDPE-HDPE and 60,000 m.t./year of PP. Indian Oil is working on a number of investment projects. It broke ground recently on a PP project at Paradip that will be designed co-produce 700,000 m.t./year. The plant, slated to be on-stream in 2017, will more than double Indian Oil's PP capacity. The company currently has 650,000 m.t./year of PP capacity at Panipat, Haryana State. Gail is also doubling ethylene capacity at the company's gas-based petrochemicals complex at Para, Uttar Pradesh State, to 900,000 m.t./year and adding 450,000 m.t./year of LLDPE- HDPE, which will double its capacity for PE. 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

29 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Vinyl s: PVC The demand for PVC increased substantially but was subdued in to 2%, however it is expected to gain in to 5.6% and touch a double digit 13.9% by Table 6: PVC Demand Supply PVC (KT) A A E E Capacity Production Imports Exports Apparent Demand Demand Growth% 14.4% 2.0% 5.6% 13.9% Source: Industry Estimates. A: Actual, E: Estimate As the economy is expected to perform well with the easing of monetary policy and various PVC end use sectors performance improving, PVC demand is expected to see a sustained growth in coming years. While witnessed capacity addition of cpvc by DCW Ltd, Reliance Industries too is expected to increase its capacity by debottlenecking at its PVC complex at Dahej and touch a total of 750 KT capacity by Total capacity in was 1402 KT by adding Chemplast (emulsion grade) and DCW cpvc capacity of 30 KT and 121 KT respectively to 1360 KT which is produced by RIL, Finolex, Chemplast (suspension grade), DCW (suspension grade) and Shriram (suspension grade) which is expected to touch 1482 KT by with RIL adding another 80 KT capacity. PVC imports are expected to increase further to 1396 KT by from 1048 KT in Styrenics A. Polystyrene In , demand for PS witnessed a de-growth of negative (-) 13% to touch 217 KT, as shown in table below. Demand for Polystyrene is however expected to pick up in by 3.8% and further by 6.2% in Table 7: POLYSTYRENE Demand Supply POLYSTYRENE (KT) A A E E Capacity Production Imports Exports Apparent Demand Demand Growth% 0.8% -13.3% 3.8% 6.2% Source: Industry Estimates. A: Actual, E: Estimate 22 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

30 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference B. Acrylonitrile-Butadiene-Styrene (ABS) Demand for ABS registered a growth of 10.2% in however expected to see a slight dip to 9.9% in Industry capacity is expected rise in and touch 155 KT as Styrolution ABS Ltd and Bhansali Engineering Polymers Ltd. are expected to add capacity in that period and touch 190 KT by 16. Table 8: ABS Demand Supply ABS (KT) A A E E Capacity Production Imports Exports Apparent Demand Demand Growth% 14.2% 10.2% 9.9% 10.2% Source: Industry Estimates. A: Actual, E: Estimate C. Styrene-Acrylonitrile (SAN) Table 9: SAN Demand Supply SAN (KT) A A E E Capacity Production Imports Exports Apparent Demand Demand Growth% 2.5% 7.2% 5.6% 12.8% Source: Industry Estimates. A: Actual, E: Estimate Demand for SAN declined to 2.5% in and recovered to modest growth of 7.2% However, it is expected to grow at about 6% in and again see a jump in with capacity addition touching 150 KT in Imports are expected to rise in next two years. Olefins (including Butadiene, Styrene, EDC & VCM) A. Ethylene & Propylene Ethylene Capacity increased from 3837 KT in to 3907 KT in It is further going to increase to 3687 KT by and 7057 KT by In , production of ethylene and propylene was 3735 KT and 4150 KT respectively as shown in table below. Ethylene Production is expected to see a dip in with respect to slow down in production at Haldia plant. The capacity is however expected to touch 7057 KT with the new capacity lined up by RIL, GAIL BCPL and OPAL and resumed production at Haldia Plant. 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

31 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Table 10: ETHYLENE & PROPYLENE Net Availability ETHYLENE (KT) A A E E Capacity Production Imports Exports Net Availability PROPYLENE (KT) A A E E Capacity Production Imports Exports Net Availability Source: Industry Estimates. A: Actual, E: Estimate Reliance Industries is constructing a 1.4-million m.t./year ethylene plant, expected on-stream in 2016 which will crack refinery off-gases. Reliance will also adapt its 860,000-m.t./year ethylene plant at Hazira, originally designed to work on naphtha, to partly use gas. Technip is currently performing engineering work for the project. The new Jamnagar cracker will raise Reliance's HOPE total ethylene capacity to 3.2 million m.t./year. Separately, ONGC Petro additions Ltd. (OPaL), a JV among ONGC, Gail, and Gujarat State Petroleum Corp., is building a grassroots petrochemical complex at the Dahej PCPIR. The complex s' ethylene plant will be a dual-feed cracker with capacity for 1.1 million m.t./year of ethylene. Propylene capacity as mentioned in the table above increased from 4141 KT in to 4371 KT in and expected to dip a bit in owing to slow down at Haldia plant. It is however expected to increase to 5126 KT in with capacity additions lined up by RIL, HMEL, OPAL and BCPL Assam; resumed production at Haldia plant. Production in is also expected to touch 4650 KT from 4371 KT in Bharat Petroleum Corp. Ltd.'s (BPCL) board earlier in 2014 approved a program to invest an estimated 45.9 billion to produce niche petrochemicals at the company s Kochi refinery, in the southern state of Kerala. The company is expanding the refinery and building a fluid catalytic cracker that will produce 500,000 m.t./year of propylene. BPCL plans to use the propylene to produce acrylic acid, superabsorbent polymers (SAP), acrylates, and oxo alcohols. BPCL would be the first company to produce SAP in India. The complex is expected on-stream in fiscal B. Butadiene Sharp decline in crude prices and continued soft demand for synthetic rubber, coupled with new capacities led to Butadiene prices touching a new low in FY15.The demand for butadiene registered a negative growth of -1.1% in Demand is expected to register a growth of 43.4% in and 90% in on the back of new SBR and PBR plants of RIL coming up. IOCL is adding 140 KT of Butadiene capacity in and OPAL is expected to add 58 KT in increasing it to 115 KT in Production is expected to increase in line with the new capacity addition taking place and is expected to increase from 266 KT in to 374 KT by Asia Petrochemical Industry Conference May 2015, Seoul, Korea

32 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Table 11: BUTADIENE Demand Supply BUTADIENE (KT) A A E E Capacity Production Imports Exports Apparent Demand Demand Growth% -1.1% 6.3% 43.4% 90.3% Source: Industry Estimates. A: Actual, E: Estimate There was an exportable surplus of 113 KT in , which declined to 108 KT in and expected to further decline to 46 KT in and 20 KT in C. Styrene India does not have any capacity for styrene and is fully dependent upon imports as shown in table below. For , India s total imports for Styrene was 572 KT and growth in styrene was at 3.8%. In , imports for Styrene is projected to increase by 7.3% and expected to reach 614 KT & 647 KT in & respectively. Table 12: STYRENE Demand Supply STYRENE (KT) A A E E Imports Exports Apparent Demand Demand Growth% 6.0% 3.8% 7.3% 5.4% Source: Industry Estimates. A: Actual, E: Estimate D. EDC & VCM Almost the entire production of EDC and VCM in India are consumed captively by the polymer manufacturers for production of PVC and hence, PVC manufacturers who do not have facilities for captive production of EDC and VCM have to rely entirely on imports to meet their demand for PVC building blocks viz. EDC and VCM. Table 13: EDC & VCM Import into India EDC (KT) A A E E Capacity Production Imports Exports Apparent Demand Growth (%) 1.6% 2.2% 10.6% 0.0% Source: Industry Estimates. A: Actual, E: Estimate 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

33 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY (KT) A A E E VCM Capacity Production Imports Exports Apparent Demand Demand Growth (%) 1.5% 9.8% 0.0% 3.6% Source: Industry Estimates. A: Actual, E: Estimate While EDC registered nominal growth of 2.2% in , VCM witnessed a growth of 9.8% in the same period. However, EDC is expected to register a double digit growth of approx.10% in In case of import EDC witnessed a jump from 451 KT in to 472 KT in which is increase further to 541 KT in In case of VCM increased from 440KT in to and expected to remain same in Fibre Intermediates In , the combined production of fibre intermediates viz. ACN, Caprolactam, PTA and MEG reached 4582 KT of which PTA and MEG constituted 75% and 23% respectively with ACN and Caprolactam together accounting for the remaining 3%. Table 14 : FIBRE Intermediate Demand Supply (KT) A A E E ACN Capacity Production Imports Exports Demand Demand Growth (%) 1.8% 27.7% 4.8% 3.8% CAPROLACTAM Capacity Production Imports Exports Demand Demand Growth (%) 9.0% 2.9% 4.0% 3.9% 26 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

34 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference PTA Capacity Production Imports Exports Demand Demand Growth (%) 6.6% 7.1% 7.2% 9.1% MEG Capacity Production Imports Exports Demand Demand Growth (%) 3.7% 11.9% 0.8% 5.1% Source: Industry Estimates. A: Actual, E: Estimate PTA and MEG constituted 50% and 44% of the total 1963 KT fibre intermediates imported in Fibre intermediates exported from India in was 64 KT and is expected to jump to 301 KT in with the addition of new capacity from RIL. ACN witnessed a robust growth of 27.7% in on the back of pesticide industry doing well. PTA import volumes into India (which is another big and growing polyester market in Asia) are also expected to decline after the new plant by Reliance Industries runs at full capacity and touch nil by Caprolactam, which is used to manufacture automobile tyre cord, should benefit from an increase in discretionary spend, once the global economy returns to the growth path. To manufacture one tonne of caprolactam, about a tonne of benzene is required. In , GSFC produced ~85 KT of caprolactam; its sales accounted for 18% of total revenues. Synthetic Fibres In , the combined production of synthetic fibre (PSF, ASF, PPSF, PFY, PPFY, VFY, VFS and NFY) reached 4034 KT against demand of 3866 KT. The demand growth was at 7.2% in It is expected that the fibre demand growth will be ~5.6% by The capacity in the and is expected to increase to 6673 KT and 6789 KT respectively from 6597 KT in RIL commissioned its new Polyester Filament Yarn (PFY) facility at Silvassa, from April The entire produce from this facility has been successfully placed in the domestic and international markets. With the commissioning of this ultra-modern Polyester Filament Yarn Facility, Reliance s total PFY capacity, including the Malaysian facilities, is in excess of 1.5 MMTPA. This expansion further strengthens RIL s position as the world s largest producer of Polyester Fibre and Yarn. 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

35 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Table 15: Demand Supply Balance of Synthetic Fibre (KT) A A E E PSF Capacity Production Imports Exports Demand Demand Growth (%) 4.3% 2.8% 4.9% 3.5% ASF Capacity Production Imports Exports Demand Demand Growth (%) 12.0% 18.0% -11.3% 0.0% PPSF Capacity Production Imports Exports Demand Demand Growth (%) 3.0% 3.0% 10.0% 0.0% PFY Capacity Production Imports Exports Demand Demand Growth (%) 4.2% 8.4% 0.9% 5.0% PPFY Capacity Production Imports Exports Demand Demand Growth (%) 22.1% -31.5% -0.3% 22.0% 28 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

36 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference VSF Capacity Production Imports Exports Demand Demand Growth (%) 4.8% 8.1% -3.5% 13.5% VFY Capacity Production Imports Exports Demand Demand Growth (%) 2.7% 14.6% 2.2% 1.1% NFY Capacity Production Imports Exports Demand Demand Growth (%) 7.2% 0.0% 15.6% 0.0% Source: Industry Estimates. A: Actual, E: Estimate Aromatics Paraxylene PX demand declined to 1.5% in from 5% in PX demand is expected to pick up again in and register a demand growth of 5.3% before growing at a robust space of 45.8% with lined up capacities. PX capacity in was 2472 KT and with MRPL capacity addition of 537 KT in it is expected to touch 3009 KT. Further 383 KT of capacity will be added in making it a total 920 KT by MRPL as planned and capacity addition by RIL will take India s PX capacity to 5642 KT in PX import was at 679 KT in and it is expected to increase to 759 KT in meanwhile exports are expected to increase from 640 KT in to 1061 KT in before witnessing a dip in to 880 KT. Table 16: PARAXYLENE Demand Supply (KT) A A E E PARAXYLENE Capacity Production Imports Exports Apparent Demand Demand Growth% 5.1% 1.5% 5.3% 45.8% Source: Industry Estimates. A: Actual, E: Estimate 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

37 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Reliance is adding 2.3 million m.t./year of p-xylene capacity to its existing Capacity. It also operates a small, 150,000 m.t./year p xylene plant at Patalganga, Maharashtra State. Reliance will, on completion, have capacity for 4.3 million m.t./year of p-xylene by Meanwhile, Indian Oil Corp. has delayed the startup of a new 400,000 mt/year p- xylene plant at Vadodara in Gujarat state, from 2015 to Surfactants Demand for key surfactant LAB increased by 1.8% and 3.3% respectively in from before improving by 3.3% in as shown in table below. LAB capacity is expected to remain unchanged till LAB import is expected to decline marginally to 120 KT in from 126 KT in Exports are also expected to decline from 29 KT in to 24 KT in Table 17: Demand & Supply of LAB & EO (KT) A A E E LAB Capacity Production Imports Exports Demand Demand Growth (%) 6.3% 1.8% 3.3% 3.5% EO Capacity Production Imports Exports Demand Demand Growth (%) 2.7% 10.9% 1.2% 5.5% Source: Industry Estimates. A: Actual, E: Estimate EO capacity increased from 234 KT in to 253 KT in and further is expected to touch 268 KT in Debottlenecking of EO capacity by RIL in happened and further debottlenecking expected in RIL capacity would also be enhanced to 188 KT in and 203 KT in Demand for EO grew by 10% in however it is expected to see a decline and grow at by 1.2% in before recovering to 5.5% and touch 203 KT in Synthetic Rubber SBR which accounts for 40% of the total synthetic rubber demand is consumed mostly in the tyre sector. In , synthetic rubber demand grew at 7% and is expected to grow at 8% in Reliance Industries Ltd. began production at its new 150,000 mt/year SBR plant at Hazira in September, which is the largest in India. The plant has capability to produce entire range of dry as well as oil extended grades of emulsion SBR. As shown in table above, SBR demand registered a growth of 6.7% in and expected to improve in Imports are expected to significantly reduce in onwards with RIL and ISRL new capacities coming up to full steam. EPDM demand is expected to improve by to a double digit growth of 13.5%. 30 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

38 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference India is a net importer of SBR and with RIL s new capacity, India will be self-sufficient in SBR. With this, RIL has reaffirmed its leadership position in synthetic rubbers in the Indian market. After start-up of new PBR capacity at Hazira, RIL is expected to increase its domestic market share as substantial portion of production from new line will be placed in the domestic market. Table 18: Demand Supply Balance of PBR, SBR, NBR & EPDM (KT) A A E E PBR Capacity Production Imports Exports Demand Demand Growth (%) 8.3% 7.5% 8.1% 7.5% SBR Capacity Production Imports Exports Demand Demand Growth (%) 21.3% 6.7% 8.6% 6.1% NBR Capacity Production Imports Exports Demand Demand Growth (%) 12.9% 8.6% 7.9% 9.8% EPDM Capacity Production Imports Exports Demand Demand Growth (%) 15.7% 8.0% 5.7% 13.5% Source: Industry Estimates. A: Actual, E: Estimate 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

39 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Reliance is the only producer of PBR in India. Indian Oil is also expected to start a third SBR line with a capacity of 60,000 m.t./year at Panipat. India is expected to jump three places to become the world's No.3 car market by This has fuelled a domestic rush to produce more of the synthetic rubber that is mixed with natural rubber to make tyres. Carbon Black Feedstock & Carbon Black Carbon black is an additive for rubber products which also finds application as a key raw material in various chemical industries including inks, coatings, paints, batteries, electrical cables, plastic films, pipes and sealants etc. More than 60% of the demand for carbon black comes from tyres segment. According to ATMA (Automotive Tyre Manufacturers' Association), carbon black constitutes 11% of the raw material cost of tyre companies and forms 20-25% of volumes of the tyre. Table 19: Demand Supply Balance of CBFS & Carbon Black (KT) A A E E CBSF Capacity Production Imports Exports Demand Demand Growth (%) 10.4% -6.1% 5.2% 5.6% CARBON BLACK (KT) Capacity Production Imports Exports Demand Demand Growth (%) 17.0% 10.3% 1.7% 6.1% Source: Industry Estimates. A: Actual, E: Estimate The domestic carbon black industry continues to reel under pressure this year in due to deceleration in growth in automobile sector coupled with unabated dumping of carbon black in India by China South Korea and a few other countries which will affect the demand growth to drop to 1.7% from 10% in Total import of carbon black in India during FY14 was 100 KT and import from China and South Korea accounted for 90% of total import. Due to this dumping procurement of carbon black from domestic sources was affected and carbon black companies in India had to continue with production cut during the year. Demand for carbon black in India is expected to 6-11% during the next couple of years and is likely to receive significant boost when new capacity for tyre manufacturing hits the market. CBFS registered a negative growth by -6.1% in and is expected to improve and remain in the range of 5% in next two years. Other Key Petrochemicals Overall other key petrochemicals demand in witnessed negative growth of 3.9% and is expected to pick up by to a positive 7%. Benzene demand witnessed a negative growth of 4.4% in however is expected to grow at ~12% in (before a further decline in ) with capacity addition lined up by OPAL, MRPL, IOCL, BPCL, HPL, and boost in domestic sales. Exports too are expected to pick up by Asia Petrochemical Industry Conference May 2015, Seoul, Korea

40 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Table 20: Demand Supply Balance of Benzene, Toluene, MXS & OX (KT) A A E E BENZENE Capacity Production Imports Exports Demand Demand Growth (%) -2.1% -4.4% -17.1% 12.8% TOLUENE Capacity Production Imports Exports Demand Demand Growth (%) 16.1% -9.6% 8.9% 4.5% MXS Capacity Production Imports Exports Demand Demand Growth (%) -2.8% 20.5% 26.0% 11.1% OX Capacity Production Imports Exports Demand Demand Growth (%) 5.8% -1.1% 2.9% -0.3% Source: Industry Estimates. A: Actual, E: Estimate Toluene demand registered growth of 16% in Toluene demand registered a negative growth of 9.6% in but forecasted to improve by 8.9% in MXS witnessed a robust growth in demand at 20.5% in with increase in production and domestic sales. OX registered a negative growth rate of 1.1% in There is no new capacity addition lined up for OX. Demand is expected to increase from 278 KT in to 285 KT in May 2015, Seoul, Korea Asia Petrochemical Industry Conference

41 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Outlook for the Overall Indian Petrochemical Industry India's aggregated demand for petrochemicals increased by 4% in over Combining the demand for all the key segments in the petrochemical industry aggregate demand for the entire petrochemical sector in India is likely to increase from 30 MMT in to 31 MMT in and further to 35 MMT in as depicted in figure below. At the aggregate level, therefore, demand for petrochemicals in India is expected to grow at 6% and 10% per annum in and respectively. Figure 16 : Aggregate Petrochemical Demand (All key segments MMT) MMT Demand (MMT) Demand Growth (%) 10% 35 6% 4% E E 10% 8% 6% 4% 2% 0% n Polymers are likely to register growth rate of 6.7% and 9.3% in and n n n Polyolefins are expected to grow at 7.2% and 7.9% in and with the startup of new capacities. Surfactants are projected to grow at ~5% and 9% in the same period. Synthetic rubbers are expected to register demand growth in the range of 7% in next two years. Other key petrochemicals expected to grow at ~7% in India's demand from the automobiles, packaging, and agriculture and infrastructure sector is expected to grow at healthy rate with easing of government's monetary policy. This optimism is based on the expectation that India's GDP would again grow at 7% plus in Asia Petrochemical Industry Conference May 2015, Seoul, Korea

42 Asia Petrochemical Industry Conference SECTION 3 Statistical Appendix 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

43 STATISTICAL APPENDIX 36 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

44 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Demand Supply Balance: Polymers (KT) (KT) A A E E LDPE Capacity Production Imports Exports Apparent Demand Demand Growth% -8.4% 0.2% 14.0% 8.9% EVA Capacity Production Imports Exports Apparent Demand Demand Growth% 18.0% 13.0% 8.9% 6.7% LLDPE Capacity Production Imports Exports Apparent Demand Demand Growth% 4.8% -0.3% 8.8% 12.0% HDPE HDPE Capacity LLDPE Capacity Total Capacity Production Imports Exports Apparent Demand Demand Growth% 7.2% -0.8% 3.9% 10.2% All PE Capacity Production Imports Exports Apparent Demand Demand Growth% 4.1% -0.5% 7.0% 10.7% Source: Industry Estimates. A: Actual, E: Estimate 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

45 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY PP Capacity Production Imports Exports Apparent Demand Demand Growth% 12.5% 3.6% 8.0% 8.9% POLYOLEFINS Capacity Production Imports Exports Apparent Demand Demand Growth% 8.1% 1.6% 7.5% 9.7% PVC Capacity Production Imports Exports Apparent Demand Demand Growth% 14.4% 2.0% 5.6% 13.9% PS Capacity Production Imports Exports Apparent Demand Demand Growth% 0.8% -13.3% 3.8% 6.2% POLYMERS Capacity Production OR (%) 89% 90% 93% 88% Imports Exports Net Trade Apparent Demand Demand Growth% 9.3% 1.3% 7.0% 10.7 Source: Industry Estimates. A: Actual, E: Estimate 38 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

46 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Demand Supply Balance: Olefins (KT) (KT) A A E E ETHYLENE Capacity Production Imports Exports Net Availability PROPYLENE Capacity Production Imports Exports Net Availability BUTADIENE Capacity Production Imports Exports Apparent Demand Demand Growth% -1.1% 6.3% 43.4% 90.3% STYRENE Imports Exports Net Trade Demand Growth% 6.0% 3.8% 7.3% 5.4% EDC Capacity Production Imports Exports Apparent Demand Demand Growth% 1.6% 2.2% 10.6% 0.0% VCM Capacity Production Imports Exports Apparent Demand Demand Growth% 1.5% 9.8% 0.0% 3.6% Source: Industry Estimates. A: Actual, E: Estimate 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

47 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Demand Supply Balance: ABS, SAN, PX & Surfactants (KT) (KT) A A E E ABS Capacity Production Imports Exports Apparent Demand Demand Growth% 14.2% 10.2% 9.9% 10.2% SAN Capacity Production Imports Exports Apparent Demand Demand Growth% 2.5% 7.2% 5.6% 12.8% PX Capacity Production Imports Exports Apparent Demand Demand Growth% 5.1% 1.5% 5.3% 45.8% LAB Capacity Production Imports Exports Apparent Demand Demand Growth% 6.3% 1.8% 3.3% 3.5% EO Capacity Production Imports Exports Apparent Demand Demand Growth% 2.7% 10.9% 1.2% 5.5% Source: Industry Estimates. A: Actual, E: Estimate 40 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

48 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Demand Supply Balance: Fibre Intermediates (KT) (KT) A A E E ACN Capacity Production Imports Exports Apparent Demand Demand Growth% 1.8% 27.7% 4.8% 3.8% CAPROLACTAM Capacity Production Imports Exports Apparent Demand Demand Growth% 9.0% 2.9% 4.0% 3.9% PTA Capacity Production Imports Exports Apparent Demand Demand Growth% 6.6% 7.1% 7.2% 9.1% MEG Capacity Production Imports Exports Apparent Demand Demand Growth% 3.7% 11.9% 0.8% 5.1% Source: Industry Estimates. A: Actual, E: Estimate 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

49 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Demand Supply Balance: Synthetic Fibres (KT) (KT) A A E E PSF Capacity Production Imports Exports Demand Demand Growth (%) 4.3% 2.8% 4.9% 3.5% ASF Capacity Production Imports Exports Demand Demand Growth (%) 12.0% 18.0% -11.3% 0.0% PPSF Capacity Production Imports Exports Demand Demand Growth (%) 3.0% 3.0% 10.0% 0.0% PFY Capacity Production Imports Exports Demand Demand Growth (%) 4.2% 8.4% 0.9% 5.0% 42 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

50 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference PPFY Capacity Production Imports Exports Demand Demand Growth (%) 22.1% -31.5% -0.3% 22.0% VSF Capacity Production Imports Exports Demand Demand Growth (%) 4.8% 8.1% -3.5% 13.5% VFY Capacity Production Imports Exports Demand Demand Growth (%) 2.7% 14.6% 2.2% 1.1% NFY Capacity Production Imports Exports Demand Demand Growth (%) 7.2% 0.0% 15.6% 0.0% Source: Industry Estimates. A: Actual, E: Estimate 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

51 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Demand Supply Balance: Elastomers (KT) (KT) A A E E PBR Capacity Production Imports Exports Apparent Demand Demand Growth% 8.3% 7.5% 8.1% 7.5% SBR Capacity Production Imports Exports Apparent Demand Demand Growth% 21.3% 6.7% 8.6% 6.1% NBR Capacity Production Imports Exports Apparent Demand Demand Growth% 12.9% 8.6% 7.9% 9.8% EPDM Capacity Production Imports Exports Apparent Demand Demand Growth% 15.7% 8.0% 5.7% 13.5% Source: Industry Estimates. A: Actual, E: Estimate 44 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

52 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Demand Supply Balance: Carbon Black & CBFS (KT) (KT) A A E E CBFS Capacity Production Imports Exports Demand Demand Growth (%) 10.4% -6.1% 5.2% 5.6% CARBON BLACK Capacity Production Imports Exports Demand Demand Growth (%) 17.0% 10.3% 1.7% 6.1% Source: Industry Estimates. A: Actual, E: Estimate Demand Supply Balance: Other Key Petrochemicals (KT) (KT) A A E E BENZENE Capacity Production Imports Exports Apparent Demand Demand Growth% -2.1% -4.4% -17.1% 12.8% TOLUENE Capacity Production Imports Exports Apparent Demand Demand Growth% 16.1% -9.6% 8.9% 4.5% 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

53 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY MX Capacity Production Imports Exports Apparent Demand Demand Growth% -2.8% 20.5% 26.0% 11.1% OX Capacity Production Imports Exports Apparent Demand Demand Growth% 5.8% -1.1% 2.9% -0.3% Source: Industry Estimates. A: Actual, E: Estimate

54 Asia Petrochemical Industry Conference INDIAN COUNTRY REPORT Presentations for Committee Meetings APIC May 2015, Seoul, Korea Asia Petrochemical Industry Conference

55 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY

56 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Review & Future Prospects May 2015 REVIEW & OUTLOOK OF INDIAN ECONOMY 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

57 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Single most positive factor for India Stable Govt & Stable policies A Govt of majority after 30 years GDP growth showing signs of recovery Source: CSO Ÿ GDP Revised Series with as base year Ÿ India s economic growth this financial year at 7.4% against 6.9% in Ÿ IMF, ADB and OCED have revised their growth projections for Asia Petrochemical Industry Conference May 2015, Seoul, Korea

58 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference GDP Shows 5.3% Growth in Manufacturing in Growth in at constant prices (%) series series Agriculture & Allied Mining & Quarrying Manufacturing Electricity, Gas and Water Construction Trade, Repair and restaurants Transport, Storage, Communication Financial, Real estate & business Services Community, Social & Personal Services Total GVA Source: CSO Manufacturing sector GDP revisions have been substantial, and need to be noted As per the revised data manufacturing has grown more than 5% over past two years and now makes up nearly 18% of output 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

59 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY IIP Gearing Toward The Right And Positive Direction 8.2 IIP-General (%) (Apr-Jan) Source: CSO Index of Industrial Production four out of nine components ( %) IIP Overall IIP Mining IIP Manufacturing IIP Electricity IIP Basic Goods 15.0% 10.0% 5.0% 4.2% 2.7% 0.0% -5.0% -10.0% Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Source: CSO IIP strengthened 2.5% for the period of April to January 2015 Although there are small positive changes in IIP, heavy positive changes are expected due to key reforms under approval and increasing investment in infrastructure 52 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

60 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Core sector growth in Jan 15 was 1.8% Total production growth (%) in core infrastructure commodities Production growth (%) in eight core infrastructure commodities Growth of Coal(%) Growth of Natural Gas(%) Growth of Fertilizers(%) Growth of Cement(%) Growth of Crude Oil(%) Growth of Petroleum Refinery Products(%) Growth of Steel Growth of Electricity(%) Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan (Apr-Jan) Jan'14 Jan' 15 Source: CSO Source: CSO Eight core infrastructure industries reported a growth of 4.1% during Apr-Jan 15 The highest growth was reported by Electricity 8.9% and Coal 8.1% These eight industries contribute ~38% to the industrial production 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

61 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Improving Trade Balance Export - import and trade balance (USD Billion) FY09 FY10 FY11 FY12 FY13 FY14 Exports Imports Trade balance (RHS) 0 Source: Monthly Economic Report, Ministry of Finance Oil and non - oil imports (USD Billion) Oil imports Non-Oil imports FY09 FY10 FY11 FY12 FY13 FY14 Source: Monthly Economic Report, Ministry of Finance India s trade balance reached a negative USD190 billion in FY13, which improved 27.8% to a negative USD137 billion in FY14 54 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

62 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Inflation shows a sustainable decline Figures in % WPI WPI Food Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-14 Feb 15 Source: Monthly Economic Report, Ministry of Finance Figures in % CPI CPI Food 2.04 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-14 Feb 15 Source: Monthly Economic Report, Ministry of Finance Going ahead, inflation expected to print at Sub 6% in ; if the outlook on crude oil remains benign, monsoon is normal, and there are proactive measures by the government to control food inflation and improve monetary and fiscal coordination; RBI expects inflation to come around the target level of 6% for January May 2015, Seoul, Korea Asia Petrochemical Industry Conference

63 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Sensex witnessed a consistent rise in 2014 with a growth of around 40% Movement of Sensex (Apr'13-Mar'15) Touched all time high on 4th March' Note : Sensex values denote the high of the day and data for March'15 till 4th March'15 Source : BSE Sensex is expected to scale new highs in the year 2015 Indian rupee has been ranked as one of the best performers in 2014 Rupee Movement Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Source : RBI The rupee s performance compares very favourably with currencies such as the Brazilian Real (down 12.3%), Turkish Lira (down 9.7%) and the Indonesian Rupiah (down 4.5%) 56 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

64 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Foreign exchange reserve registered a new high US$ bn Feb Feb Mar Apr May may Jun Jul Jul Aug Sep Sep Oct Nov Nov Dec Jan Jan-2015 Source : RBI India's foreign exchange reserves crossed US$ 330 bn as on Feb 6th, 2015 CAD falls to 1.6% of GDP in Q3 6.5 CAD in last Nine Quarters (%) Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Source : CSO CAD is expected to CAD below 1% of GDP in May 2015, Seoul, Korea Asia Petrochemical Industry Conference

65 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Budget plans 25% increase in capital expenditure Sectors with higher plan outlay (%, y-o-y) FY 12 to FY 15 average FY 16 B.E. %, y-o-y Ÿ Ÿ Central plan outlay is budgeted to increase by 35.5% in Budget lays focus on four sectors providing crucial 15.5 Ÿ Focus on these sectors is important again because of the multiplier impact on output Roads & Bridges Rural Development Railways Power Source: Budget Make in India A major new national program designed to transform India into a global manufacturing hub 25 thrust sectors identified where India can become leader including Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Chemicals Automobiles Pharma Textiles IT Ports Railways Aviation Food processing Electronics Will give boost to share of manufacturing in GDP Leading to higher growth, higher exports and job creation 3000 companies invited to explore investment opportunities 58 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

66 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference 100 Smart Cities Opportunity not to be missed Ÿ Ÿ Ÿ These cities will have 0.5 to 1.0 million residents over next years. Opportunities for Real Estate/Cement /Pipes/IT & Electronics/Telecom/Roads/Water & Sanitation / Power / Transportation Example Kochi Smart City/Gujarat International Finance Tech City India s GDP growth projections Agencies CSO ADB Crisil DBS S&P Goldman Sachs IMF OECD UN 8-8.5% 7.8% 6.0% 6.5% 7.9% 6.3% 7.5%* 7.7%* 5.9%* *figures represent calendar year 2015 Expected GDP growth rate in ~ % 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

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68 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference REVIEW & OUTLOOK OF PETROCHEMICAL INDUSTRY 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

69 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Capacity for polymers to go up significantly by 16 MMT PS PVC PP All PEs Total A A E E 4.7 Source: Industry Estimates. A: Actual, E: Estimate Capacity addition of 330 KT PP by MRPL, 170 KT by OPAL, 30 KT by BPCL-Assam and 60 KT by RIL in Polymer demand grew at 1.3% in MMT PS PVC PP All PEs A A E E Source: Industry Estimates. A: Actual, E: Estimate Demand for PE & PP is expected to register growth of 7% and 8% in Asia Petrochemical Industry Conference May 2015, Seoul, Korea

70 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Net exportable surplus : PP Trend in Polymers net trade (mmt) MMT 0.49 All PE PP PVC PS A E E Source: Industry Estimates. A: Actual, E: Estimate Petrochemical demand continuously growing Aggregate petrochemicals demand combining all the key sector (mmt) MMT Source: Industry Estimates. A: Actual, E: Estimate A E E.and is expected to touch 35 mmt by May 2015, Seoul, Korea Asia Petrochemical Industry Conference

71 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Planned new capacities in India (in KTs) Start up Year C2 C3 HDPE LDPE LLDPE PP PVC BCPL GAIL OPAL (15-16) RIL MRPL BPCL Total Till Source: Industry The domestic petrochemical industry is in the process of investing over ~US$25 billion to meet the surging demand 64 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

72 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Thank You! 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

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74 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference INDIAN POLYOLEFINS INDUSTRY Review & Future Prospects May 2015 REVIEW OF POLYOLEFINS SECTOR 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

75 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Polyolefins demand grew at ~2% in MMT A A E E Source: Industry Estimates. A: Actual, E: Estimate Expected to register a healthy growth of 8% and 10% in and Demand of Polyolefins in LLDPE+HDPE+LDPE MMT 4.08 MMT Polypropylene A A E E A A E E Source: Industry Estimates. A: Actual, E: Estimate PE & PP demand grew at -0.5% and 4% respectively in ; expected to show healthy growth trend in next two years 68 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

76 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Polyolefin production increased by ~2.5% in Figures in % PP 63% LLD/HD 34% LDPE+EVA 3% PP 48% LLD/HD 44% LDPE+EVA 8% Polyolefin Production MMT Polyolefin Demand MMT Polyolefin consumption is dominated by Lin PE & PP demand PE & PP Demand Trend LDPE+EVA Lin PE PP MMT A A E E Source: Industry Estimates. A: Actual, E: Estimate Line PE and PP demand growth expected to rise from onwards 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

77 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Polyolefins net trade deficit was 0.63 MMT in MMT LDPE+EVA LLD+HDPE PP A A E E Source: Industry Estimates. A: Actual, E: Estimate LLD + HDPE registered net trade deficit of 0.74 MMT and PP registered trade surplus of 0.49 MMT in Asia Petrochemical Industry Conference May 2015, Seoul, Korea

78 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference OUTLOOK FOR POLYOLEFINS SECTOR 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

79 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Projected demand for Polyolefins in India (KTA) Actual Projected % change Y-o-Y LDPE+EVA % 12.9% 8.4% LLDPE % 8.8% 12.0% HDPE % 3.9% 10.2% PP % 8.0% 8.9% Polyolefins % 7.5% 9.7% Healthy demand growth expected for polyolefins in next two years PE import dependency to remain same LDPE+EVA LLD+HDPE PP A 65% 28% 12% Figures in % E 70% 37% 15% E 69% 20% 10% Net exportable surplus for PP expected to increase with new capacities coming on stream in Asia Petrochemical Industry Conference May 2015, Seoul, Korea

80 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Thank You! 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

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82 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference VINYLS IN INDIA Review & Future Prospects May 2015 REVIEW OF VINYL SECTOR 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

83 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY PVC witnessed a growth of 2% in KT 1979 PVC Apparent Demand A A A E E Source: Industry Estimates. A: Actual, E: Estimate Demand has gone up from 1979 KT in to 2309 KT in PVC Capacity addition in PVC Capacity 1482 KT A A A E E Source: Industry Estimates. A: Actual, E: Estimate saw capacity addition by DCW in cpvc and by RIL by debottlenecking; Capacity addition is expected by RIL in Asia Petrochemical Industry Conference May 2015, Seoul, Korea

84 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Net trade of EDC & VCM EDC Net Trade VCM Net Trade KT A A A Source: Industry Estimates. A: Actual, E: Estimate Imports dependency remained high PVC demand supply balance in India Capacity Demand Import KT A A A Source: Industry Estimates. A: Actual, E: Estimate PVC deficit has increased from 644 KT in to 919 KT in May 2015, Seoul, Korea Asia Petrochemical Industry Conference

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86 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference OUTLOOK FOR VINYL SECTOR 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

87 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY PVC demand expected to register strong growth KT PVC Apparent Demand A A A E E Source: Industry Estimates. A: Actual, E: Estimate Demand to touch 2777 KT in PVC deficit to increase in future Capacity Demand Import KT A A A E E Source: Industry Estimates. A: Actual, E: Estimate No new capacity coming on-stream to meet the rising domestic consumption; capacity addition in by RIL 80 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

88 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference EDC & VCM Net Trade EDC Net Trade VCM Net Trade KT A A E E Source: Industry Estimates. A: Actual, E: Estimate Import dependency to increase! Thank You! 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

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90 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference INDIAN STYRENICS INDUSTRY Review & Future Prospects May 2015 REVIEW OF STYRENICS SECTOR 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

91 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Styrene Demand Trend Styrene demand for derivative production (KT) KT A A E E Source: Industry Estimates. A: Actual, E: Estimate Styrene derivative demand to register 7% growth next year Styrene derivatives : Demand Demand for Styrenics in India (kt) E E CAGR PS % EPS % ABS % SBR % SAN % Source: CPMA, E- Estimated Note: Other minor applications of Styrene is estimated to constitute as a whole 50KT on consumption SBR is expected to grow over 8% CAGR in period 84 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

92 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference OUTLOOK FOR STYRENICS SECTOR 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

93 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Projected demand for Styrenics in next two years Projected demand for Styrenics in India (KT) Actual Projected % change year on year PS % 3.8% 6.2% EPS % 2.4% 4.8% ABS % 9.9% 10.2% SBR % 8.6% 6.1% SAN % 5.6% 12.8% Source: CPMA ABS, SBR and SAN to grow at ~10%, 9% and 6% in respectively 86 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

94 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Thank You! 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

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96 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference INDIAN ELASTOMERS INDUSTRY Review & Future Prospects May 2015 REVIEW OF ELASTOMERS 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

97 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Elastomers demand to in next two years KT A A A A E E Source: Industry Estimates. A: Actual, E: Estimate PBR demand increased by 7.5%; SBR by 7% in 14 KT PBR KT SBR A A A A E E A A A A E E Source: Industry Estimates. A: Actual, E: Estimate Demand for PBR & SBR is expected to grow at 8%+ in Asia Petrochemical Industry Conference May 2015, Seoul, Korea

98 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Elastomers imports stood at 369 KT in A A E E KT PBR SBR NBR EPDM Source: Industry Estimates. A: Actual, E: Estimate SBR deficit stood at 205 KT in ;expected to reduce substantially to 57 KT in and then touch 4 KT by May 2015, Seoul, Korea Asia Petrochemical Industry Conference

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100 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference OUTLOOK ELASTOMERS 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

101 Asia Petrochemical Industry Conference INDIAN PETROCHEMICAL INDUSTRY Outlook for & is positive but subdued 15% PBR SBR NBR EPDM 13.5% Figs in % 10% 5% 9.8% 8.6% 8.6% 7.5% 8.0% 8.1% 7.9% 7.5% 6.7% 6.1% 5.7% 0% A E E Source: Industry Estimates. A: Actual, E: Estimate Elastomers to register growth rate of 8% in and 7% in Elastomers import dependency to decrease by PBR SBR NBR EPDM A 47% 53% 86% 100% Figs in % E 42% 51% 78% 100% E 18% 39% 56% 100% Source: Industry Estimates. A: Actual, E: Estimate New capacity being added in next two years in SBR and PBR 94 Asia Petrochemical Industry Conference May 2015, Seoul, Korea

102 INDIAN PETROCHEMICAL INDUSTRY Asia Petrochemical Industry Conference Thank You! 7-8 May 2015, Seoul, Korea Asia Petrochemical Industry Conference

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