Chemicals and Petrochemicals

Transcription

1 Establishment of Methylene Diphenyl Diisocyanate (MDI) manufacturing unit Chemicals and Petrochemicals Government of Gujarat

2 Contents Project Concept 3 Market Potential 5 Growth Drivers 7 Gujarat Competitive Advantage 8 Project Information 10 - Location/ Size - Infrastructure Availability/ Connectivity - Raw Material/ Manpower - Key Players/ Machinery Suppliers - Potential Collaboration Opportunities - Key Considerations Project Financials 15 Approvals & Incentives 17 Key Department Contacts 19 Page 2

3 Project Concept (1/2) What is Methylene Diphenyl Di-isocyanate (MDI)? MDI, is an aromatic Di-isocyanate. MDI reacts with Polyols in the manufacturing of Polyurethanes. Major three forms for MDI - Pure MDI, Polymeric MDI and Modified MDI.. Forms of MDI Pure MDI Polymeric MDI Modified MDI Major applications of MDI MDI and Polyols in varied combinations are used to manufacture different types of rigid Polyurethane foams which are used in refrigeration, automotive, furniture, construction, appliances, insulation, coatings and adhesives and recreation. Page 3 Source: Process of production

4 Project Concept (2/2) MDI production process flow diagram Benzene Nitration Nitro benzene Exothermic catalytic hydrogenation Aniline Liquid phase condensation Diphenylmethane diamine (MDA) Liquid phase phosgenation MDI Source: PlasticsEurope MDI end uses Rigid (polyurethane) foam will continue to have the largest share in MDI applications market owing to the increased use of rigid foams as an insulating material in the building and construction sectors. Global MDI market share by application, 2014 (4.6 billion tons) Global MDI market share by application, 2019e (6.4 billion tons) Rigid Foam 7.1% 3.2% 7.7% 4.9% Rigid Foam Flexible Foam Coatings 12.0% 36.8% 11.6% 35.9% Flexible Foam Coatings Elastomers Adhesives and sealants Others Source: Technavio Report 13.1% 27.9% 12.7% 27.2% Elastomers Adhesives and sealants Others Page 4 Source: Global MDI market , Technavio report Eco-profiles of the European Plastics Industry MDI, PlasticsEurope, March 2005

5 Global Market Potential Global MDI consumption and forecast Global MDI consumption is estimated to reach 6.4 billion tons in 2019 from 4.6 billion tons in 2014, growing at a Compounded Annual Growth Rate (CAGR) of 6.8%. Global MDI consumption and forecast (billion tons), e e 2017e 2018e 2019e Source: Technavio report Global market growth for MDI application market - Polyurethane foam MDI is mostly used for manufacturing Polyurethane (PU) foams, having key application in industrial, consumer appliances and packaging sectors. Global polyurethane foam market is estimated to reach US$25.1 billion in 2020 from US$17.3 billion in 2015, growing at a CAGR of 7.8%. Asia-Pacific is the dominant market with China being the leading manufacturer and consumer of polyurethane foam. Global polyurethane foam market (US$ billion), e Source: Markets and markets research, EY analysis e 2017e 2018e 2019e 2020e Page 5 Sources: Global MDI market , Technavio report

6 Indian Market Potential MDI market size in India by value Indian MDI market size is estimated to reach INR33.9 billion in 2020 from INR10.1 billion in 2010, growing at a CAGR of 18.9%. Market growth is driven by growth in MDI end-user industries such as construction, consumer appliances and packaging. Indian MDI market size by value (INR billion), e e 2020e Source: Market Research and EY analysis MDI market size in India by volume Indian MDI market size is estimated to reach 193,000 tons in 2020 from 80,000 tons in 2010, growing at a CAGR of 13.3%. Increasing support from Indian government is expected to aid the growth of MDI manufacturing players in the country. Indian MDI market size by volume (tons), e e 2020e Source: Market Research and EY analysis Page 6 Sources: Methylene Diphenyl Diisocyanate (MDI) Industry Outlook in India to Market Size, Price Trends and Trade Balance, Market Research, Global Data

7 Growth Drivers Growth in application markets to drive the demand for MDI MDI for rigid foam market growth (billion tons), e MDI for flexible foam market growth (billion tons), e e 2017e 2018e 2019e Global MDI market for rigid foam is estimated to reach 2.2 billion tons in 2019 from 1.7 billion tons in 2014, growing at a CAGR of 5.3%. MDI is used as an insulating material in the form of rigid foam in construction sector. Construction sector is expected to reach US$563.4 billion in 2020 from US$428.1 billion in 2015, growing at a CAGR of 9.9%. MDI for elastomers market growth (million tons), e e 2017e 2018e 2019e Global MDI market for flexible foam is estimated to reach 1.7 billion tons in 2019 from 1.3 billion tons in 2014, growing at a CAGR of 5.5%. MDI in the form of flexible and semi-flexible foams is widely utilized for the automotive sector for manufacturing seats, headrests, armrests, dashboards, and instrument boards. Indian automobile components sector is expected to reach US$100 billion by 2020 from US$40 billion in 2015, growing at a CAGR of 20%. MDI for adhesives market growth (million tons), e e 2017e 2018e 2019e Global MDI market for elastomers is estimated to reach 741 million tons in 2019 from million tons in 2014, growing at a CAGR of 5.8%. Elastomers are utilized as thermoplastic elastomers and modifiers for different resins. The growing use of elastomers for geomembranes and material layers is driving the market growth. MDI for coatings market growth (million tons), e e 2017e 2018e 2019e Global MDI market for adhesives application is estimated to reach million tons in 2019 from 330 million tons in 2014, growing at a CAGR of 8.2%. MDI adhesives market is expected to grow as a result of increasing demand of high temperature adhesives in the industrial and commercial sectors. Global MDI market for coating application is estimated to reach million tons in 2019 from million tons in 2014, growing at a CAGR of 6%. Polymeric MDIs and their variations are used for coating and adhesive applications, driven by growing construction industry. Source: Technavio Report e 2017e 2018e 2019e Page 7 Sources: Global MDI market , Technavio report

8 Gujarat Competitive Advantage 'Petro Capital' of India, contributing significantly to the country's production of Petrochemicals (62%), Chemicals (53%) and pharmaceuticals (45%). Gujarat has World s Largest grass root petroleum refinery at Jamnagar by Reliance Industries Limited with a crude processing capacity of 1.24 million Barrels Per Stream Day (BPSD) Gujarat credited with India s First LNG chemical port terminal at Hazira Salt Processing Diamond Processing 70% 75% Geographical advantage due to location on the west coast of India Well connected to the major cities of the world by air and sea routes. The state has 45 operational ports, 12 domestic airports and 1 International airport in addition to an extensive rail and road network. Petrochemicals Chemicals Pharmaceuticals Engineering 18% 45% 51% 62% Gujarat ranked first in ease of doing business as per DIPP report 2015 Gujarat is one of the leading Industrialized States in India and the State has attracted cumulative FDI worth US$ 12 billion from April 2000 to March 2015 Ease of Doing Business: Only state which comply 100% with Environmental procedures. Gujarat fares highly when it comes to setting up a business, allotment of land and obtaining a construction permit Flourishing Economy: State contributes 7.2% of the Nation GDP and shows leadership in many areas of manufacturing and infrastructure sectors. Gujarat s SDP (State Domestic Product) at current price registered a growth of 11% during the year Key Industries: Gujarat is the leader in key industrial sectors such as chemical, petrochemical, auto and its allied sector, pharmaceuticals, engineering, textile, jewellery etc. Strategic location and excellent infrastructure: Located on the west coast of India, Gujarat is well connected to the major cities of the world by air and sea routes. The state has 45 ports, 12 domestic airports and 1 international airport in addition to an extensive rail and road network *Source: Socio Economic Review of Gujarat Page 8

9 Gujarat Competitive Advantage 38% (564 km) of the 1500 km length of DFC will pass through Gujarat which includes 62% of total area of Gujarat (18 out of 33 districts within the influence area) Investment potential for Gujarat is US$ 50 bn (60% of total investment potential in DMIC) Presence of over 1100 manufacturing unit comprising of small and large industries in PCPIR including chemical, petrochemical, engineering, plastic, dyes & pigments, textile etc. PCPIR The State has received acknowledgments of 2,466 Industrial Entrepreneurs Memorandum (IEM) filed by entrepreneurs between 2010 and October 2015 with an estimated investment of Rs. 6,01,766 Crores Gujarat, with 42.6 % of its population residing in the urban areas, is among the top three urbanized states in the country Gujarat contributes around 17.2 % to the country s industrial output whereas the value of output registered is about 18.5%. Gujarat is the one of the power surplus states in the country as a result it helping in bringing huge amount of investment from the industries and tagged as preferred investment destination in the country Gujarat contributes around 19.1 per cent to India s total exports of goods in *Source: Socio Economic Review of Gujarat *Source: DIPP report Page 9

10 Project Information Location/Size Gujarat PCPIR Gujarat PCPIR 1 (GPCPSIR) is a specially delineated Investment Region planned for establishment of domestic and export led production facilities for Petroleum, Chemicals And Petrochemicals. The PCPIR is located in South Gujarat and has Gulf of Khambhat to its West, Narmada river & Aliyabet island in the South, villages of Vagra and Bharuch in the East and Bharuch-Dahej railway line in the North. GPCPSIR also falls in the Delhi Mumbai Industrial Corridor (DMIC) influence area. GPCPSIR is located in Bharuch District GPCPSIR is also located in DMIC influence area PCPIR Investment Made till date (at historial cost) Over 100 Functional Units INR 63,651 crores (USD 9.5 billion)* Investment Committed INR 1,05,989 crores (USD 15.8 billion)* Investment on Infrastructure Development INR 15,660 crores (USD 2.3 billion)* Chemical port and storage terminal, Dahej PCPIR (one of existing units in PCPIR, Dahej) The terminal port is operated by GCPTCL Storage terminal total project cost is INR 830 crore (US$ 186 million) The terminal has a facility to store over 3.5 lakhs cubic meters of liquid chemicals Port has the annual handling capacity of about 2.5 MMTPA Existing Tank: 35 Nos. Type of storage: Fixed roof/floating roof/fixed cum Internal floating roof/double walled storage tank/ PCPIR Petroleum, Chemicals & Petro Chemical Investment Region GPCPSIR Gujarat Petroleum, Chemical & Petro Chemical Special Investment Region Source: GIDC & DMICDC Page 10

11 Project Information Infrastructure Availability Logistics & Connectivity Existing Connected to Delhi-Mumbai Broad Gauge railway line at Bharuch Bharuch Dahej rail line (62 km) Proposed Delhi-Mumbai Dedicated Freight Corridor (DFC) will touch the PCPIR on the eastern side Bharuch Dahej broad gauge line to be connected to the DFC at Dayadra Jn. (~50 kms) Existing 250 km from International Airport at Ahmedabad 90 km from Domestic Airport at Vadodara 85 km from Domestic Airport at Surat Proposed Greenfield Airport for PCPIR Existing Adani Port (Dahej) MMTPA GCPTCL Liquid Chemical Terminal MMTPA LNG Petronet (Gas Terminal) MMTPA Reliance liquid fuel jetty MMTPA Birla Copper bulk cargo jetty MMTPA New Development Development of jetty for handling ODC (Over Dimensional cargo) in Joint Venture with Dahej SEZ Ltd Existing 50 Km of six lane Dahej-Bharuch State Highway connecting six lane Delhi- Mumbai National Highway and National Expressway Proposed Ahmedabad Vadodara National Expressway to be extended to Mumbai Utilities Existing GIDC supplies 50 MGD raw water drawn from Narmada river at Nand and Angareshwar ( 25 MGD each) New Developments Water supply scheme for 50 MGD water from Miyagam Branch Canal (130 km) Existing Three 220 KV sub-stations located at Dahej & Vilayat & Six 66 KV substations located at Dahej, Luna, Bhensali & Vilayat New Development (in progress) One 440KV, one 220KV & nine 66KV substations proposed within PCPIR area Gujarat Energy Transmission Corporation Limited (GETCO) of 220 KV substation at Suva Dahej, 1600 MW gas based power plant by Torrent Power Ltd. in Dahej SEZ. Operational MW (1 st Phase) 2640 MW coal based power plant - Adani Power Page 11

12 Project Information MDI manufacturing procedure Nitrobenzene production by nitration of benzene in the presence of nitric acid and sulfuric acid Aniline production by exothermic catalytic hydrogenation of nitrobenzene in presence of excess hydrogen Liquid phase condensation of aniline and formaldehyde, followed by liquid phase phosgenation of diphenylmethane diamine (MDA) to MDI. Source: MDI, Nexant Report, May 2012 Key equipment and suppliers 1 Key Equipment Key Suppliers Separator Distillation column Heat exchanger Pumps Compressors Turbine ISGEC Hitachi Zosen, Dahej Alfa Engineering and Equipment, Bharuch District Heatex Industries Ltd, Surat Metal Fab Engineers, Surat Ambica Boilers, Vatva, Ahmedabad Aero Therm System Pvt. Ltd, Vatva, Ahmedabad Feedstock requirement and sourcing Feedstock can be sourced from various local manufacturers Remaining feedstock requirement can be fulfilled by imports from China, US or western Europe. Local Manufacturers 2 Benzene supply (KTPA) Reliance Industries 720 Indian Oil Corporation Ltd (IOCL) 125 Haldia Petrochem 132 Bharat Petroleum Corporation Ltd (BPCL) 43 Source: Mitsubishi Chemical Holdings, 2014, company websites Note: 1 The list only includes key equipment and suppliers and is not exhaustive 2 The list of local manufacturers is not exhaustive Sources: Page 12 Global MDI market , Technavio report

13 Project Information Local suppliers of Nitric acid 1 Location in Gujarat Local suppliers of sulphuric acid 1 Location in Gujarat GNFC Bharuch Amal Ltd Ankleshwar Shiv Shakti Acid and Chemicals Valsad Shiv Shakti Acid and Chemicals Valsad Gujarat State Fertilizers and Chemicals Ltd Vadodara Gujarat State Fertilizers and Chemicals Ltd Vadodara Key Players Indian Players Global Players MDI Technology Providers Note: 1 The list of local manufacturers is not exhaustive Page 13

14 Project Information Manpower Requirement 1 Approximately skilled manpower would be required for 100KTPA of MDI. Potential collaboration opportunities Indian MDI manufacturers can collaborate with global technology providers in order to take advantage of their expertise. Potential collaborations can be made with key global players like Kellogg Brown & Root Inc. and Chematur Engineering AB. HOCL has collaborated with Chematur Engineering AB for MDI technology. Key Considerations MDI health hazard: Direct contact with excess amount of MDI can be harmful to human health. Airborne MDIs can cause irritation of the mucous membranes, eyes and respiratory tracts. In addition, inhaling high levels of MDIs can worsen respiratory sensitization. Fluctuation in feedstock price: Volatility of feedstock prices in MDI manufacturing process affects the profit margins of manufacturers. Benzene, the primary raw material used in the production of MDI, is a natural constituent of crude oil. Thus, the manufacturing expenses are directly related to the fluctuating prices of crude oil. This is a challenge for the manufacturers in order to balance between production costs and selling prices of MDI. Negotiation challenge with international technology providers: International chemical companies hold the most advanced MDI manufacturing process technology. Finding mutually acceptable terms of collaboration with the technology providers is a challenge as the international companies tend to ask for a majority shareholding in the venture. Increased competition: The entry of new manufacturers due to growth in market will increase the competition for existing players and will affect their revenue. The emergence of local players has led to price wars, compelling vendors to reduce their product prices. Manufacturers are trying to offer polyurethane foams at a lower price than their competitors. Increased competition might also result in low-quality products being developed, which will in turn affect the market during the forecast period. Note: 1 Manpower requirement is indicative of a comparable project of GNFC and may vary by individual project Page 14 Sources: Global MDI market , Technavio report

15 Project Financials Project cost The total project cost of setting up a MDI manufacturing facility at Dahej will be ~INR550 crores for a production capacity of 100 Kilo Ton Per Annum (KTPA) MDI. Project specifications INR crore Land : Area: 30,000 square meters Rate: INR1,440 per sq. meter. as of 1 January Building (plant area, office, store, factory shed, lab and packaging, 16.8 open space) Built-up area: 15,000 sq. metres. Average rate: INR11,200 per sq. metre. Machinery, working capital and other miscellaneous expenses Total cost 550 Payback period Capacity (TPA) 100,000 Average capacity utilization in industry (%) Production (TPA) 98,500 Average price per unit (AR) (INR / ton) 4 80,000 Industrial average EBITDA margin % Forecasting revenues at expected industrial growth rate 6 19% Time (years) Revenue (INR crore) ,116 1,328 1,580 1,880 2,238 EBITDA (@14.23% of rev.) Undiscounted cumulative cash flows (INR crore) ,086 1,404 Investment (INR crore) 550 Estimated payback period: 3.8 years 1 Area of MDI plant is estimated based on a comparable BASF MDI manufacturing plant. 2 Land rate based on Dahej (rate may vary depending on the location of the site in Dahej PCPIR). 3 Average capacity utilization of GNFC FY15 is taken for calculation. 4 Average price per unit is considered by taking average of MDI import price in India. 5 EBITDA margin of FY14 GNFC is taken for calculation. 6 Industrial growth rate of 19% is considered taking into consideration the average potential growth of MDI demand in India. Note: The estimated project financials have been calculated based on the capital requirement/investment of a typical MDI manufacturing unit. However, they may vary by individual project. Comparable Project: Page Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GNFC) Sources: Executive Summary of EIA & EMP Report for Expansion of Brownfield GNFC Annual report Ammonia, Urea Plant, New Aniline, TDI-MDI Blend, Water Soluble Fertilizers (NPK) and CPSU Plants at GNFC, Narmadanagar, Bharuch, Gujarat, July BASF MDI Plant-

16 Project Financials Means Minimum of finance viable size Estimated industrial average (Debt/equity) 0.57x Debt raised (INR crore) 200 Equity invested (INR crore) 350 Estimated debt raised (INR crore): 200 Minimum viable size EBIT margin % Total operating costs (as% of revenues) 89.43% Total costs 861) (INR crores) Depreciation cost 2 (10.5% of PPE cost) crores 33.3 Manpower cost (50% of employee cost 3 ) 64.4 Finance cost (16% of debt) 31.9 Others (including insurance and miscellaneous) (2% of total investment) 11 Total fixed cost (FC) (INR crore) Variable cost (VC= TC-FC) (INR crore) Variable cost/unit (INR crore) Average revenue/unit (INR crore) Minimum viable size (FC/(AR-VC)) (units) Estimated minimum viable size: ~62 KTPA ,864 1 EBIT margin of FY14 GNFC is taken for calculation. 2 Depreciation cost= %Depreciation of machinery * machinery cost Industry average is used for depreciation% for estimation purposes Machinery cost is considered to be 60% of Machinery, raw materials, component import and other miscellaneous expenses 3 Employee cost=18.3% of total cost (50% of total employee cost is assumed to be fixed, while rest is considered under variable cost.) Note: 1. Exchange rate of 67 is used to convert US$ to INR 2. The estimated project financials have been calculated based on the capital requirement/investment of a comparable MDI manufacturing unit. However, they may vary by individual project. Page 16 Comparable Project: 1. Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GNFC) Executive Summary of EIA & EMP Report for Expansion of Brownfield Ammonia, Urea Plant, New Aniline, TDI-MDI Blend, Water Soluble Fertilizers (NPK) and CPSU Plants at GNFC, Narmadanagar, Bharuch, Gujarat, July BASF MDI Plant- Sources: GNFC Annual report

17 Approvals and incentives Clearances/approval required Approvals/clearance required Incorporation of company Registration/Industrial license Allotment of land No objection certificate (NOC) under air and water pollution control acts Approval of construction and country planning Finance Registration under state sales tax act and Central and State excise act Code number for export and import Environmental clearance Hazardous waste import and export approval Exiting business Department to be approached and consulted Registrar of companies Secretariat of industrial assistance (SIA) for large and medium scale industries State industrial development corporation State pollution control board Town and country planning Municipal and local authorities Chief inspector of factories Pollution control board Electricity board For loans higher than INR 1.5 crore((~us$ 0.22 million 1 ), all India financial institutions like Industrial Development Bank of India(IDBI), Industrial Credit and Investment Corporation of India(ICICI), Industrial Finance Corporation of India(IFCI) etc. Sales tax department Central and state excise department Regional office of director general of foreign trade Ministry of environment, forest and climate change after conducting environment impact assessment (EIA) for any project Ministry of environment, forest and climate change Ministry of corporate affairs Government of Gujarat (GoG) has introduced single window facilitation portal for investors providing undermentioned benefits: Centralized system to monitor applications User friendly and simplified application process for investors System for authorities and investors to check the status of applications Increased departmental ownership Page 17 Source: 1. Gujarat Textile Policy, Industries and Mines Department, Government of Gujarat, 5 September Approvals required for setting up plant, accessed 8 July Environment clearance accessed 8 July Gujarat single window clearance, accessed 8 July Exiting business, accessed 9 July USD= 67.67INR

18 Approvals and incentives Incentives from Government of Gujarat As per the Gujarat Industrial Policy 2015, following are the key incentives provided to the manufacturing sector: Capital investment subsidy of 10% loan amount disbursed by Bank/Financial Institution up to a maximum amount of INR1.5 million (~US$ 22,500 1 )in municipal corporations areas. Assistance for technology acquisition from recognized institution for manufacturing products will be provided by way of 50% of the cost payable subject to a maximum of INR 5 million (~US$ 75,000 1 ), including royalty payment for first two year. Assistance for venture capital to raise promoter contribution in the form of equity or loan through Gujarat Venture Finance Limited (GVFL). Interest subsidy scheme: 50 lakh interest subsidy for large scale industrial units. Assistance scheme for Centre of Excellence: For national level centre of excellence the amount of assistance will be up to INR20 crore (~US$ 30 million 1 )while for international level centre of excellence the limit will be INR30 crore. Such centre of excellence must encourage for innovation and entrepreneurship. 70% assistance including recurring expenditure would be availed. Incentives from Government of India Sector policy under Make in India initiative Industrial licensing has been abolished for most sub-sectors except for certain hazardous chemicals. A weighted tax deduction of 200% under Section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure incurred on scientific research and development. Expenditure on land and buildings are not eligible for deductions. In the export sector, India has entered into a number of free trade agreements with ASEAN, Japan, Korea, Malaysia, Singapore, and others. Technology development SMEs will be given access to the patent pool and/or part of reimbursement of technology acquisition costs up to a maximum of INR2 million (~US$30,000 1 ) for the purpose of acquiring appropriate technologies up to a maximum of five years. Green technology & practices: 5% interest in reimbursement & 10% capital subsidy for the production of equipment/machines/devices for controlling pollution, reducing energy consumption and water conservation. A grant of 25% to SMEs for expenditure incurred on audit subject to a maximum of INR1,00,000 (~US$1,500 1 ). A 10% one-time capital subsidy for units practising zero water discharge. A rebate on water cess for setting up wastewater recycling facilities. Incentives for renewable energy under the existing schemes. Page 18 Source: 1. Exiting business, accessed 9 July Manufacturing Sector Profile, Vibrant Gujarat website, 7 October Industries Commissionerate website, accessed on 1 June USD= 67.67INR 4. Textile industry welcomes amended TUFS, Business Standard, 2 January Approvals accessed 27 June List of defence equipment requiring industrial license,

19 Energy and Petro Chemicals Department Gujarat Narmada Valley Fertilizers & Chemicals Limited Industries & Mines Department Gujarat Industrial Development Corporation Office of Industries Commissioner Industrial Extension Bureau This project profile is based on preliminary study to facilitate prospective entrepreneurs to assess a prima facie scope. It is, however, advisable to get a detailed feasibility study prepared before taking a final investment decision. Gujarat Narmada Valley Fertilizers & Chemicals Limited Gujarat Narmada Valley Fertilizers & Chemicals Limited P.O. Narmadanagar , Dist. Bharuch, Gujarat. Phone : Fax : rgrehani@gnfc.in ; industrialproducts@gnfc.in