India - Growth without Exports (?)

Transcription

1 India - Growth without Exports (?) Hand out Lunch & Learn am

2 Competitiveness in the European chemicals and pharmaceutical markets European markets are approaching saturation Chemistry Market saturated, intense competition CAGR for 5 year period projected at +1.43% French market will stagnate, UK market will decline at -1.5% Best in class in terms of efficiency and sustainability Installed base in good shape, but low capacity utilization Overcapacity and lack of upstream integration Lacking capital investment projects Pharmaceutics Overcapacity in API manufacturing Lack of new drug candidates Changing business model of API producers Food & Beverage Agricultural production has plateaued Food markets are saturated and highly price competitive Production facilities are at their technological best leaving no room for further improvement Sources: BMI 2009, 2010; OSIRIS 2009 Page 2

3 BRIC countries have much higher growth rates in chem / pharma Growth rates in the chem / pharma industries in BRIC are much higher Growing market opportunities for capital investment projects occur US$ bn 1,300 1,200 1,100 1, Chem. + Pharma sales BRIC CAGR in % Size in US $ bn. in 2013 Brazil Russia India China CAGR % Sources: BMI 2009, 2010; DataMonitor 2010, EBSCO 2009 Page 3

4 India's Chemical Industry Traditionally petrochem & chemical industrial sites are located on the coastal areas, recently laid gas & oil pipelines sites Page 4 Current salient features of India's chemical industry Total size in FY 2010 estimated to be USD 83 bn. incl. Pharma Highly diversified base, specialty and fine chemicals 12 th largest in the world and 3 rd largest in Asia by volume (2.5% of global volume) Operates on high margins ( 8-13%) as opposed to 1 3% globally Strong presence in export market in sub segments such as dyes, fine chemicals and agrochemicals Mediocre business infrastructure and high cost of finance Focus shifting to niche specialty chemicals Issues Demand dropping off in some sectors Dumping of Chinese imports Price pressures on bulk (basic) chemicals Increased input costs Focus on specialty chemicals (15% growth) Export CAGR 20%

5 Basic Organic Chemicals & Basic Petrochemicals A growing gap between voracious demand and crippled domestic supply Basic Organics Domestic Demand & Supply (Mn tons) 2,0 1,5 2,0 1,5 2,2 1,6 2,4 1,5 2,6 1,5 2,8 1,3 Consumption of organics in India at a CAGR of 6.4% Supply shows a negative CAGR of 2.3% Net imports growing at a CAGR of more than 20% Lack of cheaper raw material availability (naphtha, gas) Infrastructure is poor, lack of adequate facilities at ports and railway terminals FY 04 Demand FY 05 Supply FY 06 FY 07 FY 08 FY 09 Poor pipeline connectivity leaves domestic manufacturers hampered adds to poor cost competitiveness Basic petrochemicals installed capacity and demand ( 000 tons) 8,120 6,530 5,970 5,000 Domestic prices are highly correlated with international prices economies of scale, global demand and supply influence small local manufacturers Large global capacity additions: Oversupply in gas rich countries like KSA and Russia. China itself is expected to have 20 mta of MeOH capacity onstream by end 2010 Low capacity utilization: Global oversupply prices tank forcing local firms to underutilize plant operating levels FY 05 FY 10 Page 5 Capacity Demand

6 Fertilizers: Demand growing in the world s second most populous nation World average of arable land per capita (Hectares) % E World average: Arable land per capita Sources: TSM Analysis, PotashCorp, Yara Global fertilizer industry will grow at 3% CAGR till 2015 Drivers: Population growth, reduction in per capita available arable land, Increasing food grain consumption, biofuel production Uncertainty in the current economic climate reflects also in fertilizer demand policy priorities in China and India Indian fertilizer 4% CAGR, 16% of the worlds population and less than 2% of total landmass Global fertilizer demand (in million tons of nutrients) +3% Fertilizer Product Consumption in India (mta) 50,2 50,0 52,4 7,4 7,0 7,1 7,0 6,8 7,2 62,6 59,7 61,3 56,8 8,6 8,8 9,0 8,2 8,6 9,4 9,7 10,1 9,2 9,7 10,2 10,9 11,8 11,9 12,1 27,9 29,1 29,9 30,9 31,4 26,6 26,5 0 FY 10 FY 11 FY 12 FY 13 FY 14 FY Other Other complex DAP Urea Source: IFA Page 6

7 Specialty Chemicals: Status, outlook & issues End Use Market Growth (indicative % p.a.) Textiles Auto 16 Glass 15 Construction 14 Paints 12 Paper 9 20 Status Growing at rates higher than the overall chemical industry Averages 14 15% and is projected to reach US$ 47 bn Changing income distribution & rapidly evolving end use market main growth drivers Rapid rise of mid income households large consumer base USD (Bn) India Indian Specialty Chemicals Industry % % Issues Need for innovation & unique local solutions unique needs Need for chemicals infrastructure / clusters upstream linkages ~ Verbund relationships Source: Industry reports, TSM Analysis, Page 7

8 Pharmaceuticals: Leapfrogging to a locus of knowledge and prowess Strategic imperatives of multinational pharmaceutical firms Focus on generics Outsourcing - CRM Specialty Generic Page 8 Indian Pharmacos will do more to serve high value markets Basic Raw Material Tactical Share / partner in value creation Focus on emerging markets STRATEGIC IMPERATIVES Rationalization of manufacturing setup Moving up the value chain in contract manufacturing Non registered intermediates, Generic APIs (simple chemistry) Registered intermediates and complex chemistry Innovator APIs Cytotoxic and high potency APIs Future domination of China Nature of customer relationships M&A, alliances to reach scale and market reach Reducing supply chain complexities Strategic Status 3 rd in the world in terms of production volume 14 th in terms of domestic consumption value Estimated at US$ 19.4 bn in FY 2009 Estimated to touch US$ 43.8 bn in FY 2014 Meets 95% of domestic medical needs: players are domestic and subsidiaries of MNCs Current value breakup Formulations account for ~ 65% Bulk Drugs ~ 35% Export growth rates: Bulk ~35%, Formulation ~ 25% Domestic formulation growth ~ 11% Drivers Increased per capita spend on pharma Improved medical infrastructure Greater health insurance penetration Increasing prevalence of lifestyle diseases

9 Take aways India s base chemical sector has evolved into a highly diversified global player (3 rd in Asia); acquisition activities seek to broaden geographical presence hedging; plagued by overcapacity fueled by high feedstock prices Fertilizers are a cornerstone of the chemical industry s growth in India based on rapidly evolving demographic factors: population, burgeoning middle class, eating habits The specialty chemical industry is moving east with India a potential global specialty chemicals hub following and learning from the evolution of the European specialty chemicals success story The pharma success story in India is based on strong bulk drugs and generic manufacturing competencies, intellectual capital and cost of inputs arbitrage. CRAMs (Contracting Research & Manufacturing Companies) successes demonstrates that full vertical integration in the Indian Pharmaceutical industry will drive India's push to be the world s Apotheker Page 9

10 Thank you for your attention! Siemens Engineering & Consulting Dr. Peter Carvalho Industry IA AS PA EC Industriepark Höchst, B Frankfurt am Main team-ec.industry@siemens.com