India is poised to emerge as a significant player in the petrochemicals sector, a development that may exacerbate existing supply challenges across Asia, as highlighted in a recent press release referencing findings from S&P Global Ratings.
The research indicates that India’s intentions to boost its petrochemical production closely align with earlier initiatives undertaken by China, which is currently transforming the global petrochemical market. This strategic shift occurs as both nations, with China being the leading consumer and India ranking third, aim to lessen their reliance on imports for critical chemicals commonly utilized in products like plastics, packaging materials, and automotive components.
“The increase in India’s petrochemical production capacity, following China’s lead, is expected to heighten competition within the wider Asian market in the coming years,” stated Ker Liang Chan, a credit analyst at S&P Global Ratings.
The initial report titled “First China, Now India: Self-Sufficiency Goals Will Add To Petrochemicals Supply,” suggests that India is committed to substantial investments aimed at reducing its dependence on imported chemicals essential for everyday items, ranging from plastic bags to automotive parts. This focus on self-sufficiency presents challenges for a sector already grappling with overcapacity issues in the Asia-Pacific region.
Additionally, another report entitled India’s Energy Landscape In Charts outlines the pivotal role these entities play in enhancing national energy security along with supporting India’s transition towards sustainability goals.
Chan elaborated that the push for greater self-sufficiency in both India and China will pose significant challenges for petrochemical exporters throughout Asia. “The self-sufficiency initiatives in the markets of India and China present a considerable hurdle for Asia-Pacific petrochemical exporters unless they take proactive measures to diversify their sales strategies and optimize capital expenditures,” he remarked.
The press release further articulated that, “We consider the USD 25 billion in expenditures from Indian public sector enterprises to be relatively stable, as these investments are tied to refinery expansions; in contrast, the planned private sector capital expenditure of USD 12 billion may exhibit more variability.”
This emerging trend could create difficulties for regional exporters who currently account for over half of the chemical imports into China and India. Redirecting these volumes to alternative markets, such as the United States, may prove economically unfeasible due to existing tariff barriers. S&P cautioned that this situation could adversely affect earnings and potentially lead to consolidation within the petrochemical sector.
Nonetheless, India’s petrochemical industry is expected to demonstrate resilience due to robust domestic demand. Projections indicate that India is likely to surpass the United States to become the world’s second-largest consumer of polyethylene, a crucial plastic product.
“The self-sufficiency ambitions of both China and India intensify the structural overcapacity in this industry, particularly in light of a sluggish global demand recovery amid ongoing trade tensions,” noted Shawn Park, another credit analyst at S&P Global Ratings.
