Page 38 - Plastics News January 2017

FEATURES
capacity utilisation for coal-based polyethylene producers
was estimated at 65-70% in 2016, down from over 80% in
2015, while China's polypropylene (PP) operating rate was
around 75% due to tighter supplies.
Petrochemicals-consuming sectors such as construction
are in the weakest position. China's construction sector
will continue to see a structural slowdown as the country
shifts from an unsustainable investment driven model, to
one that is more consumption-led. BMI forecasts China's
construction sector to grow by an annual average of
4.2% between 2016 and 2025 in real terms, a significant
slowdown from the 11.6% registered between 2006 and
2015. This will depress demand growth for a range of
polymers used in the construction market, particularly
PVC and polymer piping.
India: Project delays and sluggish industrial performance
have undermined petrochemicals growth in India, as per
BMI. However, the long-term outlook remains positive,
even with reduction in BMI forecast for consumption
growth. Low naphtha prices, a surplus of feedstock
availability and a lack of self-sufficiency provide the basis turn will impact the Indian polymer and plastics industry.
for import substitution. The main issue is greater clarity on
the government's regulatory framework for petrochemicals
clusters, as well as reducing red tape that has bound up
environmental approvals and land acquisitions. The Indian
petrochemicals industry was adversely affected by an
industrial downturn brought on by China's surplus industrial
capacity. In the first 7 months of 2016, chemicals output
grew by an average 2.2% and rubber and plastic was up
1.2%. Production indices suggest that in spite of capacity
growth with newly opened plants such as BrahmaputraGas
Cracker and Polymer, India's petrochemicals industry has
yet to see any rise in output volumes.
Growth rates may have been higher had project targets
been met in 2016. Bharat Petroleum Corp Ltd (BPCL)'s
Kochi Refinery in Kochi, Kerala was due to be expanded
to 310,000 bpd from the current 190,000 bpd in May,
but was pushed back to possibly Q4-16. Propylene and
ethylene, used as raw materials in the production of
synthetic textiles, would be among the petrochemicals
that would be produced at the proposed petrochemicals
complex, which it aims to open in 2018. JBF is building
a 1.25 mln tpa PTA unit at the Mangalore SEZ, which will
supply downstream PET producers. It signed an agreement
• January 2017 • Plastics News 38
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with BP for PTA technology licensing. The complex was
due to come on stream in H1-16, a year behind schedule,
but by Q3-16 was yet to be completed. BMI continues to
believe that growth will strengthen in 2016 and beyond,
with per capita petrochemicals consumption doubling in
2015-2020 and output growth set to reach 10% pa.
Ambit Capital, a Mumbai-based equity research firm, has
officially estimated that the demonetisation-driven cash
crunch will result in India's GDP growth crashing to 0.5% in
H2 of financial year 2016-17. This means the GDP growth
for six months, from October 2016 to March 2017, could
decelerate to 0.5%, down from 6.4% in the previous six
months. Further, it is estimated that during the October
to December quarter- the GDP growth may contract, thus
showing negative growth. However, Ambit is hopeful that
a strong formalisation of the informal economy will ensue
through 2017 until 2019 and this disruption could also
crimp GDP growth in 2017-18 to 5.8 % from their earlier
estimate of 7.3%. Demonetisation is expected to have long
term impact on a number of sectors including automobiles,
FMCG and a other businesses that thrive on cash. This in
Global economic growth remained soft in 2016 amid
economic and geo political reasons such as Brexit, a
coup d’état in Turkey, the ongoing civil war in Syria,
potential policy changes in USA after the presidential
elections, topped by demonetization announced in India
in November. IMF has predicted global growth is projected
to slow to 3.1% in 2016. The World Bank is revising its 2016
global economic growth forecast down to 2.4% from the
2.9% pace projected in January. World Bank has raised its
2017 forecast for crude oil prices to US$55 per barrel as
members of the OPEC prepare to limit production after
a long period of unrestrained output. Whether the rise is
sustained will depend on how strictly OPEC members abide
by the agreement, something they have not always done
in the past. but what if US shale gas output increases and
hampers the price rally?
Amid the expectations of “feel-good” factor, India's Union
Budget 2017-18 is expected to be different from the
previous ones with a series of populist policies. We move
into the New Year amid high expectations of a desire by the
government to create a positive feeling for the future so as
to boost domestic and international investor confidence.