India should scale petrochemical capacity to counter China: Reliance

A Reliance official said India must boost petrochemical output, as China's refiners allocate 40 to 50% of their output to petrochemicals, more than double the proportion seen in India

India must scale up its petrochemical production to meet domestic and international demand and curb China's increasing dominance in the sector, a senior executive at Reliance Industries said on Friday.

 

Petrochemical margins have declined globally due to China’s rapid capacity expansion, which has led to an oversupply. In China, petrochemicals account for 40 per cent to 50 per cent of the output of some refiners, more than twice the level typically seen in India.

 

Rising petrochemical demand in India

 

At present, India’s petrochemical demand represents only a small share of the global average. However, as the economy continues to grow, consumption is expected to increase. India is currently experiencing the fastest economic growth among major economies, while China's growth has slowed, with its gasoline and gas oil demand reportedly having peaked. In contrast, Indian demand for these fuels is still rising, though at a slower pace, as the country transitions toward cleaner energy sources.

 

 

Reliance official warns of China's dominance

 

Vikram Sampat, senior vice-president of strategy and business development for the polyester chain at Reliance Industries, warned at an industry conference that China was taking over "the entire petrochemical industry" and emphasised the need for India to respond. "If we don't do it, China will continue to grow," he said.

 

Sampat noted that Reliance currently has a petrochemical intensity -- the share of petrochemicals in its total refining capacity -- of 20 per cent. He projected that, should petrol demand reach its peak, refiners could redirect 30 per cent to 50 per cent of gasoline yields into petrochemical production. If diesel demand peaks, the share could increase to between 50 per cent and 70 per cent.

 

India's shift towards petrochemicals

 

Analysts believe that Indian refiners will increasingly prioritise petrochemical production to maintain margins and drive growth as the demand for transport fuels derived from fossil fuels nears its peak in the coming years.

 

China’s central planning agency stated in its annual report that domestic refiners should cut back on fuel output and prioritise increased petrochemical production, according to a Bloomberg report. 

 

China is currently the world’s biggest exporter of key products like polyethylene terephthalate (PET) resins, purified terephthalate acid (PTA), polyvinyl chloride (PVC) and polyester fibre. Beijing is mandated to limit total refining capacity to under one billion tonnes annually by this year, down from the current level of approximately 960 million tonnes.

 

(With inputs from agencies)