India Petrochemicals Demand Face Downturn with Extension of Lockdown till May 3rd

Although Indian players have turned optimistic as the country’s efforts in containing the contagious spread of the coronavirus are being widely appreciated, the battle is yet to be won! The uncertainty is still lingering the country’s petrochemicals market, where demand outlook seems bearish as the lockdown extends till May. Despite relaxed restrictions on certain businesses after 20th of this month, several downstream industries are likely to remain shut or work with less labor at reduced rates.

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Players Declare Production Halts as Demand Depresses

Waning demand since the PM announced 21-day lockdown starting 25th March 2020 led major refiners, both state-run and private including Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL), and Haldia Petrochemical Ltd (HPL) to induce production cuts or shut units so as to balance inventory against the drop in domestic demand. As per the sources, sensing the demand slowdown, IOC is planning to shut down its 800 KTPA cracker located at Panipat, Haryana. HPL has also closed its steam cracker and polymer units fearing rise in inventory levels. BPCL has also reported that the company has reduced the run rates of the refinery-linked petrochemical units in Kochi and Mumbai to less than a third. On 15 April, Gas Authority of India Ltd (GAIL) confirmed the shutdown of its 400,000 KTPA polyethylene (PE) plant at Pata in Uttar Pradesh state due to overflowing inventories and logistical constraints.

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Downstream Players Await Relaxation

Downstream industries such as packaging and plastics industry, auto components manufacturers and paints and dyes industries are eyeing on instructions from concerned authorities as the Indian government declared partial relaxation on certain sectors after 20th April. Several packaging companies like UFlex and Ecoplast have restarted partial operations at their factories after packaging materials were declared as essential goods in early April.

Petrochemical Price Crash

Petrochemical prices plunged to several years low after the onset of coronavirus in India. Subdued demand due to lack of buying orders and plummeting crude have put a huge dent to the Asia’s petrochemical industry. Players are anxious whether the lockdown will end by the stipulated time, and how fast the operations will get back to normal considering supply chain restrictions and expected labor migration may be other impediments for the recovery of the petrochemical sector.

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Source: ChemAnalyst