Chemical industry analysis

EXPECTED TO REACH BY 2025

EXPECTED TO REACH BY 2020
2018 PRODUCTION
GROWTH
FDI
EXPORTS 2016-17
EXPORTS IN AUG
% IN TOTAL EXPORTS of chemicals
% IN TOTAL EXPORTS of petroleum chemicals
Current capacity
Current production
Petrochemical demand

currentfeedstock requirement

Ethanol requirement for oil companies

Current Pipieline is
Shortfall of

ICL (ICL +1.8%) reports a contract to supply 550,000 metric tons of potash, including
options, to be shipped between Sept. 2018 and June 2019 with a customer in India.
Gov is planning to bring an integrated policy in this sector
The Cabinet Committee on Economic Affairs has approved an equity investment of Rs 1033.5
Chemicals and Fertilizers Limited (RCF) for setting up a Coal Gasification based fertilizer proje
Fertilizer Limited (TFL) in Odisha

A US federal agency has tied up with an Indian engineering consultancy services firm to adv
on commercial scale coal gasification and develop carbon capture storage and utilisation te
the growing need to have a multi-pronged approach to the abatement of greenhouse gases
economic growth

U.S. President Donald Trump, who dislikes multilateral trade agreements,

India had approached the United States to "start doing a
 l industry analysis
8.85312
USD 300 Billion
USD 200 billion requirement for 31.36 lakh kilolitres
USD 160 Billion
8-10% Annually At an estimated $126 billion, U.S. goo
100% allowed
USD 29 billion /

USD 11.10896 billion

USD 8.85 Billion
22 million tons
17-18million tpnnes 9 million tonnes is currently being added
30-40 million Tons in next 3 years

Five new integrated cracker plants of This will serve the

need of Petrochemical
1.5 million capacity each before 2025 products in country

31.36 lakh kilolitres

17.63 lakh kiloliters
14 lakh kilolitres

ply 550,000 metric tons of potash, including

018 and June 2019 with a customer in India.
olicy in this sector
ffairs has approved an equity investment of Rs 1033.54 crore by Rashtriya
or setting up a Coal Gasification based fertilizer project by Talcher

n Indian engineering consultancy services firm to advance the adoption, use and research
and develop carbon capture storage and utilisation technologies in India,This will address
ged approach to the abatement of greenhouse gases in India while not compromising on
economic growth

who dislikes multilateral trade agreements, said earlier this month that
roached the United States to "start doing a trade deal,
 nt for 31.36 lakh kilolitres of ethanol

mated $126 billion, U.S. goods and services trade with India last year was less than a fifth of its trade with China
 Metal industry analysis

steel imports for current fiscal year 3.8MT (5M)

steel exports for current fiscal year 3.5MT(5M)

Contrary to the global production which has not kept

0.65t
pace
from
with
0.58mt
consumption the aluminium
Alluminium production (17-18) 18% Growth
CAGR(2011-2018) 11%
The country’s aluminium consumption last fiscal at 3.62 mt was in excess of its indigenous p
aug 24 2018 AAI proposed alluminium to be 10 million tonnes per annum
IMPORT DUTY on Primary alluminium duty 7.50%
EXPORT DUTY on scrap import duty 2.50%
Steel Demand forecast 2018 by WSA 5.50%
Steel Demand forecast 2019 by WSA 6.00%
steel sector contributes Nearly 2% of GDP
Proposed import duty on steel 15% from 12%
steel imports for 2017-18 8.4 mt
Estimated target of steel production by 2030 300 tonnes pa
2017-18 production 137.97tonnes
Share in world crude steel production 6%
Strong performance of the secondary steel sector has added muscle

Import of coking coal in 17-18 47mt

expected import by 2023 58mt
expected demand by 2020 88mt
CRISIL Research sees prices falling only marginally in the range of $190-200 per ton
poised to soften further to $175-185 per tonne in 2019.

After two years of falling, the country’s coal import grew 8.1 per cent in 2017-18
The import of thermal coal is likely to increase in the coming months, as Coal India
– for an 11th straight month save August and September – causing a fuel shortage

Demand for metallargical coal 2018 51mt

Expected demand by 2023 65mt

Automakers in India use 70% galvanised steel in cars for export, according to a ministry note o
 Union government targets to raise the share of manufacturing in GDP t
new jobs by 2022.,However, for the past six years, the share of manufa
remained in the range of 15.9% to 16.6% despite the aggressive Make
India’s non-ferrous base metal industry, mainly comprising aluminium, c
not able to unlock its full potential due to unfavourable tariff structures—
on raw material. This makes production uncompetitive even as low impo
scrap is flooding the market . https://www.financialexpress.com
needed/1312789/

Association says inward shipments of the metal are not just hurting the domestic i
exchange outgo of about $4.5 billion, in a scenario of growin

Aditya Birla Group's Hindalco Industries, state-owned National Aluminium Co and A

annual output of four million tonnes can cater to the entire domestic market, whe
Excess production is exported by these companies. In such a situation, aluminium
essential. creating a foreign exchange outgo of about $4.5 billion, in a sc

Some aluminium products used in the auto sector of the country which the domestic
in its discussion with the government officials has clearly stated that imports of suc
essential imports such as those of primary or scrap aluminium need to be clam
Above topics were discussed in the meeting & we have wait for government words

Mining major NMDC's stock, which had been on a downtrend owing to weak iron pr
bounced back in August with gains of about 30 per cent. The reason is a rebound
demand outlook led by rising steel production, and expectations

India currently produces 1 to 1.5 tonnes of gold per year from just one working field in the country while
The country can ramp up capacity to produce between 100-200 tonnes of gold in a year which could co

According to the World Gold Council, despite a history of gold mining, India's current production levels
in 2016.
dustry analysis

3.8% lesser than last year

15.2% lower than last year

12.5% growth

was in excess of its indigenous production

n tonnes per annum

57.81

eel sector has added muscle to India's steel production

the range of $190-200 per tonne in 2018. Coking coal prices are
.

w 8.1 per cent in 2017-18

oming months, as Coal India is set to miss its production target again
mber – causing a fuel shortage at the country’s thermal power plants

xport, according to a ministry note on the subject. The global average is 50%
of manufacturing in GDP to 25% and creation of 100 million
ears, the share of manufacturing in India’s GDP has
pite the aggressive Make in India push. A key problem is
y comprising aluminium, copper, zinc, lead, nickel and tin, is
vourable tariff structures—especially, the high import duty
mpetitive even as low import duty on finished products and
www.financialexpress.com/opinion/a-better-duty-structure-

not just hurting the domestic industry but are also creating a foreign
billion, in a scenario of growing trade Defiecit

d National Aluminium Co and Anil Agarwal-led Vedanta Ltdr combined

e entire domestic market, where consumption is usually 3.1-3.6 mt.
In such a situation, aluminium imports into India become totally non-
of about $4.5 billion, in a scenario of growing trade Defiecit

he country which the domestic industry does not produce. The industry
arly stated that imports of such products could continue but the non-
rap aluminium need to be clamped down, said industry officials.
t for government words

wntrend owing to weak iron prices since the beginning of the year, has
cent. The reason is a rebound in international iron-ore prices, strong
production, and expectations of more price hikes.

one working field in the country while it consumes 900 tonnes per annum
nnes of gold in a year which could come out of around 20 mines.

ning, India's current production levels are very low and it produced less than 2 tonnes
in 2016.
 Paper Industry

Growth 6-7%

Estimating capacity 18.5 million tonnes from 15.3my

First, the demand for paper has revived in India thanks to the cut in paper produc
due to environmental concerns. Second, there is an increasing trend to use pape
eat food products due to the ban on the use of plastic bags. Third, paper is being
used in quality packaging of FMCG products in organised retail. Fourth, increasin
growth in the education sector have also enhanced paper consumption

Furthermore, key paper companies such as West Coast Paper MillsNSE

-4.78 %, JK PaperNSE -0.06 % and N R Agarwal IndustriesNSE -4.43 % hav
been able to reduce debt in the past two quarters and enhance cash-flow
visibility

sdsd

CAGR(2011-17) More than 10%

CAGR(2018-2023) 5.60%
estimation of paper sell
in 2022-23 20 million tonnes
Anticipated to reach
by 2022-23 75000 crores

As paper industry of India are become more competitive by adding impro

roads & railways and communication facilities, revision of forest policy
based paper industry so that plantation can be raised by industry, coope
state government.
 In addition, growing Indian economy, the rising disposable income
rate, growth of FMCG market, etc. encourage the use of paper for
packaging and much more. Among them paper for paperboard and
ratio of total paper market. And secondly largest share is contribu
both segments are anticipated to sale more than 15 million tonnes
period.

The emerging segment of paper is speciality paper which in

bond, cheque, currency note, paper for security printing, stam
opportunities of growth in near futur

rank 15th place in world

India's share 2.60%

West Bengal, Andhra 72% of total instant

Pradesh, Gujarat, Orissa, capacity of
Karnataka, and Maharashtra production

Uttar Pradesh, Tamil Nadu,

Haryana, Kerala, Bihar, and
Assam 26% 0f total production capacity
The ITC has removed the U.S. duties on Canadian imports of uncoated gr
Paper markets are in the midst of an upward price cycle. For the first tim
years, all paper markets are considerably tight and price increases ar
implemented with relative ease in 2018. This is similar to the last big pr
2007-2008
Globally over 400 million tonnes of paper and paper products w
consumed in 2017

The domestic demand in India grew from 9.3 million tonnes in FY08 to 17

The industry is classified into four segments, Printing & Writing (P&W), P
Newsprint. Printing & Writing (P&W) share has remained stable at around
from 46% in FY08 to 52%

This increase in imports has been led by the duty-free import from ASEA
initiated investigations in November last year into imports of uncoated c
January this year into imports of coated paper from China, the U.S. and t
Europe, and Singapore: label stock, wet strength papers, tea bag tissu
overlay tissue, thermal papers, digital papers, coated papers/boards
neighbours, Middle East, Eastern Europe: A4 copiers, wood-free (mostly
based mills), coated duplex (m
converted products like stationery items, calen

In the beginning of 2017, paper companies did not undertake price hike
and lower power & fuel cost. Domestic paper prices have risen marginall
market, and healthy demand were the primary factors that provided an
paper and demand for wood pulp (natural fibre) increased. Major pulp
price, leading to a

Supply
 On the supply front, the current installed capacity of the
industry stands at around 14 million tonnes per annum and the
industry is operating at a capacity utilization level of around 85 -
90%

Pricing power of players is expected to remain muted on

account of recent capacity additions as well as threat from
cheap imports under the Free Trade Agreements (FTAs).
Government’s policy of extending preferential tariff treatment
to import of paper and paperboard under the free trade
agreements (FTAs) and other bilateral and multilateral trade
agreements has led to enhanced duty-free import of paper
especially from Malaysia, Indonesia and Thailand thereby
impacting domestic players

CARE Ratings expects that the overall paper demand growing at a CAGR o
of supply coming to the market, and healthy dema

demand for P&W paper is 5 million tonnes. This segment is categorized i

Uncoated Wood-Free (UWF), Coated Wood-Free (CWF), Uncoated Mecha
The Newsprint segment comprises ~15% Mechanical (CM)Paper Industry an
of the Indian
3.5% during FY08-17 to 2.6 mn tonnes
Specialty papers & others is the smallest segment, accounting for only ~4
account of increased
used for preference towards
packaging of paperless
gift items, economy
grocery and
bags, etc. higher
and tissu
media

Packaging paper & board segment caters to industries such as FMCG, food
CAGR of 8.9% and reach 11.4 million tonnes in FY20 due to factors such a
retail, and increasing preference for ready-to-eat foods. Printing and Writi
expected to grow on account of an anticipated pick-up from the educatio
Improving literacy rates, rising circulation and an increasing number of ne
million tonnes in FY20.
from 15.3my

a thanks to the cut in paper production in China

is an increasing trend to use paper in ready-to-
plastic bags. Third, paper is being increasingly
organised retail. Fourth, increasing literacy and
also enhanced paper consumption.

as West Coast Paper MillsNSE

rwal IndustriesNSE -4.43 % have
quarters and enhance cash-flow

ore competitive by adding improvements of key ports,

cilities, revision of forest policy is required for wood
an be raised by industry, cooperatives of farmers and
e government.
 the rising disposable income of consumer, higher literacy
ncourage the use of paper for writing, printing, newspaper,
em paper for paperboard and packaging is used in highest
ndly largest share is contributed by stationery. Altogether
more than 15 million tonnes (MT) at the end of forecasted
period.

s speciality paper which includes paper use in bank,

r for security printing, stamp paper, etc. has the wider
ties of growth in near future.

tal production capacity

anadian imports of uncoated groundwood.
ward price cycle. For the first time in many
ably tight and price increases are being
This is similar to the last big price rally of
-2008
of paper and paper products were
ed in 2017

9.3 million tonnes in FY08 to 17 million tonnes in FY17 at a CAGR of 6.9%

nts, Printing & Writing (P&W), Packaging Paper & Board, Specialty Papers & Others, and
e has remained stable at around 30%, while Packaging Paper & Board share has increased
from 46% in FY08 to 52% in FY17

the duty-free import from ASEAN countries and Korea. The Directorate General of Anti-Dumping and Allied Duties
year into imports of uncoated copier paper from Indonesia, Thailand, and Singapore and another investigation in
paper from China, the U.S. and the EU. As per ASSOCHAM, India imports the following types of paper from the US,
t strength papers, tea bag tissue, soft tissue, filter paper, insulation kraft, extensible kraft, decorative laminates,
l papers, coated papers/boards and some specialities. India exports following grades of papers primarily to its
A4 copiers, wood-free (mostly from bamboo and agro waste by several small mills), MG varieties (from small agro
based mills), coated duplex (mostly recycled fibre) and large quantity of
ucts like stationery items, calendars, books, magazines, children's play books and comics.

es did not undertake price hikes because of factors such as competition from imports, stabilization in wood prices
aper prices have risen marginally in FY18. Tight markets, low Chinese pulp inventories, lack of supply coming to the
rimary factors that provided an upside to the prices. Since mid-2017, China banned the use of mixed grade waste
al fibre) increased. Major pulp exporters such as Indonesia, Malaysia and Chile diverted pulp to China at a higher
price, leading to a rise in price of end product.

Raw Material Scenario

 ed capacity of the Pulp is the primary raw material used for manufacturing of paper, and is obtained through processing
es per annum and the of fibres separated from wood, wastepaper, agriculture residues etc,Due to the limited availability of
on level of around 85 - wood, agro-based raw materials and waste paper are generally used as substitutes for manufacturing
paper.
Wood accounts for 30-35% of production, while wastepaper and agri-residues account for 45-50% and
20-22%,respectively. India has a total land area of 3.3 million sq km with forests covering only 0.7
million sq km. About 78% of the total land area is non-forest area. With diminishing forest resources
and limitations on enlarging man-made forests, there is
scarcity of raw material for paper mills

remain muted on
well as threat from On the raw material side, due to the domestic scarcity of wood, the wood based companies have
greements (FTAs). increasingly resorted to import of wood chips and also invested in the social forestry initiatives for
ential tariff treatment supply of wood. The waste paper is imported as well as domestically procured. The price of wood had
der the free trade increased substantially in the period FY12- 15 by around 16.7% CAGR. The rise in input costs coupled
nd multilateral trade with foreign exchange fluctuations led to stress on profit margins for most players during this period.
ree import of paper However, the wood prices have fallen in FY16 and FY17 by around 9-10% from peak levels of FY15
d Thailand thereby leading to
yers

The general decline in imported coal prices coupled with energy saving efforts of the paper
manufactures reduced the power & fuel cost of the industry. The decline in the imported coal prices
was partly off-set by the weakening rupee. In FY18, international coal prices increased, which is
expected to increase costs

er demand growing at a CAGR of 6.7% to touch 20.7 million tonnes in FY20. Tight markets, low Chinese pulp inventories, lack
o the market, and healthy demand are the primary factors that provide an upside to the prices in 2018

s. This segment is categorized into four parts, namely

d-Free (CWF), Uncoated Mechanical (UM) and Coated
echanical (CM)Paper Industry and grew at a CAGR of
of the Indian
Y08-17 to 2.6 mn tonnes
segment, accounting for only ~4% of the industry. It is
paperless
ms, economy
grocery and
bags, etc. higher
and tissuepenetration
papers of digital
media

o industries such as FMCG, food & beverage, pharmaceutical, textiles, etc. Demand for Packaging Paper & Board segment is expected to gr
es in FY20 due to factors such as increased urbanization, requirement of better quality packaging of FMCG products marketed through orga
to-eat foods. Printing and Writing segment demand is expected to grow at a CAGR of 4.2% and reach 5.7 million tonnes in FY20. The dema
ated pick-up from the education sector with improving literacy rates and growing enrolment as well as increasing number of schools and co
and an increasing number of newspapers and magazines is expected to support growth in newsprint demand which is expected to reach 2.
egment is expected to grow at a
s marketed through organized
onnes in FY20. The demand is
number of schools and colleges.
h is expected to reach 2.8