Elite Conference 2015 : Indian Polyester Outlook: Threats & Opportunities

Transcription

1 Elite Conference 2015 : Indian Polyester Outlook: Threats & Opportunities Mumbai 19 June 2015 Presented by: Anant Kishore ( ED & CEO )

2 Preface Indian Polyester Outlook This paper will present current Indian Polyester scenario, Growth, Demand / supply situation, Raw material availability and it s cost impact. Also it will review challenges and opportunities in Indian Polyester sector.

3 PTA ~ Polyester Value Chain

4 Crude, Naptha, Px Trend Px in $ / Ton Naptha Px Crude Crude / Naptha in $ / Barrel

5 Px, PTA Spread Fig. in $ / Ton Px PTA Spread

6 PTA, MEG, Melt Cost Trend Fig. in $ / Tons PTA MEG Melt

7 Raw Material Scenario

8 India Px & PTA 7,000 6,000 Px Supply / Demand Fig. in 000 Tons PTA surplus situation 2016!!! 9,000 8,000 7,000 6,000 PTA Supply / Demand Fig. in 000 Tons 5,000 5,000 Production 4,000 3,000 2,000 Production Capacity Total Consumption 4,000 3,000 2,000 1,000 Capacity Total Consumption 1, Px Capacity Addition Capacity Addition Expected as, 2014 :- 400,000 tons (OMPL) 2015 :- 500,000 tons ( OMPL) 2016 :- 2,250,000 tons ( RIL Jamnagar ) India is still short of PTA till new plant capacity does not come into production. As the antidumping duty on PTA has been provisionally imposed, there is cost input on imports as well as local supplies making it difficult for Polyester producers. PTA cost has gone up & taken away almost 5% of margins from the bottom line. PTA Capacity Addition Capacity Addition Expected as, 2015 :- 1,100,000 tons ( RIL Dahej ) 2016 :- 1,700,000 tons (RIL Dahej, JBF ) 2017 :- 600,00 tons ( JBF )

9 China vs India ( Px & PTA ) 25,000 Px Supply / Demand Fig. in 000 Tons 50,000 45,000 PTA Supply / Demand Fig. in 000 Tons 20,000 40,000 15,000 10,000 5,000 Production Capacity Total Consumption 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Production Capacity Total Consumption Px / PTA / Polyester Capacity Fig. in 000 Tons Px PTA Polyester India China India China India China China is net importer of Px as it remained the central point of consumption growth. Px imports into China is ever increasing. PTA capacity addition in China still growing. Worldwide, China still dominates PTA pricing dynamics.

10 Polyester Production & Growth Forecast

11 India Polyester Production Filament Capacity / Production 6,000 5,000 4,000 Fig. in 000 Tons Filament demand is bottoming out. Almost all Filament production will be for captive use!! Staple Capacity / Production Fig. in 000 Tons 3,000 2,000 1, PET resin Capacity / Production 2000 Fig. in 000 Tons Capacity Production For Polyester, no new capacity addition in pipeline Capacity Production PSF Virgin + Recyclate capacity Virgin Recyclate Total Industry utilization of Filament & Fiber is 74~75% for last 2yrs.There is excess capacity in Filament & Fiber. PSF capacity is hampered by the growth of recycled fiber. Recycled fiber is covering almost one third of total fiber capacity. Currently it is 0.37million tons whereas virgin fiber is 1.12 million tons. Recycled product prices are Rs 18 ~ 20/- lower than virgin fiber which takes away the margin of virgin PSF

12 India Polyester Production Growth Forecast Fig. in 000 Tons Staple 1,230 1,322 1, Filament 2,890 3,105 3,338 3, Total 4,120 4,430 4,785 5,257 5,690 Pet Resin ,113 1,280 1,408 Fig. in % Staple Filament PET resin

13 China vs India ( Polyester Production ) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, ,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Filament Capacity / Production 0 Fig. in 000 Tons PET resin Capacity / Production Fig. in 000 Tons Capacity Production Capacity Production 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Staple Capacity / Production 0 Fig. in 000 Tons Capacity Production Filament Staple Fiber PET India China India China India China

14 Reversal of Cotton

15 Reversal of Cotton Initial Forecast by USDA shows that world cotton consumption will exceed production for first time in 6yrs. India may mirror these trend. Cotton prices are down from record > 2$/lb to 70 cents / lb this year signaling cotton prices are going to be all time low. Farmers have little interest in Cotton crop cultivation. Will be switching over to alternate cash crops this year. As a result, major cotton producing countries like, USA, China, India, Pakistan & Australia are going to reduce area for cotton cultivation. World Cotton Production down by 10% this year World Cotton area is projected to decrease by 7% next year to 31.2 million hectares. Will this s cenario pave way for Polyester growth?

16 Challenges

17 Challenges With Regulatory Framework? 1 Higher Excise Duty Period Basic ED (%) Dec Jun Jul Feb Mar Mar March 17, 2012 onwards 12 March 2015 onwards 12.5 Capacity utilisation of Polyester Industry has come down due to high incidence of Excise Duty on the Products 2 Inverted Custom Duty Polyester Chain Custom Duty (%) Present After ADD PX 0 0 PTA % MEG 5 5 PET Chips 5 5 PSF/PFY 5 5 After Anti-dumping on PTA there is inverted Custom Duty on Polyester. No industry can survive if incidence of inverted duty structure is there.

18 Challenges With Infrastructure / Other issues? 1 Higher Energy Cost Polyester Industry s major cost constituents are: Raw Materials 75% (Incl. Process Chemicals) Power & Fuel cost 10 % More than 85% cost is going into Raw Materials & Fuels. Energy Costs are still high. 2 Logistics Set up Polyester products are moving mainly by road. But the essential infrastructures like, Roads, Ports & even Railways are very poor. The products movement time has gone up & so is the logistics cost.

19 Converting Challenges Into Opportunities

20 Converting Challenges Into Opportunities? Higher Incidence of Duties / Inverted Custom Duty Fiber neutrality policy / Excise duties at par with Cotton yarn industry. Year 2008 saw huge investments when excise duty was at 4%. Reduce Excise duty on Polyester & increase in Cotton yarn ( which is Zero presently ). This will also aid Govt. in getting higher revenue. Excise duty on recycled fiber should be treated at par with virgin.they would still get advantage of cheaper raw material so is their selling price based on quality. Govt. has already imposed 2/6% duty on them.

21 Converting Challenges Into Opportunities? Higher Incidence of Duties / Inverted Custom Duty To bring down import duty on PTA / MEG to zero With inverted duty structure in place, it is very difficult for Polyester industry to survive. OVERALL THERE SHOULD BE CONDUCIVE GROWTH POLICY FOR THE INDUSTRY TO GROW

22 Converting Challenges Into Opportunities? High Energy Cost Another area of concern is Indian Coal mines. Coal quality is very poor ( Low GCV ) & due to shortage of good Coal, the cost per GCV has gone up by 150% in last 6 months. Power tariffs from all the SEB s has gone up. Now with reduced Crude prices, should not the power cost come down? Need Debate Even Captive power cost based on Gas / Coal has gone up almost 150% in last one year. Power and Fuel constitute major portion of production cost. It is prime responsibility of regulatory bodies to bring down energy cost to aid in lower production cost thereby supporting downstream processes

23 Converting Challenges Into Opportunities? Logistics Set Up Logistic Cost is another big area of concern Polyester products are moving mainly by road. Due to poor infrastructure, Roads / Ports & even Railways, the movement time has gone up & so is the cost.

24 In Nut Shell!! Oil prices going to stabilize at lower levels by supporting higher growth. As a result PTA margins are likely to improve. This will also help improving margins in Polyester. Going Forward, India will be PTA surplus by 2016 ensuring availability of PTA. Imports of PTA will continue for sometime till antidumping duty on local PTA is withdrawn. India will witness some growth in value added products with higher margin. Old capacities may shut down. Polyester sector margins may improve slightly due to better utilization of capacity. No New capacity is likely to be come up in immediate future. There will be some limited growth in recycled fiber capacity. POY & PET margins will be under pressure due to excess capacity in India, but should improve after consolidation and better utilization. Last but not least. Polyester Industry has become low margin Industry in India. The cost of production has gone up. More challenges are coming on way due to poor infrastructure, high energy cost, non conducive govt. policies etc The need of the hour is to revisit policies and make them more growth friendly, create good infrastructure to reduce logistics costs & energy Cost.

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