India’s petrochemical producers reported a substantial increase in their profits and escaped margin pressure through an increased focus on product mix in the financial year 2023-24. The primary petrochemical producers had earlier projected steep margin pressure in the financial year 2023-24 due to a significant decline in the prices of primary raw materials, with little hope for recovery amid global oversupply.
Major primary petrochemical producers such as Oil and Natural Gas Corporation (ONGC), Gail (India), and Indian Oil Corporation Ltd (IOCL), among others, reported a stellar performance in the financial year 2023-24. Both topline and bottomline of these companies rose sharply, following increasing demand for petrochemicals and derivatives in India, in tune with the robust economic growth. Private players such as Reliance Industries also posted robust growth in their performance from Oil-to-Chemicals (O2C) in the financial year 2023-24. Polymer prices declined by 15-20 percent in the financial year 2023-24.
| India’s petrochemical production (‘000 tonnes) |
| Categories | FY 2022-23 | FY 2021-22 | Variations (%) |
| Synthetic fibre | 4,006.38 | 4,040.01 | (-)0.83 |
| Fibre intermediate | 4,988.03 | 5,481.67 | (-)9.01 |
| Polymers | 11,486.62 | 12,470.65 | (-)7.89 |
| Synthetic rubber | 344.86 | 382.63 | (-)9.87 |
| Synthetic detergent intermediates | 703.02 | 780.39 | (-)9.91 |
| Performance plastics | 1,960.16 | 1,697.68 | 15.46 |
| Olefins total | 11,296.05 | 12,527.02 | (-)9.83 |
Sources: Department of Chemicals and Petrochemicals, Government of India, and Polymerupdate Research
Financial indicatorsIndian Oil Corporation Ltd (IOCL) is proud to announce a historic financial performance for the financial year (FY) 2023-24 (April-March), marking a significant milestone in company's over six-decade journey. Demonstrating an exceptional year, IOCL recorded a net profit of Rs 39,619 crore, the highest ever in the company's history and over a four-fold increase from the net profit of Rs 8,242 crores in the previous year.
This remarkable achievement is supported by a stellar operational performance across business verticals. The company achieved its highest-ever sales volume reaching 97.551 million tonnes of products. Its refining throughput soared to 73.308 million tonnes, coupled with a throughput of 98.626 million tonnes achieved through an extensive over 19,500 km pipelines network across the nation. These figures stand as historical bests in the operational history of IOCL. The performance showcases the company’s commitment to fuelling India’s energy needs while navigating the complexities of the global energy market.
Another government-owned petrochemical producer, GAIL (India) Ltd, reported profit before tax of Rs 11,555 crore in FY 2023-24, up 75 percent from Rs 6,584 crore in the previous year. The company’s net profit in FY24 stood at Rs 8,836 crore as against Rs 5,302 crore in FY23, an increase of 67 %, while revenue from operations stood at Rs 130,638 crore in FY24 as against Rs 144,302 crore in FY23.
During the year, natural gas transmission volume registered an increase of 12 percent to 120.46 MMSCMD as against 107.28 MMSCMD in FY23. Gas marketing volume stood at 98.45 MMSCMD in FY24 as against 94.91 MMSCMD in FY23. LHC sales registered an increase of 7 percent to 998 TMT compared to 929 TMT and polymer sales jumped up by 97 percent to 787 TMT as against 399 TMT in comparison to the previous year.
| India’s aggregate petrochemical demand (million tonnes) |
| Financial year (April-March) | Volume | Growth (%) |
| 2024-25* | 61 | 7 |
| 2023-24* | 57 | 7 |
| 2022-23 | 53 | 8 |
| 2021-22 | 49 | 13 |
| 2020-21 | 43 | (-)6 |
| 2019-20 | 47 | 7 |
Source: Chemicals and Petrochemicals Manufacturers’ Association (CPMA); * Projections
Sandeep Kumar Gupta, Chairman & Managing Director of GAIL said, “The robust performance during FY 2024 is primarily driven by better physical performance across all major segments, despite lower prices in petrochemicals and Liquid Hydro-Carbons. We have incurred a capital expenditure of Rs 11,426 crore during the FY24. Our board approved the laying of C2/C3 liquid pipeline from Vijaipur to Auraiya having an estimated project cost of Rs 1,792 crore with a commissioning period of 32 months. The project will augment feedstock availability with additional polymer production at Pata Petrochemical Complex, reduce energy consumption and carbon footprint.”
RIL’s headwindsMukesh Ambani-controlled Reliance Industries Ltd (RIL) posted a total revenue of Rs 564,749 crore (US$ 67.7 billion) from the Oil-to-Chemical (O2C) segment for the financial year 2023-24, a decrease of 5 percent yoy from the corresponding period last year, primarily on account of lower product price realization following a 13.5 percent yoy decline in average Brent crude oil prices. This was partially offset by higher volumes. The company’s earnings before interest, taxes, depreciation, and amortization (EBIDTA) from the O2C segment stood marginally higher at Rs 62,393 crore (US$ 7.5 billion) for the full financial year 2023-24, with optimized feedstock sourcing, advantageous ethane cracking, and lower Special Additional Excise Duty (SAED) or Windfall Tax impact, although the margin environment across transportation fuel and downstream chemicals remained weak through the year.
Meanwhile, advantageous crude sourcing from Latin America was increased to minimize crude basket cost. Middle Distillates production was maximized with grade mix optimization for capturing the market arbitrage post-Red Sea crisis. Downstream chemical production was optimized to meet captive and domestic demand with subdued petrochemical deltas. Improved gasifier performance helped in minimizing the fuel mix cost.
Ambani said while announcing the annual result, “Strong demand for fuels globally, and limited flexibility in refining system worldwide, supported margins and profitability of the O2C segment. The downstream chemical industry experienced increasingly challenging market conditions throughout the year. Despite headwinds, maintaining leading product positions and feedstock flexibility through our operating model that prioritizes cost management, we delivered a resilient performance. The KG-D6 block has achieved 30 MMSCMD of production and now accounts for 30 percent of India’s domestic gas production. We remain committed to our projects and initiatives, including those in the New Energy segment, which will bolster the company, and help it deliver sustainable growth for the future.”
Calendar 2023 – a bad yearGlobal petrochemical demand remained weak during the calendar year 2023 due to inflationary pressure and oversupply situation, which exerted pressure on the spreads. Experts believe that these headwinds are likely to continue in the near to medium term. Several Asian producers, primarily in China, have added production capacity amid a tepid demand scenario and have resulted in many of these products being directed to other markets such as India. Although India has also increased its capacities and more additions are in the pipeline, the country’s import dependence continues. Since the oversupply situation is likely to continue, petrochemical producers may continue to face margin pressure going forward.
Navanit Narayan, Chief Executive Officer of Haldia Petrochemicals, said in a recent interview, “The year 2023 has been a bad year for petrochemicals due to high volatility in feedstock prices and depressed margins. The delay in the recovery of the Chinese market and the commissioning of large projects in China and India created a large capacity overhang which further delayed the recovery of pricing and margins. While petrochemicals industry suffered in terms of squeezed margins, the refining industry witnessed significant value creation during the year from strong gasoline and diesel demand and prices.”
Moody’s Investor Service, in its recent report, projected global petrochemical demand to remain soft due to slow growth in the world economy. At the same time, petrochemical supply will grow significantly this year as new capacities, particularly in China, are scheduled to come on stream this year. McKinsey & Company forecasted India’s petrochemical sector to grow at about 11 percent per annum of growth between FY2021 and FY2027 to reach the industry size of US$100 billion by 2027, with projections to accelerate further to US$350-370 billion by 2040.
7% demand growth to continuePerceived to move in tandem with the country’s economy, India’s petrochemical demand is likely to grow by 7 percent in FY 2024-25 due to stellar manufacturing and services sectors. The forecasted growth for 2024-25, however, is similar to the expansion projected for the recently ended 2023-24, but substantially lower than the post-pandemic move recorded in the previous two financial years.
An official paper presented recently at the World Petrochemical Conference 2024 in Houston, the United States, estimates India’s petrochemical demand may rise 7 percent to 61 million tonnes in FY2024-25, compared to a similar growth projected in the financial year 2023-24 with demand estimating at 57 million tonnes. In the previous two subsequent years, total petrochemical demand grew by 8 percent to 53 million tonnes, and 13 percent to 49 million tonnes.
This growth is attributed to the forecast of robust economic growth fuelled by the government’s massive infrastructure spending and the resurgence of post-pandemic consumer activities. After contracting in the financial year 2020-21 due to pandemic-related disruptions in factories and trade, India’s petrochemical consumption rebounded and outpaced the growth of the gross domestic product (GDP). This growth projection signifies an increase in the consumption of petrochemical value chains in the future and a healthy growth rate for the industry.
The demand for products in the petrochemical value chain in India is expected to have accelerated. Polyolefins are projected to witness a growth at 7.7 percent, while surfactants and synthetic rubber are expected to record phenomenal growth rates of 6 percent and 6.1 percent respectively, in the financial year 2023-24. Other key petrochemicals, according to a report published recently by the Chemicals and Petrochemicals Manufacturers Association (CPAI), may also experience a growth of 9 percent in the financial year 2023-24.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
