India's Petrochemical Consumption Growth Forecast at 6-7% Annually
A CareEdge Ratings report forecasts India's petrochemical consumption to grow robustly at 6-7% annually, fueled by economic expansion and downstream demand. Significant capacity expansions, particularly in polypropylene, aim to reduce import dependence. Despite this growth, the sector faces challenges from global oversupply, weak product spreads, and competition from cheaper Chinese imports. Achieving optimal profitability will depend on improving cost competitiveness, favorable global demand-supply dynamics, and government support amidst continued global capacity additions.
A recent report by CareEdge Ratings projects a robust 6-7% annual growth in India's domestic petrochemical consumption over the medium term. This sustained expansion is attributed to the country's economic growth and consistent demand from downstream industries. Given this strong consumption, reducing import dependence has become a strategic imperative for the sector, prompting both public and private entities to announce substantial capacity expansion plans. Notably, polypropylene capacity is forecast to increase by 1.8 times between FY25 and FY30, surpassing the anticipated 1.4 times demand growth, potentially eliminating polypropylene import reliance by FY30.However, the report warns that while capacity additions are essential, cost competitiveness will be paramount for domestic players. The ability to achieve sustainable product spreads and adequate returns on significant capital investments will rely heavily on operational efficiency, global market conditions, and pricing strategies. The near-term outlook for the domestic petrochemical sector indicates weak prices and spreads due to a prevailing global oversupply. CareEdge Ratings points out that considerable global capacity additions, largely driven by China, have outpaced demand, creating a mismatch that has pressured Indian manufacturers' operating profitability and led to intense competition from cheaper Chinese imports over the past three years. Although H1FY26 saw marginal improvement in profitability due to lower input costs from declining crude oil prices, the long-term success of domestic players, amidst strong consumption growth and continued global capacity build-up, will be contingent upon improving cost competitiveness, favorable international demand-supply dynamics, and necessary government support.
