India Feedstock, Intermediates & Refined Products Stare at Rs. 72000 Cr Losses Due to Lockdown
by Chem Analyst Chemical Database PriceDwindling demand and decline
in crude futures made India’s petrochemical feedstock hover several years low
post the pandemic invaded the country. India is largely self-sufficient in
naphtha, which is a key feedstock for petrochemical products and bulk polymers.
The sliding demand made the country’s feedstock players reduce their run rates
by almost 40% with some of the players also announcing plant shutdowns. India
imports huge volumes of other feedstock (like LNG, LPG, methanol etc.) and
hence the current situation makes the sector more of a beneficiary as consumers
eye on cheaper stocks after the restrictions on cargo shipments are eased, when
several major producers are facing a supply glut.
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Feedstock, Intermediates and
Refined products segment would be the worst hit sector with an estimated
revenue loss of INR 72000 cr. for the industry. As the industry is highly
consolidated with a handful of large players, and is heavy traded commodities,
it explains the magnitude of such loss and the industry might even layoff about
60-65 thousand employees to compensate for the same.
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With all the companies
rethinking strategies to cut operating expenditures or to introduce new product
mix in their existing portfolio, it has been evident that the impact of
COVID-19 has been severe to both the top-line and bottom-line numbers of
entities across the chemical & petrochemical value-chain. With plunging of
profits for almost every company, Indian economy is spiraling to an apparent
hopeless inactivity. Critical feedstock imports such as Methanol was severely
affected owing to supply chain disruptions and halted in-bound and out-bound
transport. This has been worsened by the stalled investments in capacity
additions across Ethylene & Aromatics value-chain, with all pre-FIDs having
been deferred for the year. Refinery margins have been precariously low for the
domestic players, killing their profitability.
For the first time in the
last decade, outlook for the Indian Chemical & Petrochemical market remains
grim across all countries. COVID-19 has dealt a severe blow to the earnings of
manufacturers as well as intermediaries and left them struggling to stay afloat
amidst massive supply-chain disruptions and washed-out demand. IMF has pegged
India’s GDP growth rate at 1.9 per cent for FY20 and the country is likely to
fall into recession if the lockdown continues.
Despite recent relaxation in
lockdown norms across the country, situation remains highly grim necessitating
an urgency in revival of downstream demand. Managing labour restrictions has
become challenging owing to continuous nature of production in manufacturing
units. Moreover, recent Styrene gas leak at LG Polymers in Vizag plant has
forced the company to shift entire Styrene inventory to South Korea, thus
halting their plant operations and impacting the feedstock draw rate. Total chemical & petrochemical industry stare at a
loss of INR 1600-1700 crore per day during the lockdown. The revenue of most of
the companies have been hit due to negligible demand of all major feedstocks,
bulk chemicals and petrochemical products. Majority of downstream processors
and end-users run on thin margin and characterized by high fixed cost. The
total lockdown has blocked cash flow. This will result in job cuts and
reduction in variable expenditure.
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Created on May 26th 2020 02:58. Viewed 265 times.