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Reliance claims that India must increase its petchem production to counter China's dominance.

A senior Reliance Industries official stated on Friday that India must increase its petrochemical capacity to meet the local and global market demand, and to contain China's increasing dominance in the sector.

The margins on petrochemicals have been shrinking around the globe as China's capacity growth has created an excess. Some refiners can produce petchems up to 40-50% of the total output, which is more than twice what India typically produces.

India's petrochemical consumption for now is only a fraction of global average, but it is expected to increase as the nation's economy grows.

Many analysts believe that India's economy is growing at the fastest rate of any major country, while China is stagnating, and its demand for gasoline and gasoil has peaked. The use of these two auto fuels in India is still increasing, but at a slower rate as the country tries to switch to cleaner fuels.

Vikram Sampat is senior vice president, strategy and business, for Reliance Industries' polyester chain. He told an industry gathering that China had taken over the "entire petrochemical sector" and India must take action.

He said, "If we do not act now, China will grow."

Sampat stated that Reliance's overall portfolio has a 20% petrochemical production capacity.

Analysts predict that Indian refiners are going to increase their focus on the petrochemicals in order to maintain margins and grow as demand for fossil-fuel transport fuels reaches its peak.

Sampat expects that refiners will redirect 30-50% of gasoline production to petrochemicals if the petrol demand spikes. If diesel demand peaks the percentage of output that goes into petrochemicals can rise as high as 50%-70%. (Reporting and editing by Barbara Lewis; Nidhi verma)

(source: Reuters)