India Feedstock, Intermediates & Refined Products Stare at Rs. 72000 Cr Losses Due to Lockdown: ChemAnalyst
NOIDA, , NATIONAL CAPTIAL REGION, INDIA, June 3, 2020 /EINPresswire.com/ — Dwindling 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.
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.
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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Source: EIN Presswire