Indian private-sector conglomerate Reliance Industries on 29 August announced the addition of 1.5mn t/yr of polyvinyl chloride (PVC) capacity in India, effectively doubling India's PVC production to 3.055mn t/yr and reducing its reliance on exports.
India currently produces 1.555 mn t/yr of PVC. The country also imported an average of 1.86mn t/yr of PVC from 2018 to 2021, according to GTT data. But exports have remained almost non-existent as local supply is unable to keep up with demand. This implies that India's estimated average PVC consumption is around 3.415mn t/yr for these four years.
Japan has been India's top PVC supplier, with India importing 378,000t last year. Indian buyers favour Japanese cargoes as these have 0pc import duties, making them more affordable. Taiwan ranks second at 342,000t, followed by China and South Korea at 296,000t and 264,000t respectively.
The new 1.5mn t/yr plant in Jamnagar will shrink India's PVC supply deficit to a mere 365,000 t/yr in 2026, assuming that consumption levels remain the same. India is poised to become almost self-sufficient in 2026 with this new capacity addition.
The small shortfall could be fulfilled by Reliance's petrochemical joint venture with Abu Dhabi's state-owned Adnoc in Ruwais. New site plans indicate that the facility would be able to produce up to 300,000 t/yr of PVC, according to Reliance.
PVC produced in Ruwais will target the local Middle Eastern markets and India. The Comprehensive Economic Partnership Agreement signed earlier this year will cut Indian PVC import duties on cargoes from the UAE to 5pc from 2026. These duty benefits will be on par with cargoes from southeast Asia, which are also subjected to 5pc import duties, increasing the price competitiveness of cargoes from the UAE.
Obstacles ahead
Reliance is in pole position to dominate PVC markets in India, given the joint venture and new capacity addition in Jamnagar. But this pursuit is not without its obstacles.
Cargoes from Reliance's UAE joint venture will remain at a disadvantage to Japanese cargoes, which are not subjected to import duties, with Japan remaining India's top source of PVC imports because of these duty advantages. The sale of UAE- and India-origin cargoes could also be threatened by the rise of Chinese PVC imports, following the removal of additional anti-dumping duties in February.
India's imports of Chinese PVC reached 318,000t in January-June, surpassing the 296,000t imported in the whole of last year. Chinese imports could more than double from last year to 636,000t if the trend holds for the rest of the year.
The main driver for this has been the availability of competitively-priced Chinese carbide PVC cargoes. These cargoes are often cheaper than conventional ethylene-based PVC, despite the lack of duty advantages. Chinese producers were willing to offer substantial discounts earlier this year, as Covid-19 lockdowns weighed significantly on downstream activity in China. Chinese PVC producers had excess inventories on hand and were looking to clear them in sales to India and the rest of south Asia.
Indian buyers have been keen on importing these cargoes as they can perfectly substitute ethylene-based PVC for most applications. Many final goods processors can also manufacture the same product at healthier margins using Chinese carbide PVC.
Some participants recently banded together to urge Indian authorities to restrict volumes imported from China, as the cheap carbide PVC on offer has made it difficult for local producers to compete. Other participants were considering pushing for additional anti-dumping duties to be re-imposed. But they held back on this as it would take more time for authorities to enforce. No formal decision or indication has been provided yet by Indian authorities.
But the Chinese threat to Indian producers has been declining, as current weakening sentiment and high feedstock prices have made it difficult for Chinese producers to offer carbide PVC cargoes at big discounts to ethylene cargoes in the near term. Chinese carbide-based PVC cargoes were offered at a mere $30/t discount to ethylene-based PVC cargoes last week in Indian import markets.
Should carbide PVC cargoes regain its cost advantage, it could dominate Indian import markets in the next few years and Indian producers could find it difficult to sell locally. With the massive capacity addition in 2026, Indian producers could turn to the export markets if significant buildups occur, although this is a move that has not previously happened. An Indian producer only very briefly considered it earlier this year when it was forced to slash prices because of competition from China, but did not ultimately follow through as it was able to sell to the domestic market.
It is unclear how trade flows will change, but the additional 1.5mn t/yr of PVC capacity is set to cut India's reliance on imports. Regional producers will subsequently have to look for new export destinations to make up for the losses in exports to India. This will be especially challenging for producers in Asia that have new capacity additions planned with India as a main export destination. Producers looking to export to India must be prepared to be aggressive in their offers, with additional supplies in the pipeline.
