India petrochemical market ends financial year on a low

Indian petrochemical producers are facing a tough start to the country's new financial year, as a nationwide lockdown to curb the spread of coronavirus slashes sales and limits distribution.

"We have ended the financial year with high inventory and low sales, and everyone wants the opposite," said a major methanol trader. India's financial year lasts from 1 April to 31 March.

Sales of key petrochemical products have slumped following the sudden 21-day lockdown of the country from 25 March.

There has been limited or no distribution of chemicals such as methanol because of logistics and transportation challenges resulting from the lockdown.

"There is no market as products are not moving," said an official at another Indian producer, referring to a lack of port facilities and a slowdown in customs activity. This has led some methanol buyers to look at either cancelling or deferring shipments.

The movement of migrant workers from factories to villages amid the lockdown may slow production at downstream factories in the coming month.

"Migrant workers are not able to return immediately after the lockdown is lifted, so that is going to slow down the market for longer," said a trader.

Major producers including Bharat Petroleum (BPCL), IOC and Haldia Petrochemical have reduced production or shut units in an effort to balance inventory against the sharp drop in domestic demand.

The lockdown may also affect new cracker and downstream projects that are due to start in 2021-22. Engineering companies and contractors may have had to cut back operations at project sites in some instances, which may have an eventual impact on project timelines, said another producer.

"When one shuts down a country as large as India for 21 days, the impact is expected to be huge," a trader added.

By Mahua Chakravarty