India’s $37 Bn Petrochemicals Push To Reshape Asian Supply Balance
India’s growing investments in the petrochemicals sector are set to reshape the regional supply landscape, potentially deepening the imbalance already confronting Asian producers, according to a new report by S&P Global Ratings.The credit rating agency noted that India’s planned capacity expansion closely follows China’s earlier drive towards self-sufficiency in petrochemical production, a shift that could significantly alter trade flows and competition across Asia. While, China remains the world’s largest consumer of petrochemicals, whereas India is the third-largest. Both are seeking to reduce import dependence for raw materials used in everyday goods such as plastics, packaging and automobile components.
“India’s capacity additions in petrochemicals, which follow those of China, will increase competition within the broader Asian industry over the coming years,” said Ker Liang Chan, credit analyst, S&P Global Ratings.
The report, First China, Now India: Self-Sufficiency Goals Will Add to Petrochemicals Supply, said India is expected to continue large-scale investments aimed at cutting reliance on imported chemicals used in a wide range of consumer products.
S&P pointed out that this expansion comes at a time when the Asia-Pacific petrochemical market is grappling with excess capacity. A companion analysis, India’s Energy Landscape in Charts, links the sectoral investments to the country’s broader energy security and sustainability targets.
Chan added that the rising push for self-sufficiency in both China and India could create headwinds for other Asian exporters.
“Greater self-sufficiency in India and China markets poses a challenge for Asia-Pacific petrochemical exporters, absent mitigating actions to diversify sales and optimise capital expenditure”,he said.
According to S&P estimates, India’s public sector enterprises have committed around USD 25 billion in petrochemical investments, largely tied to refinery expansion projects. Private sector investment plans worth about USD 12 billion are expected to remain more flexible.
The surge in capacity could pressure regional exporters that currently supply more than half of China’s and India’s petrochemical imports. Shifting trade towards alternative markets such as the United States may prove difficult given tariff barriers and weaker demand, potentially dampening industry earnings and fuelling consolidation.
Despite these risks, S&P expects India’s domestic market to remain resilient, supported by rising consumption. The country is projected to surpass the United States as the world’s second-largest consumer of polyethene, which is a key raw material for plastics manufacturing.
“The self-sufficiency goals of China and India exacerbate the structural overcapacity in the industry, particularly amid lacklustre recovery in global demand and ongoing trade tensions”,said Shawn Park, credit analyst, S&P Global Ratings.
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