India is poised to emerge as the next major player in the global petrochemicals industry, supported by planned capital expenditure of USD 37 billion aimed at boosting self-sufficiency, S&P Global Ratings said in its latest report. The report, ‘First China, Now India: Self-Sufficiency Goals Will Add To Petrochemicals Supply,’ warns that India’s aggressive capacity expansion, following a similar path as China, will intensify oversupply pressures in Asia’s petrochemical sector.
India, the world’s third-largest petrochemical consumer after China and the United States, has historically depended on imports to meet domestic demand. However, a shift toward self-reliance is underway, with S&P projecting India to account for one-third of global capacity additions by 2030. S&P Global Ratings anticipates that India will adhere to its large-scale investment plans to reduce dependence on imported chemicals used in daily essentials ranging from plastic bags to auto parts.
Oversupply risk and investment split
Overcapacity in the Asia-Pacific petrochemicals market is unlikely to deter India from pressing ahead with major investments in domestic manufacturing. Of the USD 37 billion in capex, USD 25 billion will come from public sector undertakings tied to refinery expansions, while USD 12 billion will be invested by private players, who may exercise more flexibility.
“India’s capacity additions in petrochemicals, which follow those of China, will increase competition within the broader Asian industry over the coming years,” said S&P Global Ratings credit analyst Ker Liang Chan.
The report noted that India’s strong domestic demand, particularly for polyethylene, is expected to cushion local producers’ earnings even as global peers face pricing pressures and possible consolidation.
Impact on regional exporters
The shift toward self-sufficiency could hit Asian exporters hard, as more than half of India and China’s chemical imports currently originate from the region. “Greater self-sufficiency in China and India poses a challenge for Asia-Pacific petrochemical exporters, absent mitigating actions to diversify sales and optimise capital expenditure,” Chan added.
With US exports limited by tariffs, options for Asian exporters are narrowing, and S&P warns this could further pressure earnings and accelerate consolidation across the industry. Indian producers, however, are expected to remain relatively resilient. S&P forecasts India will overtake the US to become the world’s second-largest consumer of polyethylene, one of the most widely used petrochemicals.
“The self-sufficiency goals of China and India exacerbate structural overcapacity in the industry, particularly amid a lacklustre recovery in global demand and ongoing trade tensions,” S&P analyst Shawn Park said.
China has been leading global capacity additions, a trend expected to continue in the near term. “By 2030, India will take over that baton, we estimate the country will make up a third of global new additions in that year. For Asian exporters, redirecting volumes may prove difficult, with limited scope to increase shipments to the US given trade barriers. “In our assessment, this may consequently impair earnings and drive consolidation within the industry,” S&P said.
Still, robust local consumption is likely to support Indian producers’ earnings, even in a challenging global environment. |
