Published on November 25, 2013
The chemical industry is vital for any nation’s economy, which has for generations brought about significant changes in the way we live and think. The chemical industry has several sectors and one of the most important sectors is the organic chemicals industry. This key sector provides chemicals intermediates to other industries like paints, dye stuffs, pharmaceuticals, adhesives, pesticides etc.
The major organic chemicals produced in India include methanol, formaldehyde, phenol, acetic acid, pyridines, acetic anhydride, alkyl amines and ethyl acetate. Apart from India the other major producers of organic chemicals are USA, Germany, U.K, Japan and China. Countries like Brazil and Chile are trying to increase production of these important chemicals.
Large volumes of imports from China have led to a decline in production of major organic chemicals in India. With significant rise in demand, the gap between domestic supply and demand has increased. The rising demand for organic chemicals has been met mostly through imports. During the XIth plan period domestic production declined at the rate of 6 per cent per year, while imports grew at 17-19 per cent per year. In order to establish additional domestic capacity and meet demands through local production we need substantial investment. Lack of sufficient feedstock is another hindrance for the sector, thus ensuring feedstock availability including naphtha, alcohol and natural gas is essential.
Methanol is the most important organic chemical, produced in India from naptha and natural gas. Methanol can also be produced from coal and petcoke- a method which is yet to be commercialized. The poor quality of coal available in India has made production of methanol through this route unviable. As a result the rising demand for methanol is met via imports.
As far as methanol consumption is considered, the two major end-use segments for methanol are energy and chemical. The energy sector utilizes methanol as a blending component for methyl tertiary butyl ether (MTBE) and petrol, tertiary amyl methyl ether (TAME) and di-methyl ether (DME). The chemical segment requires methanol to produce acetic acid, formaldehyde, di-methyl terephthalate (DMT) etc.
Demand for methanol is expected to reach 2.5 million tonnes by the end of the XIIth Five Year Plan period. Investments and strategic planning could reduce dependence on imports and help set up additional capacity.
Acetic acid is used for producing purified terephthalic acid (PTA), acetic anhydride, vinyl acetate monomer (VAM) and acetate esters. It is produced through alcohol or methanol route. The alcohol route has become unviable in India as a result of limited availability of this feedstock.
PTA is the basic raw material for polyester and fiber. Rising demand for PTA had led to increased demand for acetic acid as well, which is mostly met through large volumes of import. Consumption of acetic acid is expected to reach 1 million tonnes by the end of the XIIth Five Year Plan period.
Formaldehyde and phenol have been growing at a moderate pace. Phenol is utilized to produce caprolactam and bisphenol-A. Formaldehyde is an important chemical for the laminate sector. Demand for formaldehyde is estimated to be 0.3 million tonnes, while the demand for phenol is estimated to be 0.4 million tonnes by the end of the XIIth Five Year Plan period.
Acetic Anhydride demand is expected to reach 0.08 million tonnes. Despite sufficient production, India has little trade in terms of acetic anhydride.
Ethyle Acetate primarily used for paints, printing inks and pharmaceuticals. Demand for this organic chemical is met through domestic production. India also exports large quantities of ethyl acetate.
Alkyl amines include methylamine, ethyl hexyl amines, ethylamines, butylamines, isopropylamines. The Indian industry is self-sufficient in terms of alkyl amines, which are used to produce paints, rubber chemicals, pharmaceuticals, agro-chemicals etc.
The organic chemicals industry in India has several opportunities to expand. It is important that the Indian organic chemical firms explore opportunities outside the country through green-field or brown-field projects. Companies can enhance their product portfolio by including specialty chemicals like lubricating additives, polymers additives, water treatment chemicals etc. This move would increase their profit margins. The newly discovered natural gas reserves in the country will enable local manufacturers to procure feedstock at stable prices.
Despite these opportunities to grow, there are several challenges that the industry needs to overcome. Lack of cheaper raw materials like naphtha and natural gas, which are essential for the industry, is a major challenge. Compared to countries like Middle East, China, Thailand and Indonesia, cost of raw materials is higher in India. The Indian industry is plagued by poor infrastructure, poor pipeline connectivity, inadequate facilities at railway terminals and ports. Further the oversupply and large capacity additions in global markets are also a cause of concern for domestic manufacturers.
Demand for basic organic chemicals can grow at a rate of 10 per cent per year in order to reach 5 million tonnes by the end of the XIIth Five Year Plan period. To meet this demand the industry will have to grow at a rate of 10-12 per cent per year. Policy initiatives from the government and creation of favourable investment climate will help the industry achieve the growth target. Establishing world scale plants will reduce the industry’s dependence on imports and help it move towards self-sufficiency.
