Does the end of Iran’s economic isolation bode well for India?

Iran’s economic and political isolation might end sooner than expected. A pact between Iran and the five major world powers has enabled the Islamic Republic to use nuclear energy for peaceful purposes. India has welcomed this agreement and is glad that business with Iran can now be carried out with much more ease and in a transparent manner. Western sanctions imposed upon Iran had a disastrous effect on the country’s economy. Iran is home to vast oil and gas reserves, which when put to use can make Iran a major petrochemical hub. But the sanctions imposed by the western nations had restricted hydrocarbon exports, crippled operations at refineries and affected production and export of petrochemicals. Without access to technology, financial support, technical know-how and markets, Iran had to shelve plans to increase petrochemical output. Iran’s economy was on the verge of collapse.

India continued to maintain social, political and economic ties with Iran, despite the hurdles created by the sanctions. India used to import large quantities of crude oil from Iran but the sanctions forced our nation to cut down imports to much lower levels. But recent developments can lead to a more broad-based and a more balanced trade between the two countries. India heaved a sigh of relief when the new agreement was signed, especially because of the positive impacts it could have on our economy.

Iran’s entry into the world economic order meant that the Iran-India gas pipeline project could become a reality. But the difficulties with the project persist primarily due to the strained relations between India and Pakistan. The two neighbours will have to reach an understanding in order for the project to be completed. India requires large quantities of gas for local production and this demand can be met through LNG imports from Africa, Australia and the Middle East. However, pipeline supplies from Iran can compete with any of these supplies but chances are that the project may never see the light of day.

The possible end of Iran’s economic isolation will definitely moderate oil prices. If Iran manages to expand production within 2-3 years oil prices will plummet, benefitting countries that rely on imports, including India.
Despite access to large gas and oil reserves the Iranian petrochemical industry has failed to make its mark. Petrochemical production and exports had been badly affected by the sanctions and efforts to expand capacity were futile. The lifting of sanctions will bring about radical changes in the way the petrochemical industry of Iran functions. While the return to normalcy might be slow, government efforts can help Iran emerge as a major petrochemical hub by the end of the decade.

India exports sizeable quantities of chemicals from Iran, including basic chemicals (methanol, isobutanol, vinyl acetate, ethanolamines), polymers (PVC, PE, SBR, PBR, ABS), aromatics (mixed xylenes, toluene), LPG (propane, butane), fertilizers and raw materials (ammonia, urea, sulphur, ammonium nitrate). The sanctions had forced India to reduce the volume of imports. However, Iran can now increase the amount of imports without any hassles. The coming few years are likely to witness a rise in demand for basic chemicals in India. India’s imports of urea and ammonia are also expected to increase as domestic production based on costly gas may make imports seem like a cheaper alternative.

India can also invest in downstream chemical business in Iran, which includes technical agrochemicals, pharmaceutical ingredients and specialty chemicals. Thus, a revitalized Iran will do wonders for the Indian economy.

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Can Nigeria become a hub for petrochemicals?

The petrochemical industry plays a crucial role in bolstering the economy of any given nation. This sub-sector of the petroleum industry provides us with a wide array of products like kerosene, LPG, diesel, ethane, plastic, rubber, yarn and some crucial raw materials. The petrochemical industry sustains sectors like electronics, packaging, automotive, construction, textile and agriculture.

Nigeria is Africa’s top oil producer and has oil and gas resources in abundance- sufficient for the petrochemical industry to grow by leaps and bounds. However, the Nigerian petrochemical industry is plagued by numerous factors, which have hampered its growth.

Refineries are a major source of feedstock for the industry; however the miserable condition of the nation’s four refineries is not an encouraging prospect. The low refinery capacity utilisation is taking a toll on the industry’s output, forcing the nation to rely on imports. The Petroleum Industry Bill (PIB), which is supposed to encourage investment in gas development, will give the industry a much needed respite. However, the delay in the implementing the bill has also stifled the industry’s growth.

Considering the sorry state of affairs, the proposed privatisation of the refineries represents a glimmer of hope for the moribund industry. Thus, from the first quarter of 2014 private investors will have the opportunity to save the refineries from sinking. Take for instance the remarkable transformation of the Indorama Eleme Petrochemicals Limited (IEPL) following privatisation of the company in 2006. The company accounts for a major share of local manufacturing of petrochemicals and meets the demands of the local plastic industry. IEPL has reduced the country’s dependence on imports by 25 per cent- a remarkable feat. It also accounts for 10 per cent of Nigeria’s non-oil exports.

This change in the fortunes of IEPL has not only boosted polymer production, but has also helped accelerate growth of industries such as plastic bags, packaging, containers and woven sacks. The IEPL success story is a testimony to the fact that if Nigeria works toward creating a favourable investment climate, the nation’s aspiration to become a hub for petrochemicals can be realized.

Less resource-rich countries like South Africa have a strong petrochemical industry, which is based on coal feedstock. The country has to rely on Mozambique for gas and has still managed to build Africa’s largest petrochemical industry. However, Nigeria is blessed with vast gas reserves, but continues to lag behind. The nation should use its vast resources strategically to maximise the industry’s potential.

Once the petrochemical industry strengthens its foothold, industrial manufacturing will flourish. It will generate employment for millions of the unemployed in the country and will lower the amount of foreign exchange spent on importing petrochemical products.

The government should waste no time in addressing issues of weak infrastructure and poor legislation. The need of the hour to create a favourable investment climate as this would encourage more investors in the industry.

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Alcohol based chemicals- a key contributor to the growth of the Indian Chemical Industry

The Indian chemical industry has various segments, which for years have contributed to the overall development and growth of the industry. Alcohol based chemical industry holds an important position in the Indian chemical industry and has made significant contributions to the boost the Indian economy. Alcohol is an extremely important feedstock for the production of basic chemicals. Alcohol is used for diluting, blending and other industrial purposes. Alcohol is also used for blending with petrol.

The two countries leading ethanol production on a global scale are United States and Brazil, followed by EU, China and India.

The alcohol based chemical industry in India currently stands at $1.1 billion. The industry provides livelihood to about 7,500 people and envisages an employment increase of 5 per cent. Some of the important alcohol based chemicals produced in India are acetic acid, ethylene glycol, glyoxal, ethylene oxide derivatives, acetaldehyde etc. The end user industries of these chemicals include dyestuffs, personal care products, pharmaceuticals, agrochemicals, pigments, flavours and fragrances etc.

India has 20 major manufacturing units and about 340 distilleries. However, the capacity utilization is low as a result of lack of access to sufficient quantities of molasses. Also, production of alcohol has been declining despite a steady increase in demand. Thus the industry has to depend on imports to meet the rising demand for alcohol.

The alcohol based chemical industry aspires to grow at the rate of 7-8 per cent to reach $1.7 billion by the end of the XIIth Five Year Plan period. However, considering the current condition of the industry this growth target can be achieved only with the support and encouragement of the Indian government.

The industry has proved its heightened environmental awareness by manufacturing chemicals using renewable feedstock. Its contribution to green chemistry has given the industry a competitive edge. The green chemicals that the industry produces has helped limit GHG emissions. Also, carbon footprint of alcohol based chemicals is lower compared to fossil fuel based chemicals. The industry has also made significant contributions to the foreign exchange reserves of the country.

However, the industry is not without weaknesses and has several obstacles to overcome. Volatile prices of molasses and alcohol have adversely affected fluctuation in prices of feedstock. Limited availability of industrial alcohol and increasing demand for alcohol for blending with petrol has made industry heavily dependent on imports.

The high export/import tax, transport fee, purchase tax, vend fee, de-naturalization fee etc have made it very difficult for the industry to thrive. The innumerable state taxes affect the competitiveness of the industry.

Only government support and encouragement can help the industry scale new heights and explore better growth opportunities. The government should find a solution to the problem of inadequate supply of molasses. The central government should regulate the movement of molasses and ethyl alcohol as this move would prevent difference in taxation applied by different countries.

In order to make the industry more competitive, the Indian government should prioritize supplying ethanol as feedstock for green chemicals. This step would increase employment, save precious foreign exchange, generate more capital investment opportunities and enable improved utilization of existing capacity.

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The global inorganic chemical industry overview

The inorganic chemical industry comprises of several segments, the oldest and largest of which is the chlor-alkali industry. The global chlor-alkali is estimated to be worth $70 billion, while the Indian chlor-alkali industry accounts for 4 per cent of the global market. This segment of the chemical industry produces key compounds like caustic soda, liquid chlorine and soda ash.

Caustic soda is generally used for finishing operations in textiles, for manufacturing soap and detergents, paper, alumina etc. The aluminium industry is the major user of this chemical. China accounts for nearly 34 per cent of global caustic soda capacity and has the highest capacity at 27 million tonnes. The other rapidly emerging centre for caustic soda production is the Middle East. Countries like Australia and Latin America are the leading importers of caustic soda. Majority of the caustic soda is exported from Asia, North America and the Middle East. In India there are nearly 37 manufacturers of caustic soda and have manufacturing units that produce nearly 3.246 million tonnes of caustic soda. These units also produce chlorine. Gujarat is the largest caustic producing state with a capacity of 1.6 million tonnes. The industry’s growth is driven by demand from paper, textiles and alumina industry.

Chlorine is used for a number of applications such as bleaching, water treatment, manufacturing paper and pulp, PVC, fertilizers, pesticides etc. Chlorine capacity in India stands at 2.876 million tonnes. 80 per cent of the demand for chlorine comes from sectors like pulp and paper, vinyl, pesticides etc.

The Indian caustic soda industry has immense growth potential, provided it takes advantage of opportunities in hand. The major raw material used by the industry is salt and India has plenty of this resource. With efficient technology, innovative products and an improved environmental awareness the industry is developing rapidly. Production capacity of both caustic soda and chlorine in India is sufficient to meet domestic demands. 

However, there are several obstacles the industry needs to overcome. China with is higher production capacity and lower power tariff poses a threat to the Indian caustic soda industry. The industry has to sharpen and improve their technical as well as marketing capabilities. Chlorine usage in India is highly limited by a number of factors. It is produced only as a co-product of caustic soda. There is a need to promote usage of chlorine for water treatment that would ensure availability of clean drinking water. Grid power costs in India are higher compared to USA, Europe and the Middle East.

Soda ash is a vital inorganic chemical and is used for manufacturing detergents, soaps, silicate, glass, specialty chemicals etc. Soda ash is produced through the Solvey Process. This chemical can be produced either via the natural or the synthetic method. Natural soda ash accounts for nearly 11.7 million tonnes of the total production. US has the highest natural soda ash capacity. China is also a major producer of this chemical and accounts for nearly 40 per cent of the total global soda ash capacity. The glass industry accounts for 50 per cent of the global soda ash consumption. Soda ash can replace utilization of caustic soda in certain sectors like pulp and paper, water treatment etc.

In India, soda ash capacity stands at 3.16 million tonnes. The Indian soda ash industry accounts for 5.3 per cent of the total global capacity. Gujarat is the major producer of soda ash primarily due to the availability of key raw materials- salt and limestone. India offers two varieties of soda ash- light soda ash and dense soda ash. Increase in urban population and per capita income has led to increased use of soaps and detergents. The demand for soda ash is driven by the glass and detergent industries.

The Indian soda industry includes established companies and world leaders like Tata Chemicals. With adequate capacity the industry can easily meet domestic demands. The industry also exports considerable amounts of the chemical. The consistent growth rate of the end user segments will definitely benefit the soda industry.

China, with increased production capacity and lower power tariff, has proved to be a major threat to the Indian soda industry. With majority of the manufacturing units located in Gujarat the end use industry has to spend high logistics cost as a result of being located in southern or eastern regions.

The chlor-alkali sector provides direct and indirect labour to nearly 1.5 lakh people. The sector is expected to generate jobs for a greater number of people by the end of the XIIth Five Year Plan period. The industry is expected to see exponential growth during the five year plan period. However, in order to reach the growth target the industry will have to collaboratively work with the government. The Indian government should formulate certain policy guidelines on the taxation levels on captive power and electricity. The government should encourage coastal shipping and inland waterways to reduce logistics costs. Petrochemical complexes should be encouraged to produce ethylene, which can double chlorine consumption. The government should support increased chlorine consumption as this would lead to availability of caustic at lower costs.

Renewed R&D efforts, energy efficient technology, enhanced brand building and environmental friendliness will make it easier for the industry to flourish.

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Breaking news on latest petrochemical plants and projects

News flashes and detailed analysis of the world’s petrochemical markets. GCP provides regular updates of latest petrochemical plants and projects, capacity expansions, plant shutdowns, and process technology for effective and efficient business planning.

This access to market intelligence and latest petrochemical plants and projects will be beneficial for all petrochemical professionals.

            

          

We enable our subscribers to observe market conditions and make strategic purchasing and planning decisions by providing latest news for phenol and acetone.With product-specific news and analysis make informed short-term purchasing decisions and long-term investing plans.Our latest news for phenol and acetone will be of immense help to several petrochemical  professionals

             
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Chemicals pose threat to the Arctic bird population

With heavy usage of chemicals round the clock and its unstoppable limit to levy its usage the Arctic bird population is being rightly affected. From pollution, climate change and various other factors the Arctic population has had its own reach ability of getting endangered. The exposure to organic chemical pollutants (POPs) is also one of the prime reasons affecting the lives of the population in the region especially the glaucous gulls.

Several contaminants, plus other threats that endanger the gull, like global warming and new parasites in the environment, work together to harm the gull. Studies show that the gull is a bioindicator species that provides clear evidence that the Cape Dorset marine food web consists of a complex mixture of a more recently introduced chemicals of potential health concern to Arctic wildlife. Also as per research it was found that the gull’s liver contained high levels of methyl mercury and mercury. Also, traits of flame retardants were found in liver. Flame retardants are chemicals that are pre dominantly used in the North and swept by the atmospheric waves in the Arctic region. However, such chemicals increasingly being a part of the food web are posing a great threat to the health and wellness of the bird and above all are a very big setback to the ecosystem and the global environment as well.

Most of the synthetic chemicals found in Arctic animals break down very slowly. The persistence in the environment lets them to accumulate in animals, and pass on to the food web. Arctic animals store energy as fat for survival in the cold, and therefore fat is an important part of the diet. Most of the organic pollutants are fat-soluble and accumulate in the fatty tissues of animals. Henceforth, with the fat in their diet, animals take in the organic contaminants.

However effective steps are being taken to stop the usage of flame retardants as an effective measure In Europe a proof has to be given to the legislations that the product to be used is not persistent, bioaccumulation in species, and is not toxic. Thereby, Hope is but sustained that effective methodology will be adopted to the ecosystem and the Arctic environment.

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Chemical prices and market intelligence for efficient decision-making

Global chemical price is the name to be reckoned with when it comes to providing chemical prices. Having access to latest chemical prices will you to understand the ever changing chemical market and also make sound business decisions. We provide daily price alerts via SMS and email, thereby making it easier for our subscribers to access these prices, and that too at his/her convenience.

Global chemical price provides comprehensive and relevant global information related to chemicals and petrochemicals with an emphasis on India. Indian chemical price alerts are made available to help Indian based refineries, manufacturers, importers, exporters, traders, brokers and end-users to safeguard their business from volatility in the Indian chemical industry. With Indian chemical price alerts you will be able to monitor the prices for major domestic commodities without any hassles. 

Global chemical price aims to make the latest chemicalprice updates, market analysis, news and on-going chemical market trends available for traders, manufacturers and end-users. Our chemical price updates and market reviews are meant for customers to understand the intricacies of chemical industry and make important long-term as well as short-term trading decisions. All the resources needed to make informed business decisions are now just a click away. 

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Gulf Petrochemicals Industry faces tough competition from US

The petrochemicals industry of the Gulf region has seen tremendous success in the past two decades. The region's proximity to massive oil and gas reserves has been an added advantage for the petrochemicals industry. State-of-the art technology and expertise has helped generate employment for thousands. Access to cheap gas and petroleum has accelerated the growth of this industry. However, with increasing competition and prises, the region's advantage of access to cheap raw materials is gradually diminishing.

Experts believe that natural gas is soon going to become pricey and that the ethan reserves are declining. Petrochemicals companies will have no option but seek access to technology and major growth markets.

Natural gas is being used up at an alarming rate. Increased power usage has resulted in shortage of natural gas. With the consumption of this commodity expected to rise further and much of the natural gas set aside for exports, the petrochemicals industry is going to face a tough challenge of finding cheap feedstock.

The International Energy Agency noted that, "Demand continues to increase strongly in the Middle East, driven by power generation, water desalination and petrochemical projects, as well as own use in LNG and gas-to-liquids production. In some cases, low regulated gas prices have resulted in physical shortages of gas, as demand has outstripped local supply capacity.”

Added to the significant decline in availability of natural gas, Gulf region are likely to experience difficulty in increasing production of ethane- major by-product of natural gas and essential raw material for the petrochemicals industry. The existing supply of ethane has been set aside for on-going and new projects.

The shale gas revolution in the U.S. has revitalized their petrochemicals sector. The U.S. produced about one third of the world's petrochemicals products, but the sector gradually declined and its market share shrunk to 10 per cent by 2010. However, access to cheap natural gas has helped the sinking industry rise. The 110 new projects estimated to be worth 77 billion dollars are proof that the U.S. petrochemicals industry is emerging and this newly gained self-sufficiency will force Gulf companies to look for new markets.
The petrochemical industry within the Gulf states like Saudi Arabia, and Qatar have undergone radical changes and are as developed as anywhere in the world. Saudi Basic Industries Corporation (Sabic) is a key player of the market and is a Fortune 500 company.

The Middle East accounts for 13 per cent of the global petrochemicals production. Capacity expansion helped increase production, which reached 127.8 million tonnes in the previous year. Saudi Arabia is the leader of the regional petrochemical industry and produces nearly 86.4 million tonnes per annum (mtpa). Qatar on the other hand produces 16.8 million tonnes and Oman 9.5 mtpa. These three regions account for 88 per cent of the Gulf petrochemical industry. The UAE produces 6.1 million tonnes per annum and accounts for 5 per cent of the industry. When compared with the Gulf petrochemicals industry, the global industry has not develop at such an accelerated pace.

Petrochemical industry of this region is expected to produce 191.2 million tonnes by the year 2020, with Saudi Arabia in the lead. Saudi is likely to produce 40.6 million tonnes during this period, while Qatar and UAE are likely to add 10 million tonnes and 8.3 million tonnes, respectively.
Increased productivity of the regional industry, however, has not resulted in a significant rise in profits. Many companies have suffered a steep decline in their returns. But this setback hasn't disheartened the industry. Instead, the Gulf states continue to make heavy investments in this sector. Gulf Investment Corporation said, “GCC players are expected to continue their overseas investments in order to boost regional supply and asset acquisition."

There are as many as 65 projects, collectively valued at 150 billion dollars. Saudi Aramco and Dow Chemical recently established a joint venture- Sadara Chemical company, which will construct a polyethylene and propylene producing plant at Jubail Industrial City. The 20 billion dollars Sadara Chemical complex will be the first unit in Middle East to utilize refinery liquids . Sabic has decided to construct two downstream plants with production capacity of 250,000 tonnes per annum of methyl methacrylate (MMA) and 40,000 TPA of polymethylmethacrylate (PMMA) at Jubail.

In Qatar, Qatar Petroleum and Royal Dutch Shell are keen to construct an olefins plant at Ras Laffan. This 7 billion dollars project is expected to produce 1.1 million TPA of ethylene and 170,000 TPA of propylene. Qatar Petroleum is also planning to develop a petrochemical complex at Ras Laffan along with Qatar Petrochemical Company.

While in the UAE, International Petroleum Investment and Abu Dhabi National Chemicals Co. have planned to establish a 10 billion dollar aromatics, olefins and nitrogen chemicals project.
But the industry continues to face innumerable challenges.

The Gulf petrochemicals industry remains sensitive to the global economy. With newly gained self sufficiency, U.S petrochemical industry has been revamped and poses a major threat to the regional petrochemical sector. European economies, on the other hand, have been declining. Major emerging economies are also suffering from poor economic growth. In such a situation Gulf producers are likely to target Asian markets, especially India and China. However, China's own plans to develop its petrochemical industry at world scale will become a major obstacle for the Gulf petrochemical sector.

Only strategic planning can enable this region to maintain its stronghold in the industry. They should become a part of the ongoing shale revolution in the U.S. Increasing output of specialty chemicals will also be beneficial. The petrochemical companies of the region and the government are bracing themselves to face the tough challenges that lie ahead of them. The government is keen to produce value-added products and to consolidate the industry.

Only timely action will help the region maintain its position in the industry. It's now or never!

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BY : Priyanka Menon

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