Performance of RIL\'s petrochemical division in 2010-11

Reliance maintained its leadership in the domestic market with a commodity polymer production share of 47%. RIL's polymer production for the year remained unchanged despite turnaround activities carried out during the year. RIL's cracker operatin

Reliance maintained its leadership in the domestic market with a commodity polymer production share of 47%. RIL?s polymer production for the year remained unchanged despite turnaround activities carried out during the year. RIL?s cracker operating rate was at 90% in FY-11 as compared to 98% in FY-10. Due to cracker shutdown at Hazira, Nagothane and Gandhar manufacturing sites, the production of ethylene decreased by 8% to 686 KT while the production of propylene decreased by 5% to 696 KT as compared to the corresponding  period of the previous year.

Ethylene scenario 

Ethylene is the primary building block and a major feedstock for polymers. It is a raw material used in the manufacture of polymers like polyethylene, polyvinyl chloride and polystyrene, as well as organic chemicals like ethylene oxide and ethylene glycols. These products are used in a variety of end markets, such as packaging, transportation, electronic, textile and construction. Global ethylene markets continue to recover from a state of oversupply that developed in 2008-2010, stemming  mainly from the construction of new capacity in the Middle East and Asia and recessionary global conditions. Global ethylene production totalled 122 MMT in 2010, representing an operating rate of 84.9% as compared to 84% in 2009. 

Capacity additions in the Middle East and the Asian continent during the recent past have dramatically changed the supply scenario. The Middle East now accounts for 18% of global ethylene capacity as compared to 10% in 2005. Similarly, Asia now contributes to 33% of the global ethylene capacity as compared to 29% in 2005. With the capacity that has become operational in the Middle East, the feedstock mix for cracker has also changed in favour of gas.

 Strong economic growth in developing Asia has resulted in the demand for key petrochemical products reaching an all-time high. Petrochemical prices also improved on account of higher demand and cost push from higher feedstock prices.

Polymers are used in a wide variety of applications like agriculture, food packaging, healthcare, automotive components and household appliances. Plastics growth will continue to be driven by applications where plastics can deliver a cost advantage and performance enhancement.

Global commodity plastics consumption in 2010 was estimated at 196 MMT. Of this, polyethylene (PE) accounts for 36% of all plastic consumption, followed by polypropylene (PP) which accounts for 25% and polyvinyl chloride (PVC) which accounts for 18% of plastic demand.

Operating rates in Asia improved on account of higher demand and planned maintenance shut-down by cracker operators. The US saw a remarkable improvement in the operating rates with improved demand and advantageous feedstock. Competitive pressure on margins has resulted in the closure of some high-cost assets in Western Europe. In 2010, PP capacity addition of 4.7 MMT exceeded incremental growth in demand of 3.4 MMT. Consequently, operating rates declined to 82.3% vis-?-vis 83.2% in 2009. In the next four to five years, around 90% of incremental capacity is expected to come up in the Middle East, Asia and Africa reflecting the region?s growing prominence in the sector.

Operating rates for PE declined to 81.9% levels in 2010 from 83.0% in 2009 as incremental capacity of 8.1 MMT exceeded incremental demand of 4.8 MMT. In 2010, global demand for PE grew by 7.1% following the economic revival. While the whole of Asia is leading in demand growth for PE, new capacity is being built predominantly in the Middle East and China. Global capacity addition in 2010 was 8.1 MMT, out of which 6.2 MMT is in these two regions. In 2011, 2.3 MMT of additional capacity is expected globally and most of it is coming up in Asia and the Middle East.

The operating rate for PVC increased to 75.9% levels in 2010 from 72.5% in 2009, with capacity addition of 2.5 MMT, lagging behind the incremental demand of 3.2 MMT. In 2010, global demand for PVC grew by 10.1% following the strong demand from Asia. In 2011, 4.5 MMT of additional PVC capacity is expected globally. The product price recovery continued throughout the last year, although not at the same pace of feedstock prices. Product margins remained stable in most parts despite the high price environment.

Product prices

Price ($/MT)

Source: Platts 

RIL performance 

Reliance maintained its leadership in the domestic market with a commodity polymer production share of 47%. RIL?s polymer production for the year remained unchanged despite turnaround activities carried out during the year. RIL?s cracker operating rate was at 90% in FY-11 as compared to 98% in FY-10. Due to cracker shutdown at Hazira, Nagothane and Gandhar manufacturing sites, the production of ethylene decreased by 8% to  ,686 KT while the production of propylene decreased by 5% to 696 KT as compared to the corresponding  period of the previous year.

Polymer production in KT

PP

The domestic demand scenario has been extremely bullish for PP, reaching 2.6 MMT with an annual growth rate of 18% in FY-11, after a robust 20% growth in FY-10. The demand for PP in India is expected to grow at a healthy CAGR of over 10% over the next 4-5 years. RIL, with its portfolio of PP grades being produced through multi-line production, is positioned well to capture the future growth. With an aim to capture new markets and opportunities, RIL introduced a new random co-polymer grade SRX100 catering to the fast growing rigid packaging sector. It has the potential to replace styrenics and imported high clarity random PP grades.

PE

RIL?s production of PE declined by 9.4% to 967 KT in FY-11. This was due to cracker shutdown at Nagothane and planned turnaround at cracker at Gandhar complex. The domestic LDPE demand reduced by 9% due to widening LLD- LD price delta and as a result most processors started using LL rich blends. In the PE business, market expansion with value-added grades is an ongoing activity to have an edge over competition. Some of the grade development activities during 2010 were: 􀁺 Introduced F46003E for HD film sector as alternate for F46003. 􀁺 Introduced HP19010 for the packaging film sector.  

PVC

PVC consumption in India is estimated to be 1.9 MMT in FY-11, which represents a growth of 6% over the previous year. India imported about 650 KT of PVC during FY-11. Pipes and fittings continued to be the major market accounting for 72% domestic PVC demand. PVC is a major product for the infrastructure sector, applied in irrigation pipes, drinking water supply, sewerage schemes, profiles for the building industry, wires and cables, etc.  

New developments and growth initiatives

Reliance took a lead role in creating new market by conducting customer meets - ?Rishta? throughout India, to propel growth of PP, PE, and PVC in the field of engineering, agriculture, infrastructure and packaging sector.

Geotextile made from PP has immense potential in construction of roads with improved durability and in river and sea embankment, to prevent erosion. Reliance worked in tandem with textile ministry, industry bodies to facilitate new investment in this ?Technical Textile?. Several states of India have already specified use of PP geotextile in road and river embankment.

Agriculture is a prime sector for sustainable growth of India. Non-woven PP has proven to be an ideal solution in banana plantations. The Company has tied up for new projects with several agricultural institutes to establish PP in other fruits and vegetables plantation. Apart from increased yields, it will help farmers to grow high quality produce for export business.

The Company worked with leading consumer durable manufacturers to successfully introduce PP in fourwheelers, refrigerators and water filters. Reliance is also driving metal replacement and import substitution programme with major commercial/two wheeler manufacturers by introducing niche grade of PP.

New Technologies. New Partnerships. Reliance has made another break-through in glass replacement by using PP bottles in ?flavoured milk? packaging. Light weight, clear, break-resistant PP bottles will now replace glass bottles. This is a landmark innovation of Reliance offering high technology, safe and hygienic product.