Long Term Outlook on Steel - TransGraph

TransGraph

Research Consulting Technology

Brands

Agriculture Metals Energy Dairy Currency Economy

Polymers Medium term price outlook

Jul 2017

TransGraph

3 © TransGraph Consulting Pvt Ltd Slide

Month Brent Crude Naphtha Ethylene Propylene PTA MEG

Jan-17 55.45 515.12 1005.48 885.24 665.71 930.48

Feb-17 56.00 521.09 1112.25 958.00 707.25 913.00

Mar-17 52.54 470.41 1076.74 890.00 679.35 787.61

Apr-17 53.82 486.01 1050.00 808.00 660.00 724.00

May-17 51.39 448.56 1014.00 738.00 642.00 728.00

Jun-17 47.55 415.77 884.00 756.00 633.00 781.00

Crude oil prices are in USD/bbl (ICE futures. Naphtha prices in USD per ton C+F Tokyo basis.)

Other prices are in USD per ton CFR India basis

Price Trends – Upstream RM

3

Crude oil prices rebounded in April after a sharp fall in March supported by expectations of OPEC producers extending the output cuts. However, prices started to decline after the meeting as the market had already priced in the support measures and concerns regarding rising production levels in US, Libya and Nigeria. Further, weaker than expected gasoline demand at the US front also weighed on prices.

Naphtha prices, at the global front, started declining from mid April in line with decline in upstream crude oil prices.

Ethylene and propylene prices also witnessed decline in the previous quarter amid decline in upstream energy prices.

However, feedstock PTA and MEG prices have seen a rise in AMJ due to the tighter product availability owing to plant shutdowns at domestic (JBF and IOCL) and at the international front.

TransGraph


Month HDPE PP PET BOPP BOPET

Jan-17 85.17 79.54 85.35 148.00 123.00

Feb-17 86.12 82.86 89.10 153.00 127.00

Mar-17 86.17 84.41 90.30 155.00 129.00

Apr-17 86.17 81.01 84.55 151.00 127.00

May-17 86.17 79.54 80.30 149.00 125.00

Jun-17 86.17 81.03 82.48 148.00 124.00

All prices are producer prices (basic rate) in INR per Kg

Price Trends – Polymers

Despite weaker trend in crude oil prices polyethylene prices remain unchanged since Mar’17, owing to relatively stable trend in the international prices and delay in supplies coming back online. However, decline in feedstock prices led to weakness in PE product prices at the start of July.

PET prices declined sharply in the past quarter amid lower demand in the market and increase in supplies due to higher margins. Further, rise in imports also pressurized PET prices.

PP prices have witnessed decline in the past quarter amid lower demand in the market and weaker upstream feedstock propylene prices.

At the laminates front, BOPP and BOPET prices declined in June following the decline in raw material prices along with weak demand owing to lower buying orders ahead of GST implementation in July.

TransGraph


Market developments

5

At the upstream front, US crude oil inventories declined by 32.6 million barrels to 502.91 million by the

end of June from the end of Mar’17 due to decline in imports and higher refinery activity in AMJ

quarter.

IOCL plants located at panipat has started maintenance turnaround in Mid July’17 for PP and HDPE

products with 300 KTPA and 175 KTPA capacities respectively. Both plants mentioned above are likely

to start in Mid Aug’17.

Further, IOCL’s MEG and PTA plants located at panipat have started maintenance turnaround early

July’17 with production capacities of 300 KTPA and 550 KTPA respectively. Additionally, JBF plant

located at Gujarat also has undergone maintenance turnaround from Mid June with MEG production

capacity of 400 KTPA. The restart date is not ascertained. With JBF and IOCL planned maintenances

supported MEG prices in the previous quarter.

RIL started new MEG plant at the end of July with production capacity of 750 KTPA. The new plant at

the start of JAS quarter is likely to pressurize MEG prices in the coming months.

RIL ethylene plant located at Nagothane added capacity of 100KTPA early May’17 reaching 500KTPA.

Upstream market analysis

TransGraph


US crude oil demand in the first five months is

estimated to have increased by a moderate 0.5%

despite strong distillate demand growth due to

slower growth rate in gasoline and other products.

Gasoline demand since the start of the summer

driving season is seen to 1.73% lower on yearly

basis owing to lower traffic volumes.

US gasoline demand growth seen to be sluggish during first month of driving season; expected to improve in the coming months

17.5

18.0

18.5

19.0

19.5

20.0

20.5

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

US crude oil demand (MBpd)

2016 2017 five yr avg

7.5

8.0

8.5

9.0

9.5

10.0


US Gasoline demand (MBpd)


Gasoline demand expected to grow at faster pace in the coming months with start of summer driving season

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4


US Distillate demand (MBpd)


Distillate fule demand likely to ease with winter

demand declining

TransGraph


Permission to non-state owned refineries to import crude oil and focus on higher electricity generation by Chinese government has aided in higher imports in the past two quarters.

China’s four state run refiners and six independent refiners are expected to take up planned maintenance in the third quarter of 2017 along with Petro China and Sinopec looking to run at lower rates raising doubts over the China’s demand sustenance in the medium term.

However, despite the refinery maintenance by Chinese refiners, contrary to the seasonal peak activity period, during JAS, new import licenses to independent refiners is likely to keep crude oil imports growth stable in the coming months.

China crude oil imports

-10%-5%0%5%10%15%20%25%30%35%40%

2.0

2.2

2.4

2.6

2.8

3.0

3.2

De

c-1

4

Feb

-15

Ap

r-1

5

Jun

-15

Au

g-1

5

Oct

-15

De

c-1

5

Feb

-16

Ap

r-1

6

Jun

-16

Au

g-1

6

Oct

-16

De

c-1

6

Feb

-17

Ap

r-1

7

Jun

-17

Au

g-1

7p

Chinese motor and aviation gasoline demand

Monthly consumption (MBpd) YoY change (%)

7.60

7.10

8.707.68

8.317.34 7.05

7.54

28%

0%

19%

6%

15%

7%

2% 3%

0

2

4

6

8

10

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17

China's Crude Oil Imports

Crude oil Imports (Mbpd) Imports YoY growth

TransGraph


OECD quarterly demand expectations

Revival witnessed in OECD Europe demand in 2016 is

expected to continue over the next two years owing

to fiscal stimulus measures aiding the consumption

growth, while sluggish growth at Japanese front is

expected to continue

Furthermore, in pick up in pace of economic activity

during starting from H2 2017, OECD demand growth

is expected to grow at a steady pace.

14.1714.31

14.96

14.37

14.68

15.20

14.51

14.78

15.22

13.6

13.8

14.0

14.2

14.4

14.6

14.8

15.0

15.2

15.4

JFM AMJ JAS

OECD -Europe quarterly Crude oil demand (MBpd)

2015 2016 2017

46.5

45.3

46.746.7

45.9

46.746.6

46.1

47.0

44.5

45.0

45.5

46.0

46.5

47.0

47.5

JFM AMJ JAS

OECD quarterly Crude oil demand (MBpd)

2015 2016 2017

4.70

3.80 3.85

4.43

3.66 3.75

4.34

3.54 3.66

0.00.51.01.52.02.53.03.54.04.55.0

JFM AMJ JAS

Japan quarterly Crude oil demand (MBpd)

2015 2016 2017

TransGraph


Non – OECD quarterly demand expectations

After the strong 3% YoY growth during JFM 2017, demand growth in non-OECD region is estimated to have grown at moderate pace of 0.5% YoY and is expected to grow at 0.2% YoY during JAS 2017.

Stagnation in growth due to refinery maintenance

in China despite the improvement in manufacturing activity is likely to keep growth rate low.

11.8

12.1 12.1

12.3

12.512.4

12.712.8 12.8

11.2

11.4

11.6

11.8

12.0

12.2

12.4

12.6

12.8

13.0

JFM AMJ JAS

China quarterly Crude oil demand (MBpd)

2015 2016 2017

4.0 4.1 3.9

4.5 4.44.1

4.44.8

4.4

0.00.51.01.52.02.53.03.54.04.55.0

JFM AMJ JAS

India quarterly Crude oil demand (MBpd)

2015 2016 2017

47.2

48.8 49.048.6

49.750.150.1 49.9

50.2

45.546.046.547.047.548.048.549.049.550.050.5

JFM AMJ JAS

Non-OECD quarterly Crude oil demand (MBpd)

2015 2016 2017

TransGraph


OPEC group monthly compliance seen declining over the past two months while Libya and Nigeria’s production seen improving

0%

25%

50%

75%

100%

125%

150%

175%

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17

Monthly compliance since start of production cuts

Iraq Saudi Arabia OPEC1.58 1.61 1.55 1.51 1.68 1.67 1.65 1.68

-16%

-8%-10%

-8%

18%

10% 9%

14%

0.0

0.5

1.0

1.5

2.0


Nigeria crude oil production

Nigeria production (MBpd) YoY Change (%)

0.68 0.67 0.62 0.55 0.73 0.88 0.94 0.98

69% 69%80%

59%

147%165%

211%234%

0.0

0.2

0.4

0.6

0.8

1.0

1.2


Libya crude oil production

Libya production (MBpd) YoY Change (%)

Saudi Arabia has maintained the compliance higher than 100% (i.e. lowering output to less than production cut levels) aiding in group keeping the compliance higher despite the lower cuts by Iraq and supply growth from Libya and Nigeria

Declining monthly compliance is likely to result in offsetting the positive impact of production cuts in the medium term.

TransGraph


Oil drilling rigs in US are seen consistently increasing in the past four months amid firm trend in prices, reaching up to highest levels since Nov 2015, when prices started to fall sharply.

Further, improved productivity due to lowering the operating costs has aided in keeping production levels stable in the second half of 2016.

Rising US oil rigs supporting output growth

4.90 4.89 4.80 4.85 5.04 5.06 5.14 5.23 5.35 5.48

722

700

705

710

715

720

725

730

735

740

4.4

4.6

4.8

5.0

5.2

5.4

5.6Shale oil productivity overview

Shale oil Production (MBpd) Shale productivity (Bbl/rig)

3.5

4.0

4.5

5.0

5.5

6.0

0

500

1000

1500

2000

Au

g-1

4

Oct

-14

De

c-1

4

Feb

-15

Ap

r-1

5

Jun

-15

Au

g-1

5

Oct

-15

De

c-1

5

Feb

-16

Ap

r-1

6

Jun

-16

Au

g-1

6

Oct

-16

De

c-1

6

Feb

-17

Ap

r-1

7

Jun

-17

Au

g-1

7

Oil drilling rigs vs Shale oil production

Oil rigs Shale oil production (MBpd)

5.1 4.9 4.8 4.8 5.0 5.1 5.3

4.1 4.0 3.9 4.0 4.0 4.0 4.0

9.17 8.85 8.67 8.81 9.01 9.13 9.28

0

1

2

3

4

5

6

JFM-16 AMJ-16 JAS-16 OND-16 JFM-17 AMJ-17 JAS-17

US crude oil production overview

Shale oil prod. (MBpd) Conventional prod (MBpd) Total prod (MBpd)

TransGraph


US crude oil inventories expected to continue the declining trend

Going ahead, with the refinery activity ramp up expected starting from May amid gasoline inventories broadly remaining lower than last year levels and demand expected to improve in July and August shall aid in lowering crude oil inventory levels in the next two months.

Month Production

(MBpd) Demand (MBpd)

Imports (MBpd)

Prod-Cons gap (MBpd)

Supply-demand (MBpd)

Refinery Utilization (%)

Refinery inputs (MBpd)

US crude oil inventories

(million Barrels)

Jan-17 8.86 19.234 8.44 -10.38 -1.94 90.22% 16392 494.76

Feb-17 9.08 19.188 7.89 -10.11 -2.22 85.84% 15572 520.89

Mar-17 9.11 20.033 8.05 -10.93 -2.88 88.15% 15982 535.54

Apr-17 9.08 19.527 8.08 -10.44 -2.36 92.82% 17024 527.77

May-17 9.12 19.36 8.08 -10.24 -2.16 93.33% 17168 509.91

Jun-17 9.19 19.96 7.84 -10.77 -2.93 93.58% 17110 502.91

Jul-17P 9.23 19.92 7.91 -10.69 -2.78 93.85% 17055 484.12

Aug-17P 9.30 20.04 7.74 -10.74 -3.00 93.65% 16759 475.43

TransGraph


Indian Naphtha scenario – Demand expected to improve keeping the markets tight

Indian Naphtha supply is expected to increase by

1.3% during JAS quarter compared to same quarter

last year driven majorly capacity addition at IOCL

paradip and seasonal factors.

Going ahead, Naphtha consumption is expected to

witness strong growth due to increase in domestic

demand for higher packaging sector products ahead

of festive season as well as fertilizer production.

6065 5835 5673 5596 6146

59775526 5493 5582

6413

0%

5%

10%

15%

20%

25%

0

1000

2000

3000

4000

5000

6000

7000

JAS'16 OND'16 JFM'17 AMJ'17E JAS'17P

India Naphtha supply demand

Supply (KT) Demand (KT)

Supply change YoY (%) RHS Demand change YoY (%) RHS

239 269 248 261 223 237 237 91 215 289 215 235 151-80%

-60%

-40%

-20%

0%

20%

40%

60%

0

50

100

150

200

250

300

350

Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17

Indian Naphtha Imports

Imports (000 tons) Import growth%

602667

925 926

745690

834 802

530

953

749696 744

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

0

200

400

600

800

1000

1200

Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17

Indian Naphtha Exports

Exports (KT) Export growth (%)

Polymer market analysis

TransGraph


Polymer margins

PE and PP prices margins have increased sharply in the

past few months and remain much higher above five

year average levels. Continuous rise in product margins

since Feb’17 is likely to keep supply higher and weigh

on prices in the coming months.

Meanwhile, PET margins have seen a decline in past

three months due to stronger prices for upstream PTA

and MEG. PET margins are currently near five year

average margins which is likely to supply steady.

0

10

20

30

40

Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17

PET chain margins

PET (%) Five year average

0

20

40

60

80


Polypropylene chain margins

PP (%) Five year average

0

10

20

30

40


Polyethylene chain margins

HDPE (%) Five year average

TransGraph


Import price parity indicates higher imports for HDPE, LDPE and LLDPE

100

105

110

115

120

125

-5

0

5

10

15

Mar

-16

Ap

r-1

6

May

-16

Jun

-16

Jul-

16

Au

g-1

6

Sep

-16

Oct

-16

No

v-1

6

De

c-1

6

Jan

-17

Feb

-17

Mar

-17

Ap

r-1

7

May

-17

Jun

-17

LDPE Indian Prices vs Import Price Parity

Import Differential (Domestic-Landed cost), INR/Kg RIL Price, INR/Kg

80

82

84

86

88

90

92

94

-10

-5

0

5

10

Jan

-16

Feb

-16

Mar

-16

Ap

r-1

6

May

-16

Jun

-16

Jul-

16

Au

g-1

6

Sep

-16

Oct

-16

No

v-1

6

De

c-1

6

Jan

-17

Feb

-17

Mar

-17

Ap

r-1

7

May

-17

Jun

-17

HDPE Indian Prices vs Import Price Parity


85

87

89

91

93

95

97

-10

-5

0

5

10

Feb

-16

Mar

-16

Ap

r-1

6

May

-16

Jun

-16

Jul-

16

Au

g-1

6

Sep

-16

Oct

-16

No

v-1

6

De

c-1

6

Jan

-17

Feb

-17

Mar

-17

Ap

r-1

7

May

-17

Jun

-17

LLDPE Indian Prices vs Import Price Parity


Import differential for HDPE, LLDPE and LDPE

had widened due to downward revision of

international prices amid lower demand while

the domestic prices remained comparatively on

a steady note.

Higher price parity (indicating domestic prices

being in premium than international prices) is

likely to result in higher imports.

TransGraph


PE imports During H1 2017, HDPE imports have declined by 47% compared

to same period last year. Going ahead, HDPE imports are

expected to increase owing to wider price parity to 184

thousand tons in JAS quarter about by 2% YoY growth from JAS

2016.

Moving forward, LDPE imports are expected to increase in the

coming quarter by 15% YoY to 114 thousand tons due to

continuous rise in import parity from March’17. Further, LLDPE

imports are likely to witness growth of 24% on yearly basis from

68 thousand tons to 84 thousand tons in JAS quarter.

99 73 68 102 103 108 84

-25%

-59% -57%

-33%

4%

48%

24%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

0

20

40

60

80

100

120

JFM-16 AMJ-16 JAS-16 OND-16 JFM-17 AMJ-17 JAS-17P

India LLDPE imports

Imports ('000 tons) Growth YoY (%)

161

104

181

130

173

134

18411%

-38%

26%

-11%

8%

29%

2%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

50

100

150

200


India HDPE imports


91

122

9993

110

129

114

13%11%

6%

-2%

21%

6%

15%

-5%

0%

5%

10%

15%

20%

25%

70

80

90

100

110

120

130

140


India LDPE imports


TransGraph


High disparity with international prices to keep PP revisions limited while PET prices are likely to be revised lower.

Meanwhile, Polypropylene price disparity with international

prices has narrowed from INR 8 per Kg (domestic being

cheaper by INR 8) in March to near zero levels by the end of

June majorly due to sharp downward revision of

international prices while domestic price revisions were at a

slower rate.

With current domestic prices being cheaper by INR 2 per Kg

compared to international prices and domestic demand

expected to remain higher, comparatively cheaper import

prices compared to previous quarters, PP imports are

expected to remain high in coming months.

PET import price parity in the past quarter has widened from

INR 5 per Kg to INR 12 per Kg despite the downward

revisions at the domestic front as the international prices fell

at a more sharper rate.

Near two year high price parity levels in PET is likely to spur

higher imports despite the increase in domestic supplies due

to capacity additions.

60

65

70

75

80

85

90

95

-5

0

5

10

15

Feb

-16

Mar

-16

Ap

r-1

6

May

-16

Jun

-16

Jul-

16

Au

g-1

6

Sep

-16

Oct

-16

No

v-1

6

De

c-1

6

Jan

-17

Feb

-17

Mar

-17

Ap

r-1

7

May

-17

Jun

-17

PET Indian Prices vs Import Price Parity


60

65

70

75

80

85

90

-10

-8

-6

-4

-2

0

2

4

Feb-

16

Mar

-16

Apr

-16

May

-16

Jun-

16

Jul-

16

Aug

-16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan-

17

Feb-

17

Mar

-17

Apr

-17

May

-17

Jun-

17

PP Indian Prices vs Import Parity


TransGraph


PP and PET imports

157168 135

157

179 175 173

18%

-15%

-24%

-10%

14%

4%28%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

50

100

150

200


India PP imports


24

40

47

33

40 4347

-31%-38%

-2%6%

68%6%

0%

-60%

-40%

-20%

0%

20%

40%

60%

80%

0

10

20

30

40

50


India PET imports


Indian PP imports declined by 8% from Jan’17

to Jun’17. Going ahead, PP imports are

expected to have decrease marginally in JAS

quarter compared to previous quarter and

are likely to be increased by 28% YoY to 173

thousand tons in JAS quarter.

Indian PET imports declined by 8% from

Jan’17 to Jun’17 amid rise in domestic

production levels. Moving forward, imports

are anticipated to increase by 9% to 47

thousand tons in JAS quarter from AMJ

quarter. However, on yearly basis PET imports

are expected to remain at similar levels of 47

thousand tons during JAS 2016.

TransGraph


Demand for packaging materials from FMCG sector is likely to higher ahead of the festive season

India’s industrial production has witnessed moderate recovery

in the past two months supported by the stable growth trend

in manufacturing sector.

Going ahead, seasonal higher production season for the food

products and other consumer non-durables starting from Sep

– Oct period (ahead of the festive season is expected to

demand higher for polymer packaging materials in the

medium term. Further, higher economic activity and seasonal

higher manufacturing growth period in JAS quarter is also

expected to remain supportive.

4.9%5.7%

4.9%5.7%

2.6%

3.8%

1.9%

3.8% 3.1%

-5%

0%

5%

10%

India Industrial Production Growth

General Mining Manufacturing Electricity

Source: MOSPI, TG research

85

90

95

100

105

110

115

120

125

130

135

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Food products production seasonality

95

100

105

110

115

120

125

130

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Consumer non-durables production seasonality

TransGraph


Indian pharma sector sales growth is seen dipping in the past two months due to dealers and stockists apprehension about the tax credit returns with the implementation of GST. Earlier, the tax rate was about 9% while under GST it has been increased to 12%. AIOCD has reported that average inventory with distributors has come down to 17 days of supply by the end of June compared to 40 days of supply by the end of May.

Going ahead, stock replenishment after the implementation of GST is expected to improve the sales gradually in the medium term. However, lower stock levels are expected to keep the sales on a sluggish note in the ease in the coming months.

Indian Pharma Sector Prospects

0%2%4%6%8%10%12%14%16%18%

6500

7000

7500

8000

8500

9000

9500

10000Indian Pharma Sector Monthly sales

Monthly Sales (Crores) YoY Growth (%)Source: AIOCD AWACS

TransGraph


Rebound in price drivers index levels suggesting possible upside revisions in coming months

80

85

90

95

100

105

110

115

120

-500

0

500

1000

1500

2000HDPE price drivers index vs HDPE prices

HDPE index HDPE India (INR/kg)

TransGraph


PP prices in line with the index movement – considering the demand drivers to rise in the coming months, PP prices likely to trade on a firm note

30

40

50

60

70

80

90

100

110

120

0

500

1000

1500

2000

2500

3000

PP price drivers index vs PP prices

PP index PP India (INR/kg)

TransGraph


PET price driver Index indicates that the prices inline with index – price are likely to move in mixed trend

20

30

40

50

60

70

80

90

100

110

120

0

500

1000

1500

2000

2500

3000

3500

PET price drivers index vs PET prices

PET index PET India (INR/kg)

TransGraph


Supply and Demand Balance - PE

India PE Balance Sheet – Quarterly

Attribute OND-16 JFM-17 AMJ-17e JAS-17P OND-17P

Production (MT) 0.935 0.926 0.948 0.957 0.945

Imports (MT) 0.490 0.463 0.490 0.479 0.497

Exports (MT) 0.103 0.110 0.112 0.113 0.110

Apparent Consumption (MT) 1.321 1.272 1.313 1.314 1.329

India PE Balance Sheet – Yearly

Attribute FY’15 FY’16 FY’17e FY’18p

Capacity (MT) 3.02 4.67 4.84 5.45

Production (MT) 2.19 3.50 3.73 4.18

Imports (MT) 1.50 1.04 1.03 1.05

Exports (MT) 0.03 0.43 0.42 0.43

Apparent Consumption (MT) 3.66 4.11 4.34 4.80

TransGraph


Supply and Demand Balance - PP

India PP Balance Sheet – Quarterly


Production (MT) 1.222 1.214 1.331 1.382 1.358

Imports (MT) 0.180 0.190 0.180 0.200 0.200

Exports (MT) 0.156 0.152 0.162 0.169 0.157

Apparent Consumption (MT) 1.246 1.252 1.350 1.414 1.401

India PP Balance Sheet – Yearly


Capacity (MT) 4.69 4.86 5.01 5.65

Production (MT) 4.58 4.80 4.88 5.42

Imports (MT) 0.53 0.71 0.89 0.98

Exports (MT) 0.72 0.64 0.62 0.64

Apparent Consumption (MT) 4.39 4.87 5.15 5.78

TransGraph


Supply and Demand Balance - PET

India PET Balance Sheet – Quarterly


Production (KT) 500 497 505 524 515

Imports (KT) 41 57 58 53 43

Exports (KT) 174 169 176 184 171

Apparent Consumption (KT) 367 385 386 394 388

India PET Balance Sheet – Yearly


Capacity (KT) 1662 2310 2310 2380

Production (KT) 1611 1811 1996 2025

Imports (KT) 191 204 215 228

Exports (KT) 706 710 697 709

Apparent Consumption (KT) 1096 1305 1514 1544

Technical analysis

TransGraph


HDPE (Injection grade) RIL Basic Rate, INR/Kg

HDPE prices are likely to hold above INR 75 and gradually scale upward to INR 85 in the coming 3-5 months.

TransGraph


Polypropylene (Injection grade) RIL Basic Rate,INR/Kg

Polypropylene prices are likely to consolidate within INR 79 to 77 ahead of scaling upward to INR 85 in coming 3-5 months.

TransGraph


PET ( bottle grade) RIL Basic Rate, INR/Kg, INR/Kg

PET Bottle India , prices are likely to hold above INR 80 on any further dips and gradually scale upward to INR 90 in coming 3-5

months.

TransGraph


Price outlook summary

Quarter

HDPE (Injection grade) PP (Injection grade) PET (Bottle grade)

High Low Average High Low Average High Low Average

CMP 81.17 79.99 83

JFM 2017 86.17 85.17 85.80 84.92 79.54 82.20 90.30 84.30 88.27

AMJ 2017 86.17 86.17 86.17 82.96 79.54 80.55 86.30 80.30 82.37

JAS 2017 86.17 75.00 80.00 79.99 77.60 78.60 85.00 80.00 82.50

OND 2017 94.00 75.00 78.00 81.00 79.55 80.20 85.00 90.00 87.50

All prices are RIL basic rates in INR per Kg

Annexure

TransGraph


Polymer Price Driver Index

Factors taken in to consideration for the price drivers index

USDINR Naphtha

Chemical products production Ethylene

Automobile production Propylene

Industrial Production PTA

Consumer durable production MEG

Consumer non-durable production International prices

Crude oil (Brent)

Methodology: Two year rolling correlation has been considered for the

each individual factor to form an uniform index based on the supply as

well as demand drivers.

TransGraph


Ethylene supply and demand – Global and Indian

36

Global Ethylene SnD 2015 2016e 2017p

Capacity (mn tons) 156.30 163.80 170.00

Demand (mn tons) 142.80 153.50 161.00

Operating rate (%) 91.36% 93.71% 94.71%

Capacity-demand 2.13% -2.69% -1.10%

Capacity growth (%) 4.06% 4.80% 3.79%

Demand growth (%) 1.93% 7.49% 4.89%

Indian Ethylene SnD 2015-16 2016-17e 2017-18p

Capacity 5.54 7.13 7.88

Production 5.29 6.88 7.61

Imports 0.03 0.03 0.06

Exports 0.00 0.00 0.00

Demand 5.32 6.91 7.67

Utilization rate 39.28% 29.92% 11.14%

143 146 150 156 164 170129 133 140 143 154 161

90%

91%

93.28%

91.36%

93.71%

94.71%

87%

88%

89%

90%

91%

92%

93%

94%

95%

96%

0

50

100

150

200

2012 2013 2014 2015 2016e 2017p

Global Ethylene Supply and Demand

Capacity (mn tons) Demand (mn tons) Operating rate (%)

Source: Industry reports, TG estimates

3.74 3.76 5.29 6.88 7.61

3.78 3.82

5.32

6.917.67

95%

95%

96%

96%

97%

97%

0.0

2.0

4.0

6.0

8.0

10.0

2013-14 2014-15 2015-16e 2016-17p 2017-18p

Indian Ethylene Supply and Demand

Production (mln tons) Consumption (mln tons) Operating rate (%)

Source: CPMAI, APIC, TG estimates

TransGraph


Propylene supply and demand – Global and Indian

37

Global propylene SnD 2015 2016e 2017p

Capacity (mn tons) 120.00 128.00 136.00

Demand (mn tons) 91.00 95.30 100.20

Operating rate (%) 75.83% 74.45% 73.68%

Capacity-demand 2.55% 1.94% 1.11%

Capacity growth (%) 7.14% 6.67% 6.25%

Demand growth (%) 4.60% 4.73% 5.14%

Indian Propylene SnD 2015-16 2016-17e 2017-18p

Capacity 5.54 7.13 7.88

Production 5.29 6.88 7.61

Imports 0.03 0.03 0.06

Exports 0.00 0.00 0.00

Demand 5.32 6.91 7.67

Utilization rate 95.5% 96.5% 96.6%

4.15 4.02 4.65 4.82 4.90

4.15 4.01

4.64 4.81 4.89

88%

89%

90%

91%

92%

93%

94%

95%

96%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2013-14 2014-15 2015-16e 2016-17p 2017-18p

Indian Propylene Supply and Demand


Source: CPMAI, APIC, TG estimates

106 112 120 128 13683 87 91 95 100

78.0% 77.7%

75.8%

74.5%73.7%

71%

72%

73%

74%

75%

76%

77%

78%

79%

0

20

40

60

80

100

120

140

160

2013 2014 2015 2016e 2017p

Global Propylene Supply and Demand

Capacity (mn tons) Demand (mn tons)Operating rate (%)


TransGraph


PTA supply and demand – Indian & Global

38

Indian PTA SnD 2012-13 2013-14 2014-15 2015-16 2016-17p 2017-18p

Capacity (MTPA) 3.930 3.930 3.930 5.65 6.43 6.43

Production (MTPA) 3.462 3.420 3.700 4.95 5.63 5.65

Imports (MTPA) 0.648 0.978 1.015 0.69 0.12 0.45

Exports (MTPA) 0.004 0 0 0.15 0.30 0.34

Demand (MTPA) 4.106 4.398 4.715 4.95 5.44 5.76

Utilization rate (%) 6.60% 7.10% 7.20% 87.58% 87.47% 87.87%


3.93 3.93 5.65 6.43 6.43

3.42 3.60

4.955.44

5.76

60%

65%

70%

75%

80%

85%

90%

95%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2013-14 2014-15 2015-16 2016-17e 2017-18p

Indian PTA Supply and Demand


67.5 77.2 85.0 90.0 93.049.0 52.0 57.0 59.0 63.0

72.6%

67.4% 67.1%

65.6%

67.7%

60%

62%

64%

66%

68%

70%

72%

74%

0

20

40

60

80

100

2013 2014 2015 2016e 2017p

Global PTA Supply and Demand

Capacity (mn tons) Demand (mn tons)Source: Indsutry Reports,TG estimates

TransGraph


MEG supply and demand – Indian & Global

26.9 28.3 30.3 32.9 35.923.6 25.1 26.5 28.3 30.3

87.9%88.5%

87.6%

86.0%

84.4%

80%

82%

84%

86%

88%

90%

0

5

10

15

20

25

30

35

40

2013 2014 2015 2016e 2017p

Global MEG Supply and Demand

Capacity (mn tons) Demand (mn tons)Source: Indsutry Reports,TG estimatesSource: Indsutry Reports,TG estimates

1.20 1.20 1.20 1.20 1.60

1.84 1.871.99

2.132.30

60%

70%

80%

90%

100%

0.0

0.5

1.0

1.5

2.0

2.5

2013-14 2014-15 2015-16 2016-17e 2017-18p

Indian MEG Supply and Demand


Indian MEG SnD 2012-13 2013-14 2014-15 2015-16 2016-17p 2017-18p

Capacity (MTPA) 1.300 1.200 1.200 1.20 1.20 1.60

Production (MTPA) 1.057 1.040 0.960 1.10 1.14 1.48

Imports (MTPA) 0.656 0.864 0.955 0.96 1.06 0.95

Exports (MTPA) 0.069 0.064 0.060 0.07 0.08 0.13

Demand (MTPA) 1.644 1.840 1.855 1.99 2.13 2.30

Utilization rate (%) 3.70% 11.90% 0.80% 91.3% 95.0% 92.50%


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