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Sector Focus: Downstream Petrochemicals

Downstream petrochemicals: State of the industry (2000-01)

Downstream petrochemicals : Tariffs, prices and landed costs

	Tariffs (per cent)				Prices (Jan 2001)			Landed costs (Rs/tonne)
	Customs		Excise		Dom- estic	Intnl		Pre- budget	Post budget
	00-01	01-02	00-01	01-02	(Rs/ton)	($/ton)
LAB	32.6	30.0	16.0	16.0	56,800	900		56,761	56,648
PAN	44.0	40.4	16.0	16.0	33,000	470	1	32,199	31,386
MAN	44.0	40.4	16.0	16.0	45,000	900	1	61,658	60,100
Methanol	32.6	30.0	16.0	16.0	14,900	221		17,091	16,756
Phenol	32.6	30.0	16.0	16.0	45,500	553	1	44,460	43,588
Acetone	44.0	40.4	16.0	16.0	36,000	417	1	41,829	40,772
Carbon Black	44.0	40.4	16.0	16.0	33,300	490		33,569	32,721
VAM	44.0	40.4	16.0	16.0	56,000	877		60,083	58,564
Ortho- xylene	21.2	19.6	16.0	16.0	25,500	400		23,951	22,754
CBFS	32.6	30.0	16.0	16.0	7,850	190		11,983	11,748

PAN: Phthalic anhydride; MAN: Maleic anhydride; CBFS: Carbon black feedstock; VAM: Vinyl acetate monomer
n.a: Not available
1 Fob prices
Notes: BR> 1) Landed cost of phenol includes a safeguard duty of 15 per cent.
2) Landed cost of acetone includes a safeguard duty of 28 per cent.

Source: CRIS INFAC

• In 2000-01, demand for MAN, LAB, VAM, EO, phenol and acetone is expected to increase by 5-7 per cent, as compared with that in 1999-2000. The growth in demand for PAN, carbon black and orthoxylene is expected to be marginal or negative. Demand for methanol is expected to increase at 10 per cent.
• Domestic supply of MAN, LAB, VAM, EO, phenol and acetone is expected to increase in line with demand. However, methanol imports are expected to increase significantly, as the growth in demand has exceeded the increase in domestic supply.
• During the April-November 2000-01 period, domestic prices of phenol, acetone, methanol and VAM increased by over 20 per cent, as compared with those in 1999-2000. Prices of PAN, carbon black, MAN, LAB remained stable, in line with the international prices.
• In fourth quarter of 2000-01, prices of all downstream chemicals (except methanol) are expected to remain stable. Prices of methanol are expected to increase by 10 per cent, due to an expected increase in international prices.
• In 2000-01, margins of methanol and phenol producers are expected to increase significantly, as compared with those in 1999-2000. Margins of MAN, LAB and VAM producers are expected to remain stable. Margins of PAN and carbon black producers are expected to decline, due to an increase in raw material prices.

Downstream petrochemicals: Budget Impact

Impact factors

Company name	Impact	Impact factors
Herdillia Chemicals	neut	A,B,C
(n.a )
Hindustan Organic Chemicals	neut	A,B,C
(8.75, 8.70 )
India Glycols	neg	C,D
(24.0, 24.25)
Philips Carbon Black	neut	A,B,C
(n.a)
Tamilnadu Petro Products	neut	A,B,C
(n.a)
Thirumalai Chemicals	neg	A,B,C
(42.5, 41.10 )
VAM Organics	neut	A,B,C
(68.10, 67.0)

Notes:
Figures in brackets indicate the closing share prices, on February 27, 2001 and February 28, 2001, respectively.
neg= negative neut= neutral

Source: CRIS INFAC

A: Custom duty
B: Diesel cost increase
C: increase in railway freight
D: corporate tax

A: The reduction in the effective customs duty on downstream petrochemicals (due to the removal of surcharge), is expected to have a negative impact on downstream petrochemical producers. Domestic prices of downstream petrochemicals are expected to decline, due to a decline in the landed costs.

B: The reduction in the effective customs duty on downstream petrochemical feedstocks is expected to have a positive impact on downstream petrochemical producers. (On an average, raw material costs account for 40 per cent of the total production costs.) The overall impact on most downstream producers is expected to be marginal due to the relatively low (10 percent) customs duty differential between finished products and raw materials. However, this is expected to have a negative impact on the profitability of producers such as Thirumalai Chemicals, as their customs duty differential is around 20 per cent.

C: The reduction of surcharge on corporate tax, from 13 per cent to 2 per cent and the expected decline in interest rates, is expected to have a positive impact on producers.

D: The reduction in effective customs duty on MEG is expected to have a negative impact on India Glycols.

Rediff-CRISIL Budget Impact Analysis
Budget 2001

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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