Extended lockdown to further hurt Indian petchem sector

"Producers are holding high polymer inventories, so I do not expect [to see] a restart [in operations] before a demand pull. Sales can no longer be based on a supply push," a key producer said, referring to an ongoing shutdown at its cracker and downstream polymer units.

The Indian government announced today an extension of the country's lockdown until 3 May to contain the coronavirus outbreak. This comes after states such as Maharashtra, Odisha, Telangana, Punjab and Tamil Nadu declared on 9-10 April an extension of lockdown measures until 30 April.

The nationwide lockdown extension will continue to keep non-essential services shut. But the government is looking at making exceptions in some parts of the country to minimise economic damage, with no further details available yet.

Demand for chemicals such as methanol, styrene monomer (SM) and polyethylene (PE) is expected to remain weak and hit further lows because of the lockdown extension.

Concerns are also mounting among market participants over the impact of the extension on the recovery of downstream markets.

India's PE sector and demand from plastic converters are expected to remain weak. Convertors are still facing significant logistical challenges with trucking product.

SM demand from derivatives sectors such as polystyrene and acrylonitrile-butadiene-styrene is expected remain low for some time after the lockdown is lifted next month.

Manpower shortage is likely to be a major issue for these sectors, which produce packaging and plastic materials. Most plants in these industries have been shut since 25 March.

Methanol demand in India is expected to remain in a deep slump through the coming month amid storage and transportation issues as well.

"Methanol is facing a lot more problems with storage and transportation from ports compared with other chemicals, and this will dash hopes that inventories can be cleared soon," a methanol importer said.

Middle East-based producers are facing supply pressures amid the lockdown in India and have had to divert methanol volumes to China and southeast Asia.

"We have not focused our sales to India this month for obvious reasons. We will review the Indian situation in May," said a Saudi Arabia-based producer and exporter of methanol.

Iran, which is the largest supplier of methanol to India, is facing considerable challenges in redirecting volumes. And US-imposed sanctions are leaving Iranian producers with limited options.

"We have not been selling any cargoes to India. We have lost one of our main export markets and now we have to wait longer," said a key Iranian methanol producer.

Petrochemical producers are also expected to maintain reduced operating rates and shutdowns at refineries and crackers across India.

Most of these producers are still assessing the situation. "We are evaluating [the situation]. It will depend on transport availability for the movement of goods and downstream demand after they [downstream plants] reopen," a key producer in eastern India said.

Producers like state-owned IOC and private-sector Haldia Petrochemicals have shut crackers in Panipat, Paradip and Haldia since the lockdown from 25 March. Other producers such as state-controlled Bharat Petroleum have cut production rates at refineries in Mumbai and Kochi.

By Mahua Chakravarty