Indian petrochemical industry battles demand loss amidst COVID-19 pandemic, says GlobalData

The wide-spread of COVID-19 has presented some new challenges to Indian petrochemical industry, as the nation-wide lockdown imposed in late March 2020 (eased over the past few weeks) has resulted in workforce shortages and supply chain disruptions across the country including weaker domestic demand. Most of the upcoming projects are largely concentrated in developed western states such as Gujarat and Maharashtra, mostly targeting the growing demand in the country. Additionally, companies are likely to implement contingency plans to mitigate the impact on vendor services and equipment deliveries due to the lockdown and restrictions, says GlobalData, a leading data and analytics company.

Dayanand Kharade, Oil and Gas Analyst at GlobalData, comments: “Globally, India leads with the largest pre-construction capacity additions in the world. The outbreak of COVID-19 pandemic and consequent lockdowns has set forth new constraints in the progress of petrochemical projects. Companies are likely to re-evaluate their investment plans on new projects and this could alter the financial investment decisions (FIDs), especially the projects targeting FIDs in 2020 foresee higher risk of postponement. Global oversupply concerns and weaker domestic demand are also expected to elevate risks of project/FID delays over the short term.”

The pandemic has significantly impacted business operations of the companies through interruptions in production and supply chains, labor shortages, idling/closure of plants etc. Producers are likely to maintain lower utilization rates and would continue to closely monitor changes to future economic conditions, which looks challenging in the short-term. Companies are likely to slash capital and operational spend, in response to demand crunch and drop in oil prices caused by the spread of the COVID-19 pandemic

Kharade concludes: “The demand for petrochemicals in India is likely to be hit hard in 2020, as growth concerns in key end-use segments such as construction, automotive etc. have been impacted. Some of the other end-use segments such as packaging, healthcare, consumer etc., often termed as essential services, continue to grip demand going down further. Demand growth of key polymers in India is expected to deteriorate in 2020 to around 1%, after an average growth of around 5% in recent times.”

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