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FOCUS: Will BIS certification reshape India’s PVC, PP, and PE supplier landscape?

by Merve Sezgün -
by Esra Ersöz -
  • 05/03/2024 (11:58)
Last week, the attention of global polyolefin and PVC industry players shifted towards India when it was announced that PVC and certain PP grades would be included in the country’s BIS certification process. Despite a six-month grace period before enforcement, this development -which did not come as a big surprise- has sparked some questions especially at a time when India’s imports surged to record highs.
In a latest move on February 26, the Indian government included PVC and PP moulding and extrusion in the mandatory Bureau of India Standards (BIS) certification process for chemicals and petrochemical imports. The enforcement of this certification is set to take effect by the end of August or after 180 days from the date of publication in the gazette. Additionally, BIS certification for both LDPE and LLDPE has been mandatory since January 5, 2024.

Is India trying to curb imports after PP, PE, PVC hit records?

Data from ChemOrbis Stats Wizard PRO reveal that India’s imports of PP, PE, and PVC experienced substantial growth last year, reaching record highs. With the latest BIS certification move, players are speculating whether India aims to slow down this acceleration or if it intends to restrict imports from specific origins. If the answer is yes to the latter, then the question arises: Which origins will take the lion’s share, and how will the supplier landscape evolve in the future?

As the world’s top PVC buyer, India imported around 3.2 million tons of PVC in 2023. The figure showed a notable increase of 70% when compared to the 2022 volume. Its PE imports last year totaled 3.8 million tons, up 58% from the previous year, becoming the second largest PE buyer of the world following China. As for PP, the total 2023 import volume climbed 19% from a year earlier to reach over 1.7 million tons.

PP: Top suppliers already applied for BIS, but Chinese remain a question

Last year, the United Arab Emirates, Saudi Arabia, Singapore, Thailand, and Oman were India’s leading suppliers of PP, in that order. Data indicate that all countries in the top five increased their PP sales to India in 2023.

Despite the new capacity additions, China which was the fourth-largest supplier in 2022, experienced a significant decline of 45% in its sales to India, causing it to drop to the seventh place in 2023.

According to market sources, most Middle Eastern PP producers have already submitted applications for a BIS license concurrently with PE. Other suppliers from Southeast Asia, South Korea, and Russia are also expected to receive their licenses. However, as for Chinese, some Indian players speculated that their licenses may not be approved.

In the meantime, data from ChemOrbis Production News Pro reveal that India intends to expand its PP capacities over the next five years. The country’s total PP production capacity, which stood at around 6 million tons/year in 2023, is projected to exceed 12 million tons/year by 2028. If all goes by plan, India may achieve self-sufficiency in PP in the future.

PE: ME producers seek compensation in India as they lose share in China

India’s rapidly growing appetite for imported PE has attracted the attention of most major suppliers, particularly those from the Middle East, who experienced a loss of market share in China last year.

In 2023, the United Arab Emirates emerged as India’s top PE supplier with slightly more than 1 million tons (a 54% increase y-on-y), followed by Saudi Arabia (490,000 tons). The United States ranked the third with 426,000 tons. In China, on the other hand, the US surpassed Saudi Arabia to become the leading PE supplier last year. US PE imports to China surged by 149% year-on-year to around 2.5 million tons, while imports from Saudi Arabia declined by 10%. The UAE’s PE sales to China also dropped by 17% to 1.6 million tons in 2023.

Market sources note that most Middle Eastern suppliers have already received their BIS certification for PE, in line with their plans to raise market share in India. However, according to some market talks, US producers are yet to apply for BIS as they are still evaluating the certification process.

PVC: Will Chinese PVC lose its home in India?

India’s total PVC imports reached a record-high of 3.2 million tons in 2023, with over 1 million tons originating from China. Compared to 2022, Chinese PVC imports saw a major gain of 102%. Despite a safeguard investigation initiated in September 2022, China maintained its position as the top supplier by a large margin, followed by Japan, Taiwan, South Korea, and the United States last year.

According to some players in the Indian market, the BIS certification will certainly mean a ban on the carbide-based PVC from China, which typically has a VCM content of more than 2 parts per million (ppm). Some players even anticipate an impact on Chinese ethylene-based PVC, the VCM content of which is more than 2ppm. The BIS specification sheet mandates a VCM content of less than 2ppm.

How would a potential Chinese absence affect pricing trends?

An excess of competitively priced Chinese offers to India has been keeping PVC prices in check, potentially prompting domestic producers to exert pressure on the government to take steps to restrict such abundant supplies. Chinese PVC producers are expected to seek BIS certification to sustain their exports to India, although Indian buyers worry that their licenses might not be approved.

On the other side of the coin, the possibility of a ban on Chinese PVC raises this question: Would India tolerate such inflation at a time when supply fails to meet demand? The competitive advantage that Chinese PVC has been providing has enabled Indian manufacturers to obtain raw materials at lower prices.

Can US suppliers risk losing India?

As ChemOrbis Stats Wizard Pro data suggest, total PVC exports out of the United States in 2023 recorded a yearly rise of 22% from a year earlier to reach around 3 million tons. If Canada is disregarded as a nearby "almost domestic” outlet, India emerged as the largest buyer of US PVC with 316,000 tons, surpassing Mexico.

If US producers do not obtain BIS certification, there is a strong likelihood that they will lose market share in India. Some players suggest that this could be a significant risk for US producers to take, particularly as global demand for PVC weakens and there is a possibility of Chinese PVC losing its foothold in India.
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