• Organic chemical is a compound containing Carbon, Oxygen, Hydrogen as the main constituents
• Covers a wide spectrum of chemicals - Acetic acid, Methanol, Formaldehyde, Acetone, Acetic Anhydride, Phenol, Nitrobenzene, etc.
• Units concentrated mainly in Gujarat & Maharashtra
• At present, all major organic chemicals are facing sluggish demand growth.

Organic Chemicals market Rs.3000crs (US $ 700 mn)

Industry

• Organic chemicals  is a Rs. 3,000 cr. market (US $ 700 mn)
• Being an intermediate, demand totally dependent on end user industry
• Industry suffers from excess capacity build up
• Industry dominated by large private companies and PSUs

• Chemicals sold directly to OEMs and also through distribution channel for some of the products
• Distribution channel mainly consists of stockists and dealers addressing smaller segments / retail market

• Domestic prices dependent on imports as international prices are volatile
• Also dependant on demand supply situation
• Some prevailing prices: Phenol - Rs. 30,000 / tonne;
•  Methanol - Rs.8,550 /.tonne; Acetic Acid - Rs. 28,000 /tonne;
•  MEK - Rs.35,000 / tonne (as of Jan 2000)

• Basic- 35%, Surcharge - 10%, CVD - 16% and special additional duty - 4%

Overview

• Made from natural gas which is rich in methane
• Methanol domestic supply in excess of demand for the last few years
• Market estimated at Rs. 435 crs. (US $ 100 mn.)

• 98 - 99 production 380,000 tonnes. Expected to reach 395,000 tonnes
• Majority of units located in Maharashtra
• Potential for large manufacturers
• Imports account for nearly 15%

MarketSize - 435 crs. (US $ 100 mn.)

Used in manufacture of formaldehyde, acetic acid & dimethyl terephthalate Used in dyestuff, fertiliser industry as a feedstock for manufacture of synthetic proteins  Used as solvent for nitro cellulose, ethyl cellulose, Used as dehydration for natural gas

Major Players
 

GNFC, Bharuch RCF, Mumbai Rama Petrochemicals, Raigarh NFL, Rupnagar Deepak Fertilisers & Petrochemicals, Raigarh Century Enka, Pune IOCL, Chennai Bongaigon Refinery & Petrochemicals, Bongaigon India Polyfibres Ltd., Barabanki Ester Industries Ltd., Nainital

*Estimated

Overview

• A readily polymerisable gas
• Commercially offered as a 37 - 50% aqueous solution which may contain upto 15% methanol
• Obtained by oxidation of synthetic methanol or low boiling petroleum gases
• Formaldehyde is a versatile chemical intermediate

• Market - around Rs. 80 crs. (US $ 17 mn.)
• Imports negligible at 0.3%
• 98-99 Production : 161,400 tonnes. Expected to reach 170,000 tonnes
• Majority of units concentrated in Maharashtra & Gujarat.

Used in manufacture of urea, resin Used as a corrosion inhibitor in oil industry  Used in textile and fertiliser industry Used as a reducing agent in the recovery of gold & silver Also used as a preservative, disinfectant,     embalming fluid

• HOCL, Raigarh
• Nuchem Ltd., Faridabad
• Cibatul Ltd., Valsad
• Kanoria Chemical & Ind. Ltd., Bharuch
• Bakelite Hylam Ltd., Hyderabad
• Asian Paints, Hyderabad, Mumbai
• Others : Rock Hard Petrochemical Industries; Century Laminating Co.; Allied Resin & Chemicals

Overview

• Acetaldehyde is a building block - acetic acid is derived from it
• Reaction of methanol & carbon monoxide (with catalyst) is the most cost effective method of producing acetic acid
• Low entry barriers in terms of capital costs and steady rise in the industry usage have lead to      addition of capacities

Market estimated at Rs. 470 crs. (US $ 110 mn.)  An element of variability in the total    production exists as a plant can be used  for the manufacture of both acetic acid and acetic anhydride Market dominated by 11 major players Imports account for nearly  40%

Production      '000 tonnes

• Used in manufacture of acetic anhydride, cellulose, PTA
• Also used in textile, pharmaceutical, dye, insecticide industries
• Used as a photographic chemical and as a food additive

GNFC, Bharuch IOCL, Raigarh Somaiya Chemicals, Barabanki Polychem Ltd., Pune EID Parry , Chennai Cellulose Products of India, Bharuch Ashok Organics, Nandesari Others - Trident Alcochem,VAM Organics, Ashok Alcochem Pentokey Organis

Prices

• Inspite of duty cuts, imported acetic acid costs more than domestic supplies
• Large producers who have integrated forward are insulated from price variations

• A class of aromatic organic compound
• Phenol is primarily made by oxidation of cumene
• Several other benzene based processes also used
• Phenol prices low in international markets - $ 700 per tonne in Jan ‘98; currently $390 per tonne (Jan 2000)

• Market around Rs. 465 crs. (US $ 108 mn.)
• Import high at 39%. Imports went up from 15,000 tonnes in 97-98 to 31,000 tonnes in 98-99      primarily  because of sharp fall in international prices
• Production in 98-99 - 62,000 tonnes. Expected to reach 70,000 tonnes in 2000
• Domestic demand come down sharply.

Market size-465crs (US $ 108 mn.)

*Estimated
 

Usage  More than 50% of phenol is produced to make phenolic resins Rest used in the manufacture of   pharmaceuticals, cellulose acetate explosives, rubber chemicals

Major Players Herdillia Chemicals, Thane HOCL, Enrakulam Bengal Chemicals & Pharmaceuticals Calcutta

Overview

• Colourless volatile liquid
• Made by oxidation of cumene

• Market at Rs. 150 crs. (US $ 35 mn.)
• Imports around 25%
• Production : 98 - 99 - 45,000 tonnes. Expected to reach 52,000 tonnes by 2000
• Dominated by a few players

• Used in pharmaceuticals, pesticides, cellulose acetate, rubber chemicals, explosives and paint industries
• Used as a solvent for various chemicals like potassium iodide, potassium permanganate
• Used as a delusterant  for cellulose acetate fibre

HOCL, Ernakulam Herdillia Chemicals, Thane

Overview

• Acetic anhydride derived from acetaldehyde by process of oxidation
• Raw material mainly molasses. Prices of molasses being volatile, affect profitability of producers
• Manufacturers who do forward integration will be able to withstand the slow down in the sector

Market estimated at Rs. 90 crs. (US $ 20 mn.) Import not high - around 3% Production : 98 - 99 - 40,500 tonnes. Expected to reach 45,000 tonnes in 2000 Limited players in the market Demand has seen a steady rise but capacity    utilisation around 65 - 70% only Industry suffering from over capacity.  Consolidation in the industry likely

Used in the manufacture of drugs & pharmaceuticals Used in dye & pigment industry Used in production of cellulose acetate which is a downstream product in cigarette industry

Market Size - 90crs. (US $ 20mn.)

Major Players

• VAM Organics, Moradabad
• Ashok Organics, Nandesari
• Mysore Acetate & Chemicals, Mandya

Overview

• Nitrobenzene is the most important nitro aromatic and is highly toxic
• Manufactured using benzene, sulphuric acid and nitric acid

Industry fragmented. Over capacity in the industry Production 98 - 99 : 42,800 tonnes expected to reach 50,000 tonnes

Major players

• Hindustan Organics, Cochin
• Hindustan Nitro Product Gujarat Ltd., Baroda
• Sadhana Nitrochem, Bombay
• Simalin Chemical Industry - Baroda

Used mainly in the manufacture of Aniline Used as a solvent for cellulose ethers Also used to make dyes, chemicals, rubber chemicals, polyurethane and as an ingredient for metal polishes and shoe polishes

42,800 tonnes

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Aniline

Production    23,500 tonnes expected to reach    26,00 tonnes in 2000 Usage Used as rubber accelerator and anti-oxidants, as a photographic chemical Used in petrochemical, explosive, petroleum pesticide industries Used as an intermediary in the chemical sector Major players  HOCL, Raigarh Hindustan Organic Chemicals  Narmada Chematur Petrochemicals

*Estimated

Citric Acid
 

Industry Produced by mould fermentation of carbohydrates Production : 98 - 99 - 5,300 tonnes. Expected  to reach 6,000 tonnes in 2000  Usage  Used in preparation of citrates as a flavouring   extract  Used in confectionery & soft drink industries Used as sequestering agent, water conditioning agent, detergent builder Major players  Citurgia Biochemicals  Bharat Starch Industries  Citric India

*Estimated
Chloromethane
 

Industry  Produced by chlorination of methane  Production 98 - 99 - 33,200 tonnes  Expected to reach 35,000 tonnes in 2000 Usage Used as a catalyst carrier in low temperature  polymerisation Used as a refrigerant, low temperature solvent Used as a topical anaesthetic Major players Gujarat Alkalies & Chemicals Ltd., Vadodara SRF, Chennai and Madurai DCM Shriram Industries, Thane Chemplast Sanmar, Meerut

Production

Maleic Anhydride
 

Industry Produced by a fixed bed process involving oxidation of butane with a catalyst Production in 98 - 99 : 12,700 tonnes. Expected - 14,000 tonnes by 2000 Usage Used  in manufacture of polyester resin,      alkyl coating resin, fumaric and tartaric acid  Used as a preservative for oil and fats Used in pesticide industry Major players Thirumalai Chemicals Ltd., Ranipet Mysore Petro Chemicals, Mysore Ganesh Anhydride Niraj Petrochemicals Ltd., Hyderabad

Production      '000 tonnes

Isobutyl Alcohol
 

Production A by product of synthetic methanol      production Production : 98 - 99 - 1,300 tonnes.     Expected production 1,500 tonnes  Usage Used in paint and lacquer industry Used as an intermediary for amino coating resin Used as a substitute for n-butanol Used as a fruit flavour concentrate

Production

Pentaerythritol
 

Production  Production 98 - 99 : 13,900 tonnes;  Expected 14,000 tonnes in 2000 Usage Used in pharmaceutical, plastic, pesticide, paint industry, explosive industries Used as special varnishes Major players  Aegis Chem Industries Ltd., Mumbai  Allied Resins & Chemicals, Calcutta  Polyols India, Calcutta  Kanoria Chemicals, Ankleshwar

Production

Key Success Factors

• Usage of right technology
• Cost control essential - especially for plants based on old technology
• Feedstock sourcing and prices critical to ensure low cost of production
• Ability to restructure operations
• Focus on export markets

• Manufacturers using alcohol as feedstock instead of petrochemical - inconsistent availability of industrial alcohol
• Controlled regime of low molasses prices  allowed these companies to make huge profits;  but with decontrol, the prices of molasses have gone up affecting profitability of players
• Competition from  manufacturers using cheaper petrochemical route
• Industry suffering from over capacity currently.

Future Outlook

• Industry likely to focus on restructuring operations
• Companies likely to focus on reducing costs by changing technology
• Proposed investments - Rs.1340 crs. (US $ 311 mn) on 7 projects in the next few years

• Organic Chemicals, an intermediary product. Hence demand for these chemicals will depend on the growth of end user industry like PTA, Textile, Pharmaceuticals, Fertilisers, Oil etc.
• Supply - demand situation & international prices are likely to affect production and domestic prices