INTERNATIONAL ECONOMICS

HS 3902: POLYMERS OF PROPYLENE

Section A Group 5

Abhay Sharma 1A

Aniruddh Srivastava 9A

Devansh Doshi 16A

Manasi Jain 23A

Sachin Gupta 38A

Vidooshi Joshi 55A

AgendaPolymers of Propylene

India’s Exports Trends

Export Markets

Import Markets

Global Markets

Important Markets for India

Export Strategies

Polymers of Propylene

Product390210 - Polypropylene, in

primary forms

390220 - Polyisobutylene, in primary forms

390230 - Propylene copolymers, in primary forms

390290 - Polymers of propylene or of other olefins, in primary

forms

Application

Packaging and labeling Textiles

Stationery Automotive Components

Loudspeakers Polymer Banknotes

Properties

Rugged Resistant to Chemical Solvents

Fatigue Resistant Mouldable

Flexible Lightweight

Production

Fractional Distillation

RILHPCL

IOC HPCLMajor Players

Industry Characteristics • High capital costs

• High energy costs

• Shortage of natural gas

• Lack of skilled manpower

• Low focus on end products exports

• Cyclical nature of business

6-8 years

India’s Exports Trends

India’s Export

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

500000

1000000

1500000

2000000

2500000

3000000

611289.203

1978376.494

Expo

rt Va

lue

in U

SD 1

000

CAGR: 14%

Most of the growth has been seen in the last three years

Source: WITS

Key Export Drivers: Domestic Production

OPAL and BPCL investing in new

capacity development

2011-12 2012-13P 2013-14P 2014-15P 2015-16P 2016-17P0

1000

2000

3000

4000

5000

3650 3945 4295 4340 4521 4596

Production Pattern in India in kilotonsProd

uctio

n

Source: CPMAIExisting players planning for capacity

expansion

Expected increase in production

Source: CPMAI

Key Export Drivers: End UsersExisting High Volume Users

Automobiles Packaging

Upcoming High Volume Markets

Construction Medical Devices

Electricals Transportation

Long term growth

Key Export Inhibitor: Crude Oil Prices

Key raw material exposed to price volatility Source: Macro Trends

Key Export Inhibitor: Price Wars

Gulf Countries always enjoyed a price advantage Proximity to raw material

Alleged Government Subsidy

Source: Aljazira Capital

India contemplating on hiking import duty

India’s Declining Advantage

2.681.4

RCA in 2003 RCA in 2012

Need to keep a check

India’s Cost

Import duty of 7.5% able to protect Indian producers

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

0.20.40.60.8

11.21.41.61.8

Cost (USD per kgm)

Export Import

Trade within HS 3902

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

-200,000.00-100,000.00

0.00100,000.00200,000.00300,000.00400,000.00500,000.00600,000.00700,000.00800,000.00

Net Trade in 1000 USD

Polypropylene Propylene copolymersOther Polyisobutylene

Net exporter of ONLY polypropylene

Export Markets

India’s Export Trends: Top Markets

China

Turkey

Indon

esia

Vietna

mIta

lyBraz

il

Pakist

anNep

alIsr

ael

Portug

al0

50000100000150000200000250000300000350000400000450000

Top Export Market 2012

China has a major share in exports

India’s Export Trends: Top Growing Markets

Brazil

Nepal

Ukraine

Seneg

al

Korea,

Rep.

Ethiop

ia

Nigeria

Ghana

Cote d'

Ivoire

Portug

al0.00%

20.00%40.00%60.00%80.00%

100.00%120.00%140.00%160.00%

136.34%

100.34%83.02%

66.64% 65.07% 58.64% 55.42% 51.70% 49.39% 49.23%

Top Export Markets by Growth

Africa critical for growth in exports

India’s Export Trends: New Markets

Exports only in last three years

India’s Export Trends: Declining MarketsTop 40 percentile markets having negative CAGR

India’s Export Trends: High Trade MarketTop 20 countries based on TII in 2012

India is concentrating on Africa

Import Markets

India’s Import Trends: Top Markets

Saudi

Arabia

Korea,

Rep.

Singap

ore

United

Arab

Emira

tes

Thaila

nd

United

Stat

esChin

a

Kuwait

Japa

n

Netherl

ands

0

200000

400000

600000

800000

Top Importers 2012

In U

SD

India’s Import Trends: Top Growing Markets

Sri Lan

ka

Iran,

Islam

ic Rep

.

Kuwait

OmanIsr

ael

Poland

Sweden

Philipp

ines

Indon

esia

United

Arab

Emira

tes

137.91%112.06% 108.06% 103.82% 91.07% 83.99% 82.73% 77.50%

58.38% 56.04%

Top Growing Importers

India’s Import Trends: Top Growing Markets

Rise in imports from OPEC countries

Global Markets

Quick Numbers• Production capacity: 288 million tons• Capacity utilization: 90%• Expected CAGR till 2016: 4%

Source: Plastics Europe

Top World Exporters

Saudi Arabia’s rise is notable

Saudi Arabia11%

Belgium10%

Korea, Rep.9%

United

States

8%Euro-pean Union

7%

Germany7%

Sin-gapor

e7%

RoW40%

World Top Exporters in 2012

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

1000000

2000000

3000000

4000000

5000000

6000000

Top Exporters

Saudi Arabia Belgium Korea, Rep.United States European Union GermanySingapore

Market Dynamics

Top Exporters have comparative advantage

Korea, Rep. Singapore Belgium Saudi Arabia0.00

1.00

2.00

3.00

4.00

5.00

6.00

3.17 3.19

4.37

5.72

RCA in 2012

Market Dynamics: Price Competitors• Gulf States want to become suppliers of end product• PP manufacturing capacities will more than double within the next five years.

• Domestic demand within the Gulf states continues to remain low

• Proximity to crude oil is an advantage • Competing in global markets with price

Market Dynamics: Developed World

Germany France USA0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1

1.41

1

RCA in 2012

Their comparative advantage is less

Market Dynamics: Innovation Competitors • North America and Western Europe will see a demise of PP manufacturing plants

• Market prices are higher as compared with China or Saudi Arabia

• Innovation in products becoming core competency

Top World Importers

China21%

Germany7%

Turkey7%

Italy6%

European Union5%Belgium

4%France

4%

Mex-ico4%

Others49%

World Top Importers in 2012

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

Top Importers

China Germany TurkeyItaly European Union BelgiumFrance Mexico

Fragmented market led by developing economies

Important Markets for India

Top Markets based on Growth

Top markets: Growth in imports> India’s export growth

Key Focus Markets

Peru Pakistan

India’s Export share in World Top Importers: Trade Intensity Index

Indication of lack of competitiveness

ChinaGermany

TurkeyItaly

BelgiumFrance

Mexico

0

50

100

150

200

250

300

244.73

0.84

269.28

78.65

4.59

0 0.15

Key Focus Markets

Peru Pakistan France

Germany Mexico

Relative Comparative Advantage

Peru Pakistan Germany France Mexico Belgium China Turkey0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0.07 0.01

1

1.41

0.14

4.37

0.07 0.11

RCA in 2012

Indication of lack of competitiveness

Key Focus Markets

Peru Pakistan France China

Turkey Germany Mexico

India has trade investment agreement with EUDuty reduced to 3% compared with 6% for MFN

Countries with zero RCA

Africa is the key

Export Strategies

Market Diversification Strategy

2008 2009 2010 2011 20120

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

0.0755

0.152

0.11670.1256

0.1795

HH Market Concentration Index

Increasing market concentration: keep a check

Analysing Market Share and Price

13.4

10.4

9.3

8.3

7.574.2

3.82.6

2.5

2.32.3

26.4

Saudi Arabia BelgiumKorea, Republic of United States of AmericaGermany SingaporeFrance NetherlandsThailand Hong Kong, ChinaTaipei, Chinese IndiaRest of World

Saudi

Arabia

Belgium

Korea,

Repub

lic of

United

Stat

es of

Ameri

ca

German

y

Singap

ore

France

Netherl

ands

Thaila

nd

Hong K

ong,

China

Taipei,

Chin

ese

India

0

500

1000

1500

2000

2500

Unit Price in USD per ton

Low share in world exports though price competitive India needs to expand production

Export Strategies

Expand Production

Develop innovative products

Compete with Gulf countries

Compete with North American and European

Countries

Expand Production

Subsidy on Capital Investments • Discount on purchase of machinery • Overcomes high capital costs

Trade Agreements• Seek FTA/PTA with the top countries

Developing Innovative ProductsPromote Joint Ventures

• Facilitates technology transfer

Incentivising Portfolio Diversification

• Capital subsidy given for expanding product portfolio