Petrochemicals demand, which has been weak for over a year, is expected to improve from here, helped by global interest rates peaking out and low levels of inventories for both end-products and essential petrochemicals, brokerage firm Motilal Oswal said in a report.
Demand for petrochemicals was weak because of the Russia-Ukraine war, high interest rates which curbed discretionary spending, and an overall weak economic outlook, Motilal Oswal added in the report dated January 25.
The brokerage firm said that Gas Authority of India Limited (GAIL), Reliance Industries Limited (RIL), and Indian Oil Corporation Limited (IOCL) are well-positioned to benefit from the demand recovery.
A fluctuation of $100 per metric ton in polyethylene spread, measured against naphtha or gas prices, would result in a standalone EBITDA impact of two percent on GAIL, five percent on RIL, and two percent on IOCL, it said.
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Low capacity additions
Asian petrochemical companies are forecasting lower capacity additions for polyethylene, paraxylene, and benzene in FY25 and some time after FY25 too. These chemicals are used in the production of plastics, synthetic fibers, and various chemicals in everyday life.
On the contrary, polypropylene is expected to see the highest capacity addition in FY25, said the brokerage firm. The capacity will be at 6.2 million metric tonne against the incremental demand of only 2.7 million metric tonne. Also, the brokerage firm expects polypropylene fundamentals to start improving from FY26 with GAIL starting its 500 thousands per annum polypropylene plant.
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