Market and product

India's polypropylene copolymer imports surged to about 40,000 mt in the first quarter of this year, up 27% from Q1 2015, led by strong demand from the country's thriving automotive sector, industry sources said last week.

And the pace of import is expected to remain robust over the next few years, as India's automobile industry gears towards lightweighting, amid continuous demand from component original equipment manufacturers, or OEMs, to meet fast-rising passenger vehicle sales.

India's PP copolymer import growth has been on a sharp uptrend over the last five years, doubling to more than 150,000 mt in 2015, in tandem with the growth seen in the automobile sector, industry sources said.

Of the Q1 imports, 85% came from Singapore, the UAE, Thailand and South Korea, data from India's Ministry of Commerce and Industry showed.

India's passenger vehicle production rose 6% year on year to 3.4 million units in fiscal year 2016 (April 2015-March 2016), while sales rose 7% to 2.8 million units, and exports were up 5% to more than 650,000 units, according to the Society of Indian Automobile Manufacturers.

Industry sources expect passenger vehicle sales to continue rising at an annual rate of about 8% over the next two years.

PP is the dominant automotive copolymer, contributing a quarter to half of an automobile's polymer usage by weight. Polyurethane contributes about a fifth by weight, while polyamides, polyethylenes, acrylonitrile-butadiene-styrene and polycarbonates, roughly proportionally, make up the remainder, according to Nexant.

An average car globally uses 150 kg of polymers and composites in 2015, up from 120 kg in 2013, and each kilogram of polymer typically reduces the weight of a car by 2-3 kg, industry sources said.

While polymer usage per car in India is currently just half of the global average, the drive for lighter cars and better fuel efficiency -- dubbed lightweighting -- is also occurring in India, which will fuel future automotive polymer demand, an industry source said, citing mileage as the second-most important consumer preference after the price of the automobile.

"[Typical] buyers graduate from a two wheeler to a car, so operational [fuel] cost is very important," traders said.

New fuel efficiency standards such as the Bharat Stage VI emission standards that will be fully rolled out in 2020, will also drive lightweighting in the years ahead, as the industry races to meet environmental standards, he added.

PP COPOLYMER DEMAND RISES ON GROWTH IN AUTO COMPONENT MAKERS

Industry sources said India's automotive sector, including compounders and component OEMs have helped drive demand for PP copolymer.

Consumption from this sector represented more than a quarter of India's overall PP copolymer demand of 700,000 mt in 2015.

India's petrochemical producers have been taking notice and switching more of their plant capacities from PP homopolymer to copolymer production in recent years, sources said.

Plants which have converted some or all of their capacities to copolymers include Indian Oil Corporation's 700,000 mt/year Panipat plant, Haldia Petrochemical Limited's 320,000 mt/year plant, and Reliance Industries Limited's 420,000 mt/year plant at Hazira, sources said.

"[Reliance] has converted [its] Hazira [plant] to produce [PP] copolymers to serve [demand from the] automotive and white goods industry," industry sources said, with company sources confirming the plant is producing almost entirely copolymers this year.

Still, the rise in domestic production is unlikely to stem the need for PP copolymer imports, as OEM raw material specification remains a hurdle to the adoption of domestic copolymer for automotive use, industry sources said. "Auto [component] makers are often global OEMs -- using specific polymers from specific producers. Local polymer producers have not been as proactive working with OEMs yet, hence the need for increased [PP] copolymer imports," said a source, predicting that such imports will be necessary for years to come.

The typical OEM raw material approval process takes six months or more, a hurdle not all domestic producers are willing to actively pursue, the source said.

With the price of import PP copolymers declining over the last five years, there is no immediate incentive for end-users to switch away from imports, another source said.

The CFR South Asia PP copolymer price, which is predominantly India, was assessed at $1,110/mt on July 20, down 30% from July 20, 2011, S&P Global Platts data showed.

GROWTH OF ALUMINUM USAGE FACES HEADWINDS DESPITE LIGHTWEIGHTING

Another lightweighting route promoted by the Indian government is the use of aluminum in cars, which saw some success in India -- primarily for its use in engines -- but struggles to find wider adoption due to higher costs, industry sources said.

The average aluminium usage per car in India is only 50-80 kg in 2015, half that of the US, automotive component makers said.

Adoption of aluminum for lightweighting typically occurs in two stages, according to sources. The first stage replaces steel or cast iron engine parts, while the second stage replaces steel in the auto body itself -- for example in wheels, hoods and doors.

First stage aluminum lightweighting is well underway, replacing traditional grey cast iron in engines for two wheelers, small passenger and commercial vehicles, but has yet to penetrate the heavy commercial vehicle category, Crisil Research said.

The second stage has been hampered by aluminum lightweighting costs, sources said.

Industry experts estimate replacing traditional steel-intensive cars with aluminum costs upwards of $1,400 to $4,600 per unit, a significant amount in a price-sensitive market like India.

Despite the rapid growth in GDP in recent years, India's gross national income per capita in 2015 was only $1,590 -- about 20% that of China and less than 3% that of the US, according to the World Bank.

Industry sources believe affordability of aluminum in India will not be resolved in the immediate future, which will temper wider adoption for its domestic automobile industry.