Is the India’s Petrochemical Industry Set to Benefit from Supply Shortages Created by China’s Ongoing Environmental Protection Inspections?

Recently, China has initiated environmental protection inspections in five provinces including Jilin, Shandong, Hubei, Guangdong, Sichuan which are the major industrial hubs in China. This has resulted in refineries and petrochemical plants either reducing their operating rates or shutting down production. 

Several independent refineries in Shandong have reduced their operating rates by as much as 40% with two of the refineries having combined capacity of 4.2 million tonnes per year shutting down production as major petrochemicals come under high-polluting industries. 

Petrochemical industry is a booming industry in India which is growing due to strong domestic demand and export opportunities. The industry is particularly experiencing growth due to major global players looking to reduce their reliance on China as the Chinese supplies have remained constrained due to the COVID-19 pandemic restrictions. 

India also being a major player in global petrochemical market is set to benefit from the supply shortages created from the environmental protection inspections in the industrial hubs of China. Major global players will be looking for options when the petrochemical companies in China will be reducing their operating rates or shutting down operations. 

The India’s chemical industry stood at around $178 billion in 2020 and is expected to grow at a healthy CAGR of more than 7% in the upcoming years. Chemicals and petrochemicals accounted for around 14% of the total exports of India. 

As per ChemAnalyst, “the ongoing environmental protection inspections in China are set to benefit the exports from India while on the other hand the prices for petrochemicals are expected to experience upside pressure due to the expected supply crunch in the Asian Markets.”