The consensus of visitors and exhibitors to PU Tech India 2017 is that the Indian polyurethane industry is growing quickly and sustainably. What lies behind this?
Despite India’s large population, the country’s polyurethane market is not big in world terms. It consumes about 570 kT/year of polyol and isocyanate in total each year, but it is growing quickly and is predicted to double in size every four years for the next decade.
Demand for polyurethane typically grows at a multiple of GDP in any country, but when you add in an increasing national wealth and simplified internal tariffs, then there is the potential for real and accelerating growth in India over the next decade, according to delegates at PU Tech India 2017.
Speaking at the opening ceremony, R.C. Bhargava, chairman of Maruti Suzuki, a joint venture between Indian company Maruti and Suzuki of Japan, said, “India is a country where consumption of materials is very, very low. The potential for growth is enormous. There is an opportunity that should not be missed.”
Bhargava, whose joint venture is larger than Suzuki’s directly owned businesses added that the key to polyurethane success is to give consumers more value. “Customers are looking for the best technology and performance,” he claimed. “They are not that interested in brands. Value for money is what drives the bulk of Indian business.”
He added that, for the polyurethane business, the higher the value given, the higher the rate of growth is likely to be. He also believes there is plenty of room for growth in the Indian economy. “India today has 18 cars/1,000 population, China has 85/1,000 population, Thailand 184/1,000 population, Malaysia 369/1,000 population,” he said. “We need high performance, light-weighting materials for cars, because they need to be fuel efficient and have low CO2 emissions. And polyurethane is one most important materials to help us achieve that.”
Virtual centre
Indian consumption of polyurethane is growing quickly, according to Mukesh Bhuta, chairman of the Indian Polyurethane Association (IPUA). “We expect consumption of PU to reach 570 kT/year this year,” he said. “This is used in five segments: flexible foams, slab stock and moulded foam the automotive sector; shoes and footwear; domestic and commercial refrigeration; and building applications.”
, vice president for Europe, Africa, India and the Middle East at
Huntsman Polyurethanes, agreed. Delivering the welcoming speech to delegates at the meeting he explained that, over the past five years, India’s polyurethane growth has surpassed China, and almost doubled. “The global economy may be sitting at a flat 3% GDP growth in constant monetary terms,” he explained, “but the polyurethane industry is having a fantastic time, with growth in double digits and a multiple of GDP. There’s a lot to be optimistic about.”
Bhuta agreed. “There are still many market areas where polyurethane has yet to penetrate in India,” he said. “IPUA has been promoting the material in a number of ways: for building insulation, and spray foam applications as well as for sleep products.”
IPUA has now launched a technical centre for its members, and Bhuta described this as “a big step forward” and a “unique model”. Industry can access training, industrial research, digital information, testing, safety audits and standards. “Many experts have been identified with experience in a number of fields,” he added. “This is a virtual technical centre, and in a few years we hope to make it a physical reality.”
Demographics drive growth
The technical centre is designed to help IPUA members grasp the opportunities offered by the country. India’s changing demographics and increasing wealth will help to speed this growth; it is expected to have a population of approximately 1.7 bn by 2050. “[This] will further propel the consumption of our materials along with growing wealth,” said Huntsman’s Hansen. “Income is expected to triple from approximately $900/year/person in 2002 to $2800/year/person in 2015.”
He added that, in aggregate terms, India is now the 10th richest nation in the world. “That will propel opportunity, with growing consumer buying power from cars, to shoes, to refrigerators and growing demand for fresh food,” he said.
Hansen believes -- and, it emerged at the event, that most of the interviewees agreed -- that India will see a average 15%/year compound growth in the polyurethane market over the next five years. “It will propel the industry past 1.2 MT/year demand by the end of 2019,” he said.
“By that time we estimate that footwear will grow by 20%, cold store insulation by 15%, refrigeration and appliances by 14%, adhesives and elastomers by 13%, and automotive by 11%. This is going to create a sizeable industry and probably PU will be one of the fastest-growing materials in this country.”
Hansen estimated that the Indian polyurethane sector currently employs 200,000 people, directly and indirectly. “That number will vastly increase in the coming years,” he said. “We expect India rapidly to become the second-largest polyurethane market in the Asia-Pacific region. We expect to see a doubling of the industry every four years for the coming decade. If you signed up for opportunity, if you signed up for growth you’ve come to the right place.”
Addressing opportunity
Multinational companies are addressing that opportunity in a number of ways. Wen Ping is general manager of the International Business Department of Wanhua, which serves the Indian market through a local company based in Mumbai.
“For us, the significance of the market is strategic, not in volume terms,” he said. “We take the long-term view. We are here for tomorrow. Estimating roughly, the Indian market is like China was several years ago. The country is on the tipping point, but there could be fast growth as fast as China did at that time.”
Wanhua operates in India with a team of people that focuses on trading and sales, with technical help and assistance, he added. “Systems for the Indian market are developed in China, Beijing and Yantai with visits to India to assess and meet local requirements.” The company has two or three sites in India to handle distribution.
China’s Jiahua has not had business in India in the past, according to vice president Yubo Li “India is good,” he said. “We have seen good development in the Indian polyurethane market in the past six years. It’s like China 15 years ago.”
The market is focused on flexible foams, he said, but the market for rigid foam is now developing, with a lot of small and medium producers. “We see a lot of developments in rigid for panels, and refrigerators, and also case applications for elastomers are increasing,” he said. “For flexible, there are some new developments in traditional slab stock and memory foam. We think this a good time to visit this market.”
Li added that, while Jiahua would be happy to deal with large customers directly, it would prefer to use distributors for smaller volume sectors such as case and elastomers. This is because small and medium-sized companies do not have import licences, as is the case in China, and it is hard for them to buy directly. “Logistics is key,” he believes.
Ananth Muthupandian, commercial director at Dow Polyurethanes said his company develops systems at its Mumbai systems house, and then produces the formulations at five other plants around the country.
“We have a network of warehouses to support our customers,” he said. “And we have offices where some of our commercial and technical people operate. Many of our customers maintain one or two days of inventory.”
John Penrice, commercial director for PU EMEAI at Dow Chemical added, “It’s a hub-and-spoke model. The key is fast service. His colleague Sudhir Shenoy, country head for polyurethanes in India, added, “95% of orders are shipped from our systems house on the same day as they are received.” As Penrice suggested, “That’s better than Amazon in India.”
Yogendra Chauhan, head of commercial operations for the polyurethanes business unit at Covestro India, said his company has a systems house, application development centres, sales, and marketing as well as distribution. “Although we don’t have raw material manufacturing in India, we have world-scale plants in China and a systems business in Greater Noida,” he said.
Like the other majors, Covestro has its own warehouses, does not have a tank farm, so materials are delivered in drums or ISO tanks. “Formulated systems are dealt with on a hub-and-spoke basis from the greater Noida location,” Chauhan explained. “This is carried out through a distribution network based around local warehousing. The industry is stressing on supply area liability and ‘just-in-time delivery’ is becoming more important in India.”
He added that the company has a fully-functional technical development centre staffed with qualified and experienced engineers and chemists. Global R&D is carried out in Shanghai, Leverkusen and Pittsburgh.
BASF is one of the companies with the most steel in the ground, confirmed Sylvain Huguenard, vice president functional materials and crop protection. “The polyurethanes business is one of BASF’s core businesses in India and is based in Mumbai and Bangalore,” he said. “There’s also a small plant in Chennai.” In total, BASF employs about 2360 people in in India, across all business lines, Huguenard said.
In 2014 BASF started an MDI splitter in Dahej, Gujarat. This was a $150m investment in the country and is complemented by polyether and ester polyol production and a systems house, Huguenard added.
Organising the business
According to Huntsman’s Hansen, all the company’s divisions in India were pulled together, creating a purpose-built headquarters in Mumbai, with two floors of modern development labs. Textiles, PU, performance products and advanced materials divisions are all based there in India.
Harshad Naik, managing director for Huntsman India, added, “This building has capacity for 600 people. The quick customer response is carried out in Mumbai; here we try to understand what the customer wants. And then it goes to Chakan for a deep dive into the product, tests and development. That is where we carry out products in relation, on equipment which matches the customers’.”
“We are committing a lot of effort on the demand side,” Hansen said. Huntsman’s goal is to produce “fit for purpose products made in India by Indian people, as much as possible with Indian raw materials for Indian customers”.
Traditionally, many systems sold in India were originally developed for different markets. Footwear systems, for example, one interviewee suggested, were probably developed for European markets.
Naik added that Huntsman has a systems house in Chakan near near Pune. “It was set up in 2012 as a greenfield project, with 35 kT/year nameplate capacity with room for growth,” he said.
A state-of-the-art technical centre is co-located there. “We need to have our technical experts work closely with customer projects, and also be close to the manufacturing plant so they could share learning between the two sides of the business,” Naik said.
Look up market
“We have got to educate the market to go for a bit more durability and quality. I think India can jump a couple of steps that maybe China went through,” Hansen added, looking towards key market segments.
According to figures from IPUA, footwear is the largest consumer of polyurethane in India, ahead of automotive and the comfort sector.
The annual demand for polyurethanes from the footwear industry in India is about 120 kT/year or 21% of demand, according to estimates from Covestro’s Chauhan “Polyurethane is a favourable material for shoes in India because of the country’s tropical climatic conditions,” he said. “Religious beliefs can make it difficult for people to wear leather shoes.”
While a lot of volume goes into footwear, Dow’s Shenoy explained it is not a market based around price and durability. “The footwear market in India is not targeted at the fashion industry, it is the bottom of the pyramid,” he said. “It is not athletic, it is not fashion – it is shoes.”
Dow’s Penrice said that, compared to other world markets, India is under-weighted in energy efficiency in a big way, and the same is true for domestic appliances. “There is very little building insulation in the cold chain,” he said. “There’s a lot of opportunity in India. It is relatively overweight in footwear. Polyurethane footwear is well established.”
Wanhua’s Wen Ping added that his company is supplying both components and raw materials that are standardised around the world, as well as solutions. “We do see some special demands in India, and we have developed polyether polyol shoe soles for local Indian manufacturers,” he said.
Choose and adapt
Huntsman’s Naik says they take technology from around the world, and make it very specific for the Indian environment. “For example, in footwear we promote polyether systems,” he said. “This is because most of India is hot and humid, and hydrolysis has a major effect on the product. We have worked with interested companies to develop a product which is unparalleled in the industry. Automotive is another market, in the CASE market is another market.
Dow’s Muthupandian believes there is a lot of value left to add in the footwear market. “India looks at value for money, and you have to show that,” he said.
The combination of large climatic differences across the country, and the way that humidity and ambient temperature can affect polyurethane processing, can lead to a very complex product slate for systems houses and product developers.
“Tailor-making products, even down to where the customer lives, is a unique feature of the Indian market,” Hansen said.
“A footwear system we sell in Chennai will not work in northern India. Even if customers are national, then the formulations will vary from location to location. A large company making flip-flops, for example, will have manufacturing plants spread across the country. Suppliers have to work closely to tailor formulations so that they are suitable for each region that their customers operate in.
The sector is highly labour intensive and flexible, which also makes it difficult for customers to achieve economies of scale. But that doesn’t stop the PU industry from trying. As Dow’s Muthupandian said, “The product may look inexpensive, but the value could be in using technology to make the product much more affordable. That’s the challenge in India.”
Driving forward
The automotive sector in India is growing strongly, and because India is a significant importer of oil, there is a big drive towards automotive fuel efficiency. Couple that with a growing middle class that wants higher quality, more comfortable cars, and the growth of polyurethane in the sector looks strong.
India is a significant producer of two-wheelers and the automotive sector is dominated by entry-level vehicles, for example those produced by Maruti Suzuki. These are economic vehicles made in large volumes.
Huguenard added that self-skinning foam for two wheelers is an important sector, and the automotive seat making industry has low levels of automation. “There is interest in light honeycomb PU and flexible foam in our market areas,” he said.
According to Dow’s Shenoy, light-weighting is more important with exterior components than seats. “Seats are associated with safety in cars in India,” he said. Seat belts are only fitted to the front of cars, and airbags will become mandatory later in 2017.
Dow’s Muthupandian believes that India is starting to see the kind of air quality problems associated with other developing countries such as China. “Fuel efficiency is the most important criterion,” he said, “but the consumer’s first question is ‘how many kilometres to the litre do I get?’ even if they are buying a Ferrari.”
Their colleague Penrice agreed. “Automotive light-weighting is going to come because of fuel efficiency,” he said.
Covestro’s Chauhan, meanwhile, believes the market will develop towards greater comfort and efficiency. “Non-seating applications such as headliners, side panels and sound barriers are driving growth,” he said. “This is especially true for entry-level and mid-size cars, as automakers make their vehicles more attractive to woo potential buyers.”
He added that customers are shifting their orientation to aesthetics, along with superior performance. “The automotive industry is looking for integration and differentiation to address this demand,” he said.
This is where composites can play an important role. Polyurethane is an enabler for designers ,and helps to offer choices to consumers in terms of colours, textures, and design, touch and feel.
Most automotive parts and materials qualifications are carried out globally as well as locally, as major OEMs have established themselves with huge production facilities, and also R&D and quality assurance that meets global standards as well as local regulations.
Down on the farm
Harneet Kochar is joint managing director at Pfeda, which serves a diverse group of companies outside the mainstream automotive sector. “We make handles for Daimler Trucks in India, and Volvo-EICHER Trucks in India,” he said. “Every JCB has a steering wheel made by us for the past 10 years. There is a niche. The people who work for car manufacturers are not interested in small volumes of tractors.”
He says that business has been growing at approximately 12% this year. “The tractor business in India is growing at an amazing rate, faster than cars,” he said. “It is maybe 15-20%, with cars around 10%. We got into that sector at a very good time. We are making around 20,000 steering wheels/month for tractors.
The market for Pfeda’s steering wheel products in the tractor sector is “growing crazily” Kochar claimed. “We introduced polyurethane into the Indian tractor market for the first time four years ago,” he said. “People were using polypropylene, and we now supply three or four main tractor producers. There is a comfort and aesthetic factor. Polyurethane looks good, it is tactile, and you get a better grip. Polypropylene steering wheels looked scrawny and thin.”
Just as the Indian car-buyer is demanding greater levels of comfort, so is the tractor sector, he added. “There is a growing demand in India for tractors with a cabin,” he explained. “The idea was to buy the cheapest machine available, but now they can spend more, buyers are looking at air-conditioning. There’s one cabin being developed with floor mats, side panels, bottle holder and a cell phone charger, and above the driver there are controls for the stereo.”
He believes they have created a polyurethane market out of nothing in the tractor industry. “Side covers, grab handles and about hundred different types of NVH foam are supplied by Pfeda for tractors,” he said. However, the company is not in the public bus sector. “The tender concept is for each year at a fixed price and with isocyanate prices the way they are, it is not an easy business to be in,” Kochar said.
Localise production
Rohit Rohan is managing director of Bharat Seats, which has a joint venture with Maruti Suzuki to make automotive seats. The company turns over more than $68m, and was floated on the Bombay Stock Exchange about nine years ago. “The offer was oversubscribed eight or nine times,” he said.
“The flotation really helped to drive the industry in India,” Rohan explained. “Now, after nine years, there are many younger firms.” He estimated that there were perhaps 50-60 such companies at flotation, but now 140 are dedicated to seating systems. “Their motivation was how to make profit, from quality, technical components,” he said. “This is the second generation. We gave them the opportunity.”
Rohan’s aim is to help local production where possible. Having given the opportunity to smaller supplier, now the seats are 75% Indian. “Machines and customers are making an impact on all kinds of features in the industry,” he said. “We were the first to help the second generation, who now supply to other competitors.”
This is driven by economics, as Maruti’s Bhargava said his firm was losing $1 bn a year because the yen appreciated about seven years ago. “We started motivating suppliers to localise production,” he said.
Previously, Maruti was importing about 4.5% of its parts but its vendors imported up to 26% of their components. “Now that number is down to 14 to 15%,” he said. “It has meant that our margins and profitability has improved substantially.”
Utility, for now
Like the footwear sector, though, the automotive sector in India is more about utility than luxury.
According to Huntsman’s Naik, German carmakers are making a small number of cars in India, but not all the components have been localised. “We are working closely with customers understand the benefits of MDI in India,” he said. “The large market for smaller cars, they still operate with blends for seating.”
His colleague Hansen added that Korean and Japanese OEMs are present in India, which make small, mid-size cars for the Indian market. “The Indian automotive seating market is mostly TDI/MDI blends,” he said. “It’s just a matter of time before the Asian market car makers move upmarket to MDI.”
The growth of the automotive industry in India is closely tied to the growth of suitable infrastructure, and this is on the way. “Prime Minister Modi announced a 4,000bn investment in infrastructure in India in highways, airports and trains,” according to Hansen. “We believe that PU has the durability to make that a good investment.”
Improved infrastructure, the growth of the urban middle class and with it the growth of supply chains of chilled and frozen food all offer opportunities for polyurethane. “We feel there will be growth of cold chain, in construction panels and spray foam,” said BASF’s Huguenard.
Dow’s Muthupandian added that the energy efficiency and insulation market is big as are industrial appliances, and energy efficiency is in a good state of growth, averaging around 15% over the past two years.
“Some customers are growing at 30 to 35% – that is huge growth,” Muthupandian said. “Some of it is going into cold storage because the government is focusing on food processing zones. India wastes a lot of food. It wastes what the UK consumes every year.”
Penrice added that Dow is heavily invested in the cold chain, with a big agrochemical business in polyurethanes and packaging materials to keep fruit and other food fresh for the retail market. “The only piece missing is the road infrastructure,” he said. “We see the cold chain growing as quickly as we can get the infrastructure.”
In the domestic appliance sector, Dow’s Shennoy said, India has adopted standards that force manufactures to upgrade performance to retain star rating every few years.
India is also in a good place to introduce best-in-class regulations for building insulation, Penrice argues. “We will try to get the right standards established early, rather having a standard upgrading every five years,” he claimed. “We can go with world-class standards now, and bring our experience of standards around the world. Emerging markets have the advantage of being able to stand back and choose the standards that fit them.”
Building trust and understanding
Erman Tan of Singapore’s Asia Polyurethane, said India “has grown tremendously” over the past few years, but the main difficulty many non-Indian companies encounter is how to add value, and how to increase it. “Customers want the “lowest possible prices,” he said, “but MDI and TDI price rises make all players in the PU value chain think about the value proposition.”
His company has been in the market since the 1980s, and has seen growth. “It is good to see so many Chinese companies here,” he said. “It will help bring a better understanding between India and China. China has recently moved toward higher value-added in terms of quality. It will be interesting to see how India will react. Will it help to expedite India’s move towards higher added value propositions or slow it?” he asked.
Meenakashi sitting pretty
Meenakashi Polymers makes seating components for buses, and also operates in the mattress market. Its ceo, Kunal Soni (pictured), finds the Indian market good for all business sectors. He believes that demand for the mattress sector should grow “five-fold” to 2026.
Meenakashi is seeing demand growing steadily for its products, which range from die-cast moulds and theatre seating to moped and two-wheeler seats, Soni said. The company operates Kruass Maffei equipment, with other machinery from India’s Polycraft
Supplying diverse markets
Vikas Garg, of Royal Industries said his firm supplies systems for rigid, integral skin, moulded foam. It is based in Northern India. The company operates with n a 300km radius from New Delhi, and produces around 4kT/year of systems. The company’s multi-product strategy has led to 15-20%/year growth over the past two years, Garg added. It uses polyols and isocyanates from a number of suppliers.
Increasing level of comfort
Praduman Patel, managing director of Prime Comfort, said his company is growing by about 35%/year. The a pan-India business operates Mulitflex machines from Hennecke, and loop peelers from Baumer.
The company was founded in 2009 and Patel claims it is now the third largest foamer in India. “We have made about 12 kT/year of foam at three locations near Greater Noida, Hyderabad and Ahmedabad, Gujarat,” he said.
Prime’s products are almost all TDI-based, with some MDI being used for memory foam. The company operates a multi-source supply strategy for diisocyanates and polyols. “We have unique products, including a rebounded memory foam,” he said. “It is something different. We have high airflow mattresses and a mattress containing reticulated foam.” Cool gel mattresses are also in the portfolio, which Patel claims to be unique in India. Mattresses that comply with the UK flammability standard BS5852 are also supplied to hotels.
