Polyurethanes are growing strongly in India and participants are enthusiastic about prospects
by Liz White, UT/ editor
India's polyurethane sector is expanding at 20 percent a year and above, with gross domestic product (GDP) growth at 8·9 percent.
Given such growth, it is not surprising that an optimistic, confident feeling came from the polyurethane processors and suppliers UTI spoke to during the PU TECH 2011 event, held in Greater Naida, near New Delhi,9·11 March.
Urethanes in India still have lot of growth to come. Globally, per capita use of polyurethane reaches 20 30 kg. In comparison, India's use per person is still only 250g per year, pointed out Rohit Relan, chair of the PU TECH 2011 organising committee and managing director of the Relan Group and Bharat Seats Ltd.
This level of use shows the 1'vast potential of the Indian population as consumers," Relan commented, in his opening speech at the show.
And growth in the PU sector is at least 18·22 percent, he emphasised.
India is seeing the "start of a new industrial revolution," said Steven English, global vice president of Dow Polyurethanes, adding that this advance "is going to be driven by products like PU. Why? Because it's versatile, and can be used in many ways," he emphasised, in a 10 March interview at the event.
Looking at India's GDP growth, "Anything less than 8 percent is now regarded as a slowdown, and the potential exists for 10·12 percent GDP growth," said Rahul Gautam, chairman of the organising group for PU TECH, the Indian Polyurethane Association (I.PUA), and managing director of India's largest flexible foam producer Sheela Foam Pvt Ltd.
At the inaugural meeting for PU TECH 2011, the Sheela executive listed the next steps needed to develop the sector.
Data from ACMA (the Automotive Component Manufacturers Association of India) show that car and commercial vehicle production in India reached 2.6 million in 2009/10, with exports of 1.5 million vehicles.
Motorcycle production is the largest volume at 8.5 million a year with over 2 million scooters and mopeds also made.
In his welcome speech, Ramachandran also noted the rise in use of rigid foam for refrigeration - with blowing agents now switched largely to pentane-based types.
Demand for PU is also see increased in the shoe sole sector, where there is now "far more automation," he added.
Altogether, the various outlets combine, Ramachandran said, to give a total PU use t in India of about 300 kt (see table p23).
In2010 the Indian PU business had a turnover of $1000million and employed about 200,000 people, 10,000 of them professionals.
Ramachandran also stressed that in technology, India wants the best: "We want to be up-to-date in technology and leapfrog to the latest technology, the best, the top solution."
The 'cold chain' by which food moves from production to the consumer is a specific focus, Relan said. This avenue - colloquially the "Far to Fork" route - needs improving, he noted.
Raising efficiency in food handling will reduce wastage, benefit both farmers and consumer. In food distribution and retail refrigeration, insulation use is low at present, so the potential here is large, Relan said (see more on is on p 27).
India also has scope to far more insulation in construction, where the potential is also enormous, and so cut energy use, said Relan.
IPUA invited architects, builders, regulators and specifiers to the exhibition to meet experts, and discuss what is going on in the cold chain, construction and the comfort sector.
Per capita income is still rising in India, Relan noted in a later interview, and its growing middle class has greater disposable income and the wish for a better standard of living.
And the country needs a lot of growth in the next 5 7 years to move rapidly to its aim of becoming a developed nation, he said.
In India revolution takes time
For his part. Gautam concluded that, "in a multiparty democracy like ours, there is always a need to explain, justify, convince and compromise. Revolution takes time."
But, he said, the next steps will get implemented sooner or later. And he emphasised that, "GDP growth of 10·12 percent will make unprecedented demands on resources such as land, energy, transport, water, sanitation and energy.
“The PU sector… will be called on to use its might in fulfilling the demands of its customers to take part in this growth," Gautam said.
India will gain a simplified and uniform tax structure, rapid and safer highways, uninterrupted and cleaner power, and educated workers, Gautam promised.
More money will be concentrated in the hands he consumer and this lead to more cash for h-level investment, said Gautam. All of this will lead to "a virtuous cycle we are actually at a tipping point," the IPUA airman concluded, "where a small action will bring about a big difference. No one can do it alone, but together we can all do something... Let's begin. The elephant is ready to fly!"
Growth and Infrastructure
One outcome of industrial growth in India could be a "nightmare of overcapacity," cautioned Dow's English, saying this is not for PU itself, but for products made with it.
"If India ends up developing an export mentality, which it doesn't really have at present, then where would those products be aimed?" English noted that. "There's only so much people can consume, and both the US and European markets are saturated, with China supplying Wal-Mart and all the US 'big-box' companies with lots of no-name brands."
India's internal demand is big enough for the country to be self-sufficient, to develop its infrastructure further and "become a modern industrial nation," English commented.
And there are now a lot of major companies in India “with their juices flowing", he added.
In terms of India’s industrial development NickWebster, Huntsman's polyurethanes director for Europe, the Middle East and India said, there is, "without doubt, a fundamental trend for economic growth and reform."
In the last three to four years, there are encouraging signs, in terms of reform and the ability to get things done, Webster added, in an interview on the opening day of PU TECH 2011.
In infrastructure, Webster is "delighted at how things have changed in terms of modern expressways, and his colleague Anand G, Huntsman's general manager for India, pointed out that the government aims for 5 percent of GDP to be spent on infrastructure. "This is edging in the last 2-3 years for 7-8 percent, or even 9 percent; he added.
As examples, Anand pointed to New Delhi's new airport, built within 36 months, and the New Delhi Metro, both aimed at helping India host last year's Commonwealth Games.
"While looking at sites for systems houses we have seen that customer facilities are developing also and some are comparable with best in the world," he commented.
Ramachandran feels that "Infrastructure development in India has improved by leaps and bounds," with good air and sea ports, an improved road network and telephone system.
"The only thing hasn't changed is the traffic," Ramachandran said, wryly.
Nevertheless, Springfeel director Sameer Malhotra said, infrastructure spending still "really needs to grow, because compared for example to China, India is 20-25 years behind."
And while Malhotra agreed that decision making is complex in India’s huge democracy, it shouldn't be debated for too long. If you need ports, you need them; if you need airports you need them."
"Definitely in the growth story of India, the next road block would be infrastructure. If you look at the per capita use of PU, it is low. That means there is so much scope for growth. But to grow, you need infrastructure to support it," Malhotra said.
"We are based in Chennai and often have to purchase raw materials locally despite having stock arrived at the port," he explained.
Government spending needs to be increased, and private investment needs to be encouraged, he added.
Generally, however, Ramachandran feels that, in India today, "Business is much more predictable. The car makers, the OEMs pay well, and promptly. Business confidence is good."
Footwear has 30% annual growth
"Footwear has caught up a lot over the last two yea rs, especially at the lower end of the business, so that we see 30 percent growth there year on year," said Dr Mahesh Gopalasamudram, director of Dow Formulated Systems in Thane, India.
"We see 40-50 machines being added each year, each of which can consume about 200 - 300 tonnes a year of polyurethane. So that's a good growth area for us," he added.
Gopalasamudram also said that, from a styling perspective, people are moving from PVC to PU, at the lowest end of the market, for shoes retailing at $5 a pair.
Moving into PU also allows automation, productivity increases and energy use drops, he said. "So PVC and EVA users find it very convenient," the Dow manager said.
Huntsman’s Anand agreed that PU is staring to replace conventional materials such as PVC and rubber, and said this is not just at the cheap, simple end of the market but "also in some fashion shoes."
Cold chain slow to move
India's cold chain development is slow: this is "something we seem to be getting wrong again and again," Gopalasamudram commented. "The domestic refrigeration market is growing, but the cold chain itself..."
IPUA is really working on this, he said noting "a lunch session today on this," during a 9 March interview at PU Tech 2011.
Measures in India's Food Security bill aim at preserving the quality of food during production and transport, he said.
Also India now has an energy efficiency bureau, which has been active over the last 5-6 years, initiating energy efficiency projects such as star rating for electrical products.
But Gopalasamudram noted that refrigerated trucks and refrigerated warehouses are few and far between in India. He said the IPUA is cooperating with the cold-chain association and the large food chain owners, because felt and rockwool insulation are still used in India. Huntsman's Anand agreed that currently, only a very small amount of PU insulation is used in trucks in India, and said work is going on here at a lot of levels, noting the IPUA's focus areas in the cold chain and construction
Anand noted that this is a profound cha for India: "Changing the way people grow f and sell 1t affects the whole way of life," he said.
Gopalasamudram made a similar point about cultural issues: In India, "People believe in fresh food, in the concept of going to a market to buy fresh food, rather than to the supermarket, that is what people do."
Anand said a lot is being done in funding for farm warehouses, regarded as vital in starting the food chain off well: "Food security for a country such as India is very important."
Government bodies are working here, with a lot of active participation in the cold chain in warehousing, transport and so on, Anand aid.
Webster also pointed out that, "Unlike in other areas where competing materials are strong, in the cold chain it really has to be PU...
The work is more about building the cold chain."
Huntsman is working with customers to stimulate the development of the cold chain across India, believing that a concerted effort of this type can really work, Webster indicated.
Discussing the value of the cold chain Dow's English said "Food preservation helps populations live longer. India has a very young population, and preserving food by whatever means, canning and refrigeration/freezing is a key to 1mprov1ng health and to longevity."
In this context, English also noted the gap in life expectancy between India and the UK for example: UN figures show India's average lifespan 1s 64, compared to 79.4 in the UK.
Telecoms shelters slowed
Up till 2008,telecoms shelters were big business 1n India, but this sector has shrunk recently, according to Amrit's Ambrish Bakhai.
_This is because over the last two years the major telecoms companies Vodufone and Airtel for example - have collaborated to use shelters jointly, under a single mobile phone mast, to save costs. Bakhai said.
At Huntsman, Webster agreed, saying, "Rigi insulation went through a boom a few years ago as the telecoms sector demanded shelters, and this has now slowed."
But the Indian market for pre-insulated pre engineered construction is growing, he added.
Mukesh Buhta, chairman of polyol supplier Expanded Polymer Systems, said rigid foam is used In India for domestic and commercial refrigeration while some goes into building panels.
The Indian government is starting to set energy norms and standards for building materials, said Buhta.
One concern, commented Buhta, is to "get standards in place to avoid fire issues such as have been seen in China."
Building codes are needed to stimulate use of insulation, and they need to be "harmonised ones across India," said Dow's Steven English.
Dow is pushing for this: Gopalasamudram said the IPUA is active here, but the challenge is that "some of these [codes] must be from the central government," English said.
Since energy efficiency is a top government priority, the IPUA is in a good position to promote insulation of buildings, and the government could take a lead by insulating its own buildings, English added.
Bakhai said current use of rigid foam insulation in construction in India is low, although shopping malls, housing and industrial construction die growing rapidly. The Amrit representative noted that there is little awareness across India of the value of insulation in saving energy for cooling/ heating buildings.
Huntsman, which has just announced a new systems house in India (see p 14), is also looking at the insulation market in India and working with customers and architects to introduce and develop the concept, said Anand. Use of foam insulation is at an embryonic stage in India and this is why Huntsman carries out what it calls "back selling," said Webster. This involves promoting the benefit of insulation to people at all stages along the value chain, and improving the awareness of the value of PU.
Huntsman puts resources not simply into selling chemicals, but promoting the value of the products made with them, Anand added.
Webster stressed, "We know in the polyurethanes sector that if you concentrate on a market and focus on growing it, you can help to build a market."
Strong growth in vehicle sector
In automotive seating, Huntsman's Anand said a traditional Indian factor is the huge presence of two- and three-wheelers. The message here for Huntsman is to promote the value of MDI based systems, said Webster. "Our mission here is to drive MDI use up," confirmed Anand.
He said the automotive sector has averaged 22 percent growth in the last few years, with the fundamental driver for this being the general rise in personal disposable income.
At flexible foamer Springfeel, director Sameer Malhotra said automotive is “definitely a growing market, one we are focusing on." Springfeel's base in Chennai gives the company an advantage, he said, because Hyundai is there as well as other automotive OEMs.
At Dow, the experts agreed that in some areas, India is now keen to leapfrog into the best technology, with some companies in automotive for example being willing to invest in, for example, systems for LFI composites.
English noted that in India "this is a very embryonic PU sector, and word of mouth is not enough to get the message across." But he added: "None of this is new: it's like China 15 years ago."
India is seeing the "start of a new industrial revolution, which is going to be driven by products like PU. Why? Because it's versatile, can be used in many ways," English stressed.
Will unified taxes make a difference?
Discussing the potential unified GST (goods and services tax), Ambrish Bakhai of Amrit Chem said currently "problems arise when you supply material from one state to another," as states impose a 2 percent import tax. This means companies prefer buying locally, he said.
With a uniform tax system, a company from Mumbai would be able to sell to Delhi easily, for example, a situation that is often avoided at present, he indicated.
India consists of 27 states, and without the interstate taxes, "businesses will prosper," said Jiten Desai, senior marketing manager, Gujarat Narmada Valley Fertilizers Co. Ltd.
Currently, states also demand road and entry permits for interstate movement and that will also go, Desai commented.
A unified GST should be in place by April 2012: the finance minister is keen to push this approach through. It is high time," Desaisaid.
Anand of Huntsman had a different view: "Really, the hassle is more about optimum location/logistics and supply chain aspects.... If you operate in India you understand the ways to deal with issues such as state tax."
Huntsman has been in India a long time: "If you have a network of warehouses across the country you can move product from one to another with no penalty," Anand added, noting that interstate taxes have been cut a lot over the last ten years, as a move towards GST
Not everyone is, however, convinced the tax simplification will take place. "The unified GST 15 a move the government has been debating for four years or more, but so far it has not happened," said Badrinath Sarangaparn, joint managing director of Ufoam. The states are led worried that they will lose income with a unified tax system, Sarangapani said.