GANDHINAGAR, INDIA — For global resin industry giants, India may not play out the same way China has, with its hyper-fast industrial growth.
But India's still getting metric tons of interest these days from materials companies looking for the next emerging market hot-spot.
Belgium's Solvay SA, for example, notes that Indian cars are using just 25 to 30 percent of the high-performance nylon resins that vehicles in developed markets use.
As India's car market grows, that will mean both more vehicles to sell plastics into and more plastics-use per car. It's a formula for possibly big growth.
“You see that the potential is huge,” said Frank Laganier, Asia Pacific regional director for Solvay's Engineering Plastics business, in an early February interview at the Plastindia trade fair, the country's largest plastics show.
“More important than the number of vehicles, what we try to identify is the potential for the penetration of plastics,” he said. “That's why we focus on promoting metals to plastics, that's where we can really make a difference.”
Solvay is one of the few global resin companies with production in India.
It bought a polyetheretherketone resin plant in Gujarat from India's Gharda Chemicals Ltd. in 2006, and has been expanding there since, including a 25 percent increase in polyaryletherketone and PEEK capacity announced late last year.
Others, like styrenic block copolymer maker Kraton Performance Polymers Inc., are just getting started in India.
The Houston-based company opened its first office in India last year but President and CEO Kevin Fogarty said the long-term potential they see means he's traveled to India as much in the last two years as he has to the rest of Asia combined.
“The infrastructure numbers here are mind-boggling really,” he said. “You start doing some math and how much money is going to be invested and… what that means in terms of roads and what part of that space Kraton can participate in.”
For most of the global materials firms, including Kraton, India's not currently a huge market.
The country has 17 percent of the world's population but only a 4 to 7 percent share of the world's plastic markets, depending on which resin you consider, said Ajay Shah, sector head for polymers and crackers at India's largest plastics maker, Reliance Industries Ltd.
Reliance projects that India's plastics industry will grow 10 percent a year through 2022.
The Mumbai-based Plastindia Foundation projects plastics use in the country will double from a very low 10 kilograms a person to 20 kg. in five years. The U.S., by comparison, is 110 kg. per person.
Polymer manufacturing capacity will jump from 10.4 million metric tons in the 2013-14 fiscal year, ending March 31, 2014, to 17.2 million metric tons in FY 2017-18, it said.
Shah suggested long-term growth depends partly on how well economic reforms pushed by Prime Minister Narendra Modi are implemented.
“If the reforms sustain and progress in the way it's been happening the last few months, this new government could be the foundation for really strong growth as we go forward,” he said.
Fogarty said Kraton believes it will need to put a technical center in India in two to five years, and he said he expects the company to need local production after that.
The resin industry executives all said they recognized the challenges ahead of India, like poor infrastructure, high interest rates and regulations that make it hard for India's businesses to achieve scale and be more globally competitive.
China's boom was led by manufacturing for export, but India's growth will be different, led by the domestic market, said Roelof Westerbeek, the president of DSM Engineering Plastics, in a Plastindia interview.
“That boom I think will take a little bit of time for India to happen, the basic reason being that India is not an export-driven country,” he said. “We believe in the future of plastics in this country but it will certainly not have the same pace that China had.
“They were having some ups and downs in India over the past couple of years, it has not been brilliant in some industries,” Westerbeek said. “But that's basically what it is. If you take a long-term view, then I think the business fundamentals [in India], the drivers are very good.”
At heart, DSM's business in India is fueled by rising personal incomes, he said. The Heerlen, the Netherlands-based company has an engineering plastics compounding plant in Pune, India, but no resin production.
“The good thing about Pune is we have a big piece of land,” he said. “The market has been a little bit modest over the past couple of years, but it's our philosophy that we want to product locally for local, especially for compounds.”
One area driving long-term growth projections is India's auto market.
Right now it's about 3 million cars a year, and it's been flat at that level since 2010, with conservative projections to go to 5 million to 6 million by 2020. PIF, by contrast, argued in a report distributed at the Plastindia show that the market will be nearly 10 million vehicles by 2020.
“Whether that growth is 3 [million] to 10 million cars in that time frame, or 3 [million] to 6 million, from the standpoint of a business like Kraton, that's pretty attractive growth that we're not seeing anywhere else in the world,” he said.
China, by contrast, has gone from 3.9 million cars a year in 2005 to more than 19 million now.
China used its export boom to drive its economy, and now it's shifting to a more domestic driven economy. But since India's not starting out with an export boom, global materials companies are thinking differently about the market.
“We recognize at Kraton that if India's going to be a domestic-focused market, and the applications are adapted for specific India consumption, then we have to be adapted as well,” Fogarty said.
One thing is the same as in other emerging markets, he said: the opportunity to substitute plastics for other materials.
“It's pretty clear to me that Indian users are becoming more sophisticated in their own right and recognizing the value of technology,” he said. “Our business continues to do pretty well, and it's driven by substitution, just like Kraton growth around the world is driven by substitution, replacing something else.”