Introduction

Until the 19th century, mankind used metals, stones, wood, glass, cotton, etc. to make lifeless possessions like vehicles, home, furniture and tools. Now, the plastics became a substitute for all these commodities, and now one see plastic being used in the manufacture of a wide range of many inanimate belongings.

Classification of Materials

Broadly materials are classified into - Metals and Non-metals. Metals can be basic metals or alloys. Some of the major basic metals include iron, copper, aluminum, nickel, gold, silver and tin. Alloys are homogeneous mixture or solid solution of two or more metals. For example, brass is an alloy of zinc and copper, while bronze is an alloy of copper and tin.

Non-metals category comprises materials such as ceramics, polymers, glasses and fluids. The word 'polymer' gets its origin from Greek word 'polumeros', meaning consisting of many parts. Polymers can be defined as any of manifold natural and synthetic blends of typically high molecular weight comprising of numerous repeated linked units, each of relatively light and simple molecule. Usually, plastics are organic high polymers, consisting of large chainlike molecules containing carbon. These are actually formed when the short-chain molecules of chemicals, monomers, (mono = single + mer = unit) are hooked together to form large chainlike molecules in the process of polymerization. If the resulting plastic is made of units of a single monomer, it's been called as a homopolymer (eg. polyethylene). When the resulting plastic is made of more than one monomer, then it becomes a copolymer. Polymers are categorized into -

Thermosetting Thermoplastics Elastomers

Thermoplastics are those types of polymers that become soft when heated and hardened when cooled. Thermosetting have property of becoming permanently hard and rigid when heated or cured. Thermoplastic scraps can be reused and reprocessed through repeated melting and solidification by heating and cooling. This is possible because they consist of long molecules that are not attached or cross-linked to each other. This is not the case with thermoset plastics as the constituent molecules are cross-linked. Thermoplastic polymers are usually supplied in the form of powders or pellets often known as granules/granulates. Thermosets are often sold in the liquid form or as a partially polymerized solid molding power. They are shaped into finished forms with or without pressure by using chemicals or heat when they're in their uncured state. Elastomers are those polymers that have elastic properties of natural rubber.

Manufacturers using different processes transform thermoplastics and thermosets into desirable articles.

Manufacturing Process of Plastics

The plastics manufacturing process starts with refined fractions of oil (naphtha) and or natural gas (ethane) that are "cracked" to manufacture monomers. The figure given in appendix 1 shows the sequential manufacturing process of plastics.

Uses of Plastics

The role of plastics multiplied with the rapid industrial development across the globe. It started playing a predominant role in building industries. The new ideas and innovations in this modern world made plastics one of the most sought after commodities. Automobile industry is one of the major users of plastics. A luxury car possesses around 500 different parts that are made out of plastics. It is also used for light fittings, upholstery and interior body design of a modern car. Plastics are known for lightweight, antirust and good insulation properties. Now-a-days, even glasses are polymeric. These polymeric glasses are highly popular because of their resilient character.

Another important market where plastic is highly demanded is furniture. Earlier, only plastic appeared in the form of decorative laminates, but now full furniture and upholstery are of plastic. Plastic foams replaced cotton, as they are preferred for their greater durability.

Usage of plastics has increased over years in water and air transport. Fibreglass boats are vogue because of their lightweight, appearance, lesser maintenance costs and their anticorrosive property. A product made of plastic give a consumer what he wants - Safety, performance and Value.

Plastics have almost substituted glassware and crockery. The plastic bottles are hit because of its shatter-resistance. You get maximum value from plastics for a minuscule price. They facilitate to make major appliances, such as refrigerators, washing machines, CTVs and computers, corrosion resistant, durable and more efficient. They turned out to be a key element in the modern packaging. They make packaging more efficient, which eventually protects resources. They are also widely used for vacuum packing.

The role of plastics spread across sectors including medical sciences, agriculture, fishing and horticulture. They are used as artificial body parts as replacements to heart valves, bones and teeth. They have their roots in textiles too. Synthetic fibres are in vogue and are used as substitutes to the natural fibres - cotton, wool and silk.

The following table shows some of the major uses of polymer products.

Indian Scenario

The per capita consumption of plastics in India is very low at about 4 kgs per year. The USA and China have an average consumption at 120 kgs and 17 kgs respectively. The world's average is at 25 kgs per year. The Indian consumption of plastics polymers stood at 4.2 million tonnes in 2003-04. The high incidence of excise duty and sales tax on plastics restricted the widespread use of plastics in drip irrigation, agriculture, etc. The consumption of plastics in agriculture is roughly 0.3 lakh tonnes against 20 million tonnes in China. It is estimated that about 3 million jobs are generated by the industry every year. There are about 20,000 plastics processing units (mainly small scale units) in India. The customs duty in India is higher at 20% as compared to China (7%) and ASEAN (8%). However, the customs duty may come down shortly, as the government is required to bring it down the peak customs duty to 10% by 2005 as per WTO norms. The turnover of the industry was around Rs.28, 000 crores, while the imports of polymers were about 410,000 tonnes in 2003-04. In the 2004 budget, the excise duties on polymers were raised to 16 percent from 8 percent. The chronology of manufacture of polymers in India:

The underlying graph depicts the per capita plastic consumption of different countries.

Production

Petrochemical industry primarily comprises of polymers, synthetic fibres, fibre intermediates, elastomers, surfactants, aromatics and olefins. The industry's production has grown at about 9.5% annually since 1999-2000. The Indian petrochemical industry made significant progress in terms of production as well as consumption. There is gradual decline in the import dependency with the growth in the production of petrochemical products over the years.

The following table shows the details of production and consumption of petrochemicals during the years 2001-02, 2002-03 and 2003-04.

Capacity and Production of Polymers (Actual & Anticipated)

Imports & Exports

From a net importer just some years ago, India has become a net exporter of capital-intensive goods. The country has emerged as a net exporter in several commodities like steel, copper, aluminum and plastics. For instance, the country made an exports surplus of Rs.462 crore in 2003 in plastics from net imports worth Rs.1538 crore seven years ago. The large capacity additions in the 1990s have changed India from a net importer to an export surplus country. The import dependency in the sector has come down to less than 6 percent in recent times from around 60 percent in 1990-91. But, a comparison between China and India reveals that India exports polymer resin, whereas China imports large quantities of polymers and exports a variety of value added plastics products. With flexible labor laws, uninterrupted power supply at competitive cost, lower interest rates and reduced port handling charges can make the country's exports more competitive.

Market Structure

Over the last few years, the Indian Petrochemicals industry has witnessed consolidation phase. The top four players - Reliance, IPCL, Haldia Petrochemicals (HPL) and GAIL - hold the majority of the polymer capacity in the domestic market. The IPCL forms a part of the Reliance group. The external dependence is reduced to a large extent, with the major players having integrated facilities. For instance, Reliance Industries makes use of its own Jamnagar refinery as a source for the petrochemicals production. Alternatively, GAIL uses natural gas for its petrochemicals production. The lean gas is transmitted to consumers such as power and fertilizer industry after the separation of hydrocarbons such as ethane, propane and butane from the rich natural gas.

The raw material costs form nearly 50-60% of the input costs in this industry. The naphtha is a pricey source of feedstock. The players in the petrochemical industry have very little bargaining power against the suppliers. They are all highly vulnerable to raw material prices, which are highly influenced by nternational demand and supply conditions.

Over the years, the government protected the domestic industry from overseas competition by imposing heavy import duties. However, of late, the government has been reducing the import duty steadily on polymers. At present, the duty is at 20%. The government is likely to cut down the duty further, as part of its commitment to various multilateral and bilateral trade agreements. This will likely to expose the domestic players to the international competition. The domestic industry may have to face global giants such as Exxon Mobil, Dow Chemicals and Shell in due course of time with the reduction and elimination of tariff and non-tariff barriers. The domestic industry may also witness immense competition within with the entry of IOC and ONGC into the business.

The following are some of the leading raw material manufacturers of India and abroad.

International Manufacturers

Exxon Mobil Honam Petrochemicals Hyndai Petrochemicals Samsung Shell Dow Chemicals

Price Volatality

The domestic polymer prices show high variation on a monthly basis. The instability in domestic prices is mainly derived from the wide variation in international prices and the imported raw material prices.

Historically, the government supported the domestic players by imposing heavy import duty on the import materials. However, the government has considerably brought down the customs duty in the last few years. At present the customs duty is at 20%, while the excise duty is at 16%. The government is likely to cut the existing duties further down in the coming years. With these cuts, the competition in this sector increases with the participation of international giants. The prices are likely to become more volatile as domestic prices closely follows international prices. With the liberalized government policy in place, more number of players is expected to enter, participate and grow in the polymer industry in the coming days, resulting in higher demand for right pricing based on indicative markets. There will be a whole lot of producers and buyers in the production and supply chain whose business is highly dependent on the right price discovery of the commodity.