India seeks other sources of supply to replace China's petrochemical imports

According to reports, Indian petrochemical importers are seeking other sources of supply outside of China, because the Indian government-led action aims to reduce their heavy reliance on imports from China.

However, boycotting China's imports will adversely affect the Indian automotive and pharmaceutical industries that rely on imported materials. Industry analysts said that the boycott of Chinese products will have little impact on China because India is not the main market for their products. She said: "India is not a major buyer of Chinese products, but China is one of India's most important sources of supply."

In the first 11 months of India's current fiscal year ending March 2020, China was its largest source of imports, accounting for 14.3%. In terms of acetic acid products, China accounted for about 38% of India's total imports in 2019. In February 2020, the monthly acetic acid imports from China have been reduced to 102 tons, and most of the imports are imported from Malaysia. Data show that in 2019, India's imports of methylene chloride from China accounted for more than 60% of total imports, but this has fallen to about 40% in the first two months of this year. The proportion of maleic anhydride (MA) imports has also fallen from approximately 33% in 2019 to 29% in the first two months of 2020.

Some industry associations in India are lobbying to oppose the recent actions taken by the customs authorities to conduct a comprehensive physical inspection of all goods from China, because this has caused serious delays in the release of goods. According to industry insiders, Indian Customs has eased its attitude after implementing physical inspections for about 10 days since June 22. Because after the border conflict, the Indian government is working to get rid of its dependence on China's massive petrochemical imports. India is also conducting anti-dumping investigations on more than 100 products imported from China.

After the recent delays in customs clearance at Indian ports, Chinese suppliers of acetic acid and vinyl acetate monomer (VAM) have also become cautious about supplies from India. China accounts for approximately 21% of India’s total VAM imports of 147,767 tons, followed by Singapore and Saudi Arabia. And India's recent demand has rebounded, making some VAM-based adhesive manufacturers continue to increase production. The load rate of these factories is expected to gradually increase from 30%-50% in June to 30%-55% in July, while the operating load rate of other downstream manufacturers will be 50%-70%. Some market participants said that the detention of goods at the port should be temporary.

The improvement in buying interest from India has helped to keep the pricing sentiment of maleic anhydride (MA) in the region stable, and to a certain extent made up for the slower-than-expected recovery of demand in Southeast Asia. The price of Asian-origin maleic anhydride (MA) goods shipped to Southeast Asia or India in July/August is usually around US$800/ton. Market participants said that some Chinese-origin maleic anhydride (MA) goods may cost 50-60 US dollars/ton lower than other Asian-origin goods, but Indian buyers do not buy it. Despite the price difference, Indian buyers are turning their attention to goods of origin outside China because they are worried that if there are any unforeseen changes in the development of the bilateral relationship, the shipment or delivery of the ordered goods may be unduly interrupted or delayed. A trader said that due to the border situation, some Indian dichloromethane importers generally have the same reluctance, even though there is no formal restriction on Chinese imports.

In India, dichloromethane of Chinese origin is currently levied on high anti-dumping duties of more than US$100/ton, while goods of origin in South Korea and Taiwan Province are exempt. At the same time, the decline in Indian import demand hit Chinese producers in late June as the increase in domestic market supply put downward pressure on prices. Official data released on Thursday showed that from April to June 2020, India’s overall merchandise imports fell 52.4% year-on-year to US$60.4 billion, while exports (including re-exports) fell 36.7% to US$51.3 billion during the same period. According to data from the Indian Ministry of Commerce, in June alone, India’s imports fell by 47.6% year-on-year, while exports fell by 12.4%, leading to India’s first trade surplus in 18 years, reaching US$790 million. These data also reflect the impact of the extended blockade caused by the new crown epidemic in India.