Last month, Mitsui Chemicals & SKC Polyurethanes Co Ltd (MCNS) – a 50:50 joint venture of Japan’s Mitsui Chemicals Inc and South Korea’s SKC Co Ltd – announced its plan to invest $ 7.3 million (about Rs 49 crore) for setting up a polyurethane (PU) system house in Andhra Pradesh.

Take another example of Dow Polyurethanes (PU) business, a part of the US-based Dow Chemical, which plans to expand its manufacturing base in India with 50 percent increase in the production capacity of its PU system house at Ratnagiri in Maharashtra.

MCNS & Dow have joined a stream of multinational companies (MNCs) that have expanded their polyurethane business activities in India over the last couple of years. Driving the consumption of PU products in the country are factors such as growing demand for energy efficient products, need for light-weighting of auto parts, insulation in buildings, etc.

“We anticipate mid-term global demand for polyurethanes to increase by roughly four percent on average, thus once again outpace global economic growth. Underlying are global trends, such as climate change, the growth of cities and the growing middle class especially in the emerging economies such as India, where for example, energy-efficient and affordable housing is required. This will drive rising demand for highly efficient insulating materials like rigid polyurethane foam, the components of which we manufacture and are continuously improving,” says Dr Markus Steilemann, business unit head polycarbonates, member of executive committee and head of innovation at Covestro of Germany.

In June 2015, Covestro (then known as Bayer MaterialScience) expanded the production of thermoplastic polyurethanes (TPU) in Cuddalore (Tamil Nadu) to 6,000 metric tonnes from 2,500 metric tonnes to meet the growing demand for this product. Superior thermal and acoustic insulation properties of TPU are key factors driving the usage of this material in applications such as hose & tubing, automotive, wire & cables, and construction.

Focus on India
Polyols and isocyanides are two key raw materials required to manufacture PU. While there are three manufacturers of basic raw materials in the country, there are many system houses (owned by both Indian as well as MNCs), which are blending units that tailor the formulation according to customer’s needs.

The demand for polyurethane is expected to increase manifold in the country, which produces 4 million cars and 9 million refrigerators annually. With a population estimated at 1.3 billion people and GDP growth rate of 7 percent or above, India offers a huge potential to global polyurethane players.

“Polyurethanes is considered as an alternative to conventional material like PVC, wood, rubber etc and caters to various major industries like automotive, construction, footwear, appliances to name a few. Expanding middle class with increasing disposable incomes and rising urbanisation is driving growth in these markets leading to growing demand and opportunities for polyurethanes,” opines Sylvain Huguenard, vice president functional materials & crop protection, BASF South Asia.

With rising consumption of polyurethane in the country, BASF has been constantly striving to localise production to strengthen its capability and serve Indian consumers. The company has two production sites for polyurethanes in India at Thane (Maharashtra) and Dahej (Gujarat), which is an integrated hub for polyurethanes manufacturing that started in 2014.

“BASF plays a very important role in PU growth and has a strong presence in India in terms of local manufacturing capability as well as application development to support market needs. We are present in both flexible as well as rigid polyurethanes systems. Flexible polyurethanes system goes in areas like automotive seating, furniture cushion, footwear etc. whereas rigid polyurethane is widely used as an insulating material for refrigerators as well as cold storage facilities,” says Huguenard.

The polyurethane industry is one of the rapidly growing industries in India which has registered double-digit growth during the past five years and is expected to double every four years in the coming decade.

“India is on the cusp of transformation that is driven by the concerted push from the government to make it an innovative and energy efficient nation. Against this backdrop, we are convinced that the plastics industry, in general, and the polyurethanes business, in particular, has a bright future here – given that our materials provide the solutions to many of India’s challenges such as sanitation, food safety and energy efficiency. So India will remain an important pillar of our growth story as it proved to be in 2016, when the country was by far the fastest growing country in the Covestro universe,” states Dr Steilemann.

The major end-user industries for polyurethane are refrigerators, automotive, mattress & furniture, footwear and construction. The current demand for polyurethanes in India is estimated at 565,000 MT with a consistent year-on-year (YoY) growth rate of 10-12 percent. The industry is largely dependent on imports as the present domestic production (of 150,000 MT) is unable to meet the growing demand for this material.

“Though polyurethane globally is fifth largest polymer family due to its versatility, in India the production and consumption is relatively small compared to other Asian countries as production costs are higher. Besides, there is inverse rate of duty structure added with costly logistic and interest cost Indian produced raw material are more expensive. Where as in countries like China, Korea, Thailand, Singapore where scale of production is very high they are exporting to India in large quantities at lower price. This is a biggest challenge today that we are facing,” points out Mukesh Bhuta, chairman, Indian Polyurethane Association (IPUA), which had organised PU Tech 2017 event in Greater Noida from March 8-10, 2017.

IPUA wants the government to take steps to promote Indian industry and address the issue of inverted duty structure, which is putting additional pressure on domestic manufacturers.

“MNCs are finding ‘Sale in India’ more convenient profitable then ‘Make in India’ they are preferring to set up large scale raw material plants in nearby countries and then export to India. They are either setting up only bulk storage tanks for distribution or setting up the system houses at a fraction of the cost taking fullest advantage of government policies which are heavily weighed in their favour compared to local manufacturers. Government should recognise importance of this polymer and incentivise local producers,” states Bhuta.

Though growth of polyurethane in India is dependent on growth of end use industries such as refrigerators, automobiles, etc there are still vast number of applications where, with good promotion, the demands can be increased substantially. “We expect to see 10-12 percent growth every year. We see a bright future for polyurethane in India and hope to grow as much as North America or Europe (if not like China which today has highest production of polyurethanes and its raw materials in the world),” opines Bhuta.

With consumer durables, infrastructure and automotive segments in India experiencing a strong growth in demand, the market for inputs materials, such as polyurethanes, is expanding at an unprecedented rate. By expanding their manufacturing capabilities, MNCs are aiming to capture larger share of PU market pie in the country.