Reliance Industries Limited · NSE:RELIANCE
Reliance Industries — IPI Annual Day Program 2002
74 slides from Reliance Industries's conference presentation, Apr 12, 2002
Slide 1: Polymer Industry A New Decade
Polymer Industry A New Decade IPI Annual Day Program April 12, 2002 Kamal P Nanavaty Reliance Industries Limited, Mumbai
Slide 2: Agenda
Agenda • 20th Century Kaleidoscope • 21st Century Outlook • Mid Term Perspective • India - China • Business Paradigms for the new decade 2
Slide 3: 20th Century Kaleidoscope
20th Century Kaleidoscope 3
Slide 4: Technology in Perspective
Technology in Perspective 7000 Internet CD Player 6000 World Population - Millions Micro Processor IC Computer Microwave Oven Colour TV Transistor 5000 Helicopter Television Refrigerator Airplane Air Conditioner Automobile 4000 Light Bulb Telephone Photographic Film Telegraph 3000 Water Turbine Stea
Slide 5: World Economic & Population Growth
World Economic & Population Growth 1750 - 2000 Rapid growth post industrialization era Source : World Economic Outlook May 2000 5
Slide 6: Rapid Penetration of Technology
Rapid Penetration of Technology Years to reach 200 million users 200 Internet Television Radio Number of Users (Millions) 100 0 5 10 15 20 25 30 35 40 Years The last 50 years have seen technology being inducted at a furious pace 66
Slide 7: Global Economy: Dominance by Triad
Global Economy : Dominance by Triad 10 Year - 2000 Global GDP - $ 31 Tr. 8 6 GDP ($ Tr.) 4 2 0 Countries USA W. Europe * Japan China Brazil Mexico Korea India India - 1.45% of global GDP & 13th largest economy Source: World Competitiveness Yearbook 2001 * Incl. 5 Countries - Germany, UK, France, Ita
Slide 8: Global Economy: Emergence of China & India
Global Economy : Emergence of China & India % of World GDP at PPP* ($38.8 tr in 2000) Russia 2% Italy 3% Japan Germ any 8% 5% Rest of World France 30% 3% UK 3% Canada 2% Mexico 2% Brazil China 3% 11% US 22% India 6% . . . India - 4th largest economy on PPP basis Source: World Bank 8
Slide 9: Global Economy: Emergence of China & India
Global Economy : Emergence of China & India Real GDP growth (AARG; 1990-00) China India US Braz il Mexico Canada UK France Germany Japan Italy Russia -6 0 6 12 India - 2nd highest economic growth region at the end of 20th century 9 Source: World Bank
Slide 10: Chemical & Petrochemical Sector
Chemical & Petrochemical Sector Value Value of of Chemicals Chemicals Output Output -- US US $$ 1.6 1.6 Trillion Trillion -- 5% 5% of of Global Global GDP GDP One of the dominant sectors of growing economies 10
Slide 11: Birth of Polymers - Initial Developments
Birth of Polymers - Initial Developments 11
Slide 12: The Power of Invention
The Power of Invention Plastics Plastics -- One One of of the the greatest greatest inventions inventions ofof the the millennium millennium Newsweek 12
Slide 13: The 20th Century: Birth of many polymers
The 20th Century : Birth of many polymers PVC 1927 PS 1930 LDPE 1939 ABS 1953 HDPE 1954 PP 1956 LLDPE 1976 mPO 1991 Serendipity to designer polymers 13
Slide 14: Polymer Industry - Key Ingredients
Polymer Industry - Key Ingredients ■ Materials ■ Catalysts ■ Process ■ Applications ■ People 14
Slide 15: Catalyst
Catalyst 1990 Single Site Catalyst 15
Slide 16: Applications developments
Applications developments 1970’s 1980’s 1990’s 2000’s • Simple household article • Technical products • Basic design • Intricate designs • Appl. Systems • No specific need • Functional need • Higher value • Low value • Packaging reqs. • Higher value • Higher KQ • Low KQ • Specific designs • Higher K
Slide 17: Noble Laureates...
Noble Laureates... • H. Staudinger - in Chemistry, 1953 on discovery of macromolecules • Karl Ziegler & G. Natta - in Chemistry, 1963 on chemistry & technology of high polymers • Pierre-Guilles de Gennes - in Physics, 1991 on methods to study liquid crystals & polymers • A.J. Heeger, A.G. Macdiarmid
Slide 18: Polymers
Polymers Polymers •• Chemical Chemical Industry Industry Output Output •• – – US US $$ 1.6 1.6 Trillion Trillion •• Commodity Commodity Polymers Polymers Output Output •• – – US US $$ 100 100 Billion Billion •• 6% 6% of of Chemical Chemical Output Output Most Favored Materials 18
Slide 19: Global Polymer Industry
Global Polymer Industry Exponential growth over last 6 decades 19
Slide 20: Six Decades since Birth ... Polymer Industry grows
Six Decades since Birth ... Polymer Industry grows over 120 MMT PS PVC PP 123 HDPE LLDPE LDPE 120 100 71 Million Ton 80 60 36 40 20 0 1980 1990 2000 Source: Chem Systems Global polymer demand growth has been 5.7% p.a through the Nineties - much higher than GDP growth @ 3.3% 20
Slide 21: Polyolefins consumption - On a high growth path
Polyolefins consumption - On a high growth path Global Polyolefin Consumption (MMT) 36.0 79.5 80 70 60 50 21.5 43.4 40 30 21.9 20 10 0 FY 80 FY 90 FY 00 Source: Chem Systems Continued high growth in the last two decades Particularly in the EOS region 21
Slide 22: Indian Polymer Industry Review
Indian Polymer Industry Review 22
Slide 23: Polymers displaying consistently high double digit growth rates
Polymers displaying consistently high double digit growth rates . . . 3294 kT 3500 PS PVC PP HDPE LD/LLD 3000 2500 2000 1500 894 1000 290 500 98 0 FY 70 FY 80 FY 90 FY 00 Source: CPMA India continues to witness strong growth with consumption trebling every decade !! 23
Slide 24: Rapid increase in capacity since 1991
Rapid increase in capacity since 1991… 5.0 figure in mn tons 4.5 4.2 4.0 PS PVC 3.4 3.5 PP LLD/HDPE 3.0 LDPE Demand 2.3 2.4 2.5 2.1 2.0 1.4 1.4 1.5 1.0 1.1 1.0 0.7 0.5 0.5 0.0 FY2000 FY 90 FY 91 FY 92 FY 93 FY 94 FY 95 FY 96 FY 97 FY 98 FY 99 Source: CPMA . . . rising from less than 0.5 mn tons in 1
Slide 25: Five cracker startups in the last decade
Five cracker startups in the last decade . . . Cracker Complex Capacity (kTA) Start-up Date NOCIL 60 1968 IPCL, Baroda 130 1978 IPCL (MGCC) 400 1992 RIL 750 1996 GAIL 300 1999 IPCL (G) 300 2000 HPL 420 2000 Source: CPMA . . . adding >2 MMT of C2 and >1 MMT of C3 capacities incl. FCC unit of RPL 25
Slide 26: Import dependency nose dives sharply
Import dependency nose dives sharply owing to massive capacity additions . . . Commencement PS PVC PP PE Import dependency (%) of Exports 700 100 Import dependency(%) Import Quantity (kT) 651 595 580 593 90 600 532 546 478 498 80 444 500 70 393 60 400 50 300 221 40 200 30 20 100 10 0 0 1990-91 1991-
Slide 27: 21st Century Outlook
21st Century Outlook 27
Slide 28: Year 2001
Year 2001 ■ Gujarat Earthquake ■ IT Meltdown & “DotCom” bust ■ Global economic recession ■ 9/11 ■ Megacorps collapse - Enron, KMart, Swiss Air 28
Slide 29: The chemical industry is at the bottom of the cycle
The chemical industry is at the bottom of the cycle 450 INDEX, 1982 = 100 400 350 300 250 200 150 100 We are here ! 50 x 0 1975 1980 1985 1990 1995 2000 2005 2010 29
Slide 30: Asian polyethylene prices appear to be in random disorder
Asian polyethylene prices appear to be in random disorder… 1,500 PRICES, CIF HONG KONG 1,200 USD/MT 900 600 300 1986 1988 1990 1992 1994 1996 1998 2000 LDPE LLDPE HDPE 30
Slide 31: ...until global events and China are added
…until global events and China are added DEMAND AND INVENTORY PRICES, CIF HONG KONG USD/MT BUILDUP 1,500 (SHORTAGE) CHINA STOPS END OF SUPPLY BUYING PROBLEMS CHINA SITUATION GULF WAR 1,200 CHINA REDUCES MULTIPLE SUPPLY PURCHASES PROBLEMS¹ FLY-UP ASIAN 900 CRISIS September 11 SURGE 600 SURGE PHILLIPS
Slide 32: Global events and China also impact polypropylene prices
Global events and China also impact polypropylene prices 1,500 CHINA STOPS CHINA REDUCES PURCHASES BUYING MULTIPLE END OF SUPPLY 1,200 SUPPLY PROBLEMS PROBLEMS¹ ASIAN USD/MT CRISIS RECOVERY 900 FLY-UP SURGE (TIGHT SUPPLY) (GULF WAR) CHINA SURGE 600 RESUMES PURCHASES (RECESSION) 300 1986 1987 1988 19
Slide 33: Petrochemical industry - Margins touching historic lows
Petrochemical industry - Margins touching historic lows Margins ($/ton) 850 800 750 HDPE-Ethylene 700 650 600 550 500 450 Margins in1980’s : 399 400 350 300 250 Margins in 1990’s : 222 200 150 100 50 0 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: Platt
Slide 34: The Next Decade - Mid Term Perspective
The Next Decade - Mid Term Perspective 34
Slide 35: Role of Polymers in the 21st Century
Role of Polymers in the 21st Century Set to offer solutions in ■ Food security ■ Shelter ■ Clothing ■ Infrastructure ■ Entertainment ■ Ecological sustainability Addressing all needs of Mankind 35
Slide 36: Global Demand for Major Polymers
Global Demand for Major Polymers MMTA 250 Polymers Growth - ~ 2 times Global GDP 200 200 162 150 123 88 100 h - ~ 3 % p.a . GDP Growt 50 0 1995 2000 2005 2010 Polymer Demand Requiring about 55 Global crackers in 10 years 36
Slide 37: Global Ethylene Capacity Expansions
Global Ethylene Capacity Expansions 7 6 MILLION TONS/YEAR 5 4 3 2 1 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 There will not be significant capacity addition after 2002 37
Slide 38: Global Polyolefin demand set to rise
Global Polyolefin demand set to rise from 79 to 136 MMT in the coming decade ... Demand Projections (MMT) Global EOS 2000 2010 CARG 2000 2010 CARG All PE 50 83 5.1% 15 29 7.0% PP 29 53 6.2% 10 20 7.6% PO 79 136 5.5% 24 49 7.2% PVC 26 38 3.7% 12 21 6.0% Ethylene 89 136 4.4% 31 55 5.6% EOS demand for
Slide 39: Indian Polymer Business Future Prospects
Indian Polymer Business Future Prospects 39
Slide 40: A Youthful Demographic Profile - 2010
A Youthful Demographic Profile - 2010 Population by age group 65+ 25-64 5% 41% 61% in the 0-14 age 34% group 15-64 15-24 20% … Young, Mobile and consuming class Source:- Report of the Technical Committee on Population Projections Constituted by Planning Commission, 1996, RGI, India 40
Slide 41: A Growth Opportunity
A Growth Opportunity India lags well behind most Asian economies in terms of per capita GDP and polymer consumption Per capita Polyolefin* consumption vs Per capita GDP 70 ” x Q 8 See eae eo Singapore Japan Malaysia Agstralia® @ g & =a § - 2 ¢ Cc} oO c - © 2 ° = & High Income Economies > 10,000 USD
Slide 42: Growth Driven by ...
Growth Driven by ... ■ Agriculture ■ Packaging ■ Communication ■ Consumer Goods ■ Health Care ■ Infrastructure ■ Transportation … Key sectors 42
Slide 43: Massive Potential in Agriculture
Massive Potential in Agriculture Huge Agricultural production − Foodgrain: 200 Mn. tons − Fruits & Veg.: 113 Mn. Tons − Targeted growth 4.5% p.a. − Massive wastage (~50%) Packaging, Storage & Distribution Irrigation and Water Controlled Envt. Management Cultivation Agriculture - still the backbone o
Slide 44: Bulk Packaging
Bulk Packaging PP Woven Sacks For Cement, Fertilizers, Foodgrains, Sugar, etc. 1999 Growth 15% p.a 2010 212 kT 1,025 KT PP FIBC’s for Capacities greater than 750 kgs. Potential for about 100 global sized Raffia units 44
Slide 45: Plastic Furniture - Transforming Seating habits
Plastic Furniture - Transforming Seating habits ■ From a scratch to 140 kT Polymer consumption in just 9 years − Growing at 25% p.a ■ Not only for domestic consumption but being aggressively exported as well ■ By 2010, at current growth rates, Polymer consumption to reach 1250 kT Potential for about
Slide 46: Double digit growth in consumer durables
Double digit growth in consumer durables 1989-93 1993-00 40 27 (%) 24 23 19 18 14 12 10 9 7 6 4 3 3 2 0 -1 Airconditioner TV Passenger cars Motor cycles Commercial Mobile Phones vehicles . . . With vast potential for polymer consumption 46
Slide 47: Consumer Durables
Consumer Durables All Consumer Goods Growing at a healthy 20% per annum PP Compounds for Consumer Durables PP Compounds for Household Appliances PP Consumption 1999 2010 22% 15 kTA 135 kTA PP Compounds for Computer Components / Peripherals 47
Slide 48: Infrastructure Development - A thrust sector
Infrastructure Development - A thrust sector Utilities Ports Water supply Social Mgmt Infrastructure - Housing Logistics - Schools -Hospitals -Roads Effluent Treatment Information Technology Power Driving huge polymer consumption in the decade 48
Slide 49: Retail Packaging
Retail Packaging Market Market CARG (%) 2000 (KTA) 2010 (kTA) 900 3600 15% Food Packaging Textile / Garment Packaging Containers for rigid packaging Fluted Board Shopping bags Cartons for Apple Pkg. Surge in PMCG is driving Plastic consumption 49
Slide 50: Packaging will account for close to half of Indian plastic consumption
Packaging will account for close to half the Indian plastic consumption Plastics Packaging Demand (million tons) 2000 2010 Growth Films 0.6 3.0 17% Woven Sacks / 0.5 1.4 12% Multifilaments Rigid 0.4 1.8 16% packaging Total 1.5 6.2 16% A very healthy growth rate 50
Slide 51: Transportation
Transportation • Production base for All major auto manufacturers • An USD 8 bn auto industry • 5.6 Mn production capacity • Emerging global production base interior trims & Instrument Panels Bumper & Fascia Parts Will provide fillip to polymer consumption Upholstery & 2000 2010 Carpets 50 kta 150 k
Slide 52: India to be 3rd largest polymer consumer by 2010
… and will make India the 3rd largest polymer consumer, globally by 2010 Global Rank in Polymer Consumption Rank Country 1988 Country 2000 Country 2010 2010/ (MMT) (MMT) (MMT) 2000 1 USA 16.6 USA 27.3 USA 38.9 3.6% 2 Japan 6.4 China 14.4 China 31.3 8.1% 3 Germany 4.3 Japan 9.1 India 12.5 14.0% 4 Chi
Slide 53: India & China
India & China 53
Slide 54: The New World Economic Order
The New World Economic Order • In the next 25 years, China will overtake US in the global output with India becoming the 3rd largest economy in the world ahead of Japan & Germany • The value of global output would have increased from 31 trillion dollars to 95 trillion dollars by 2025. By then China
Slide 55: Comparative Economic Development
Comparative Economic Development INDIA CHINA ☛ Population : 1.016 bn , AARG (1994-00 ) 1.8% 1.263 bn , AARG (1994-00 ) 1.0% ☛ Area : 3,287,000 sq. km 9,596,960 sq. km ☛ GDP: US$ bn 470, US$2.3tr (PPP basis) US$ bn 1077, US$4.5tr (PPP basis) 4th largest economy largest economy ☛ Composition of GDP: A
Slide 56: Comparative Human Development
Comparative Human Development Human Devt. Indicators INDIA CHINA ☛ Urban population 28% 32% as % of total popu : ☛ Poverty (% of popu 35% 5% below poverty line): ☛ Life expectancy at 63 years 70 years birth : ☛ Infant mortality per 71 30 1000 live births : ☛ Child malnutrition 45 9 (% of children un
Slide 57: Indo-China: GDP Growth
Indo-China : GDP Growth USD Bln. 1930 2000 1500 1077 840 1000 342.3 470 500 290.5 175.6 150.1 0 1979 1989 2000 2010* China India Ever since Chinese reforms, its GDP has multiplied 6 times as of 2000 while that of India has grown only 3 times during the same period * Projected at 6% growth p.a. 57
Slide 58: Indo-China: FDI
Indo-China: FDI (US$ mln mln.) .) China India 60000 50000 41118 40000 38752 USD Mln. 30000 20000 10000 252 2635 49 57 2613 2155 0 1979 1989 1998 1999 FDI in China grew phenomenally during the 90s while in India it picked up after the advent of economic reforms 58
Slide 59: China's polymer imports rising
China’s polymer imports rising - Trend expected to increase with WTO China imports more than 30 percent of all globally traded commodity products CHINA POLYMER IMPORTS 3,000,000 TONS PER QUARTER 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 90 92 99 91 93 94 95 97 98 00 01 96 19 19 19 19 19 19 1
Slide 60: Demand for Polymers India vis-a-vis China
Demand for Polymers India vis-a-vis China Polymer consumption over the decades (Kt) 40000 37513 Polym er grow th & GDP (%) 35000 India 1990-00 2000-10 PS All Polym ers 14.3 14.0 30000 PE/PP 16.3 15.1 PVC GDP 6.0 ~6.0 25000 PE/PP China All Polym ers 18.5 8.8 20000 PE/PP 19.5 9.4 16600 GDP 10.3 ~6.1 1
Slide 61: Opportunities for the Indian Plastic Processing Industry
Opportunities for the Indian Plastic Processing Industry 61
Slide 62: Growth in processing industry?
Growth in processing industry? ? Investment in Downstream not in sync with Polymer demand growth 62
Slide 63: Present Scenario
Present Scenario 2001 No. of Units 22,000 No. of Machines 53,300 Installed Capacity (kT) 10,300 Consum ption (Virgin + Recycled) 4,800 Investm ent (Rs. Cr.) 10,000 Average operating rate 47% 63
Slide 64: Sheltered Environment - Small Sized Units
Sheltered Environment - Small Sized Units Country No. Of Units Consumption 2000 MMTA U.S.A. 21,000 28 Germany 6,300 7 Canada 3,400 2 Brazil 5,200 4 China 22,000 15 India 20,000 3 Indian Industry still very small and fragmented Source: India - CPMA estimates China - China Petrochemical Industry 1999
Slide 65: Investment Requirements
Investment Requirements 2000 2010 CARG No. of Machines 53,300 101,000 7% Installed Capacity 10,300 30,000 14% (kTA) Polymer Consump. - 4,800 15,500 13% Virgin & Recycled (kT) Investment in 10,000 28,000 11% Machinery (Rs. Cr.) Additional Investment Required ~ Rs. 18000 Cr. 65
Slide 66: New Paradigms for the coming Decade
New Paradigms for the coming Decade 66
Slide 67: Issues & Strategies
Issues & Strategies Issues Strategies Scale Consolidation WTO Globalisation Investment Asset Renewal Technology Innovation Man Power Training Market Aspirations Total Solution Provider 67
Slide 68: Consolidation
Consolidation ■ Imperative for Raffia, Furniture and Film industry ■ Only global sized plants would survive Consolidate or Perish 68
Slide 69: Innovation
Innovation ■ New products, applications and markets ■ Augmented use of IT in business processes Innovate to Endure 69
Slide 70: Asset Renewal
Asset Renewal ■ Intellectual asset management ■ Use all assets to economic potential ■ Branding / IPR ■ Knowledge based strategies Build assets for growth 70
Slide 71: Globalization...
Globalization... ■ Leverage WTO to our advantage ■ Build capabilities for global trade ...There is no alternative 71
Slide 72: Total Solution Provider
Total Solution Provider ■ Wider participation in the value chain ■ Compress development cycles ■ Serve customer’s customers ■ Integrate knowledge with complex engineering Delivering value to the consumer 72
Slide 73: In Conclusion....
In Conclusion…. •Demand to grow from 3.5 to 12. 5 MMT •Opportunities in all end use segments •Industry must invest in technology and scale •Markets - India and beyond •IT Interface - SCM + CRM Think Global !!! 73
Slide 74: Thank You !
Thank You ! 74