Since 2010, the Indian pipe industry has seen strong growth levels, achieving an average CAGR of 9.7%. Even though the industry is comprised of organized and unorganized firms, the manufacturing of PVC pipe (and steel pipe) has remained strong.
There are numerous domestic applications for the products produced by the industry. The Indian government encourages revenue growth through orders placed for sewage, water supplies, and plumbing. The chemical and oil industries are routine customers of the pipe industry of India. There is a growing segment for irrigation use of the pipes as well.
As the population of the country expands, there will be a growing need for residential applications of pipes which are produced domestically. With a continued push for infrastructure development, even the 3.5% growth in the steel pipe segment will continue to see revenue improvements over time.
Interesting Indian Pipe Industry Statistics
#1. 73% of the PVC manufactured in India is consumed by the pipes and fittings industries. From the remaining 27%, flooring has the highest share at 8%. They are followed by wires/cables and films/sheets, which both hold a respective 5% share. (FICCI)
#2. Globally, PVC consumption for pipes and fittings stands at 43%, while flooring stands at just 3%. (TATA Strategic Analysis)
#3. One of the largest providers of PVC pipes in India is Finolex Industries. As of 2017, the company had a fittings capacity of 280,000 TPA and a volume market share of 19%. (HDFC Securities)
#4. Only 60% of the Indian pipe industry is classified as being organization. (HDFC Securities)
#5. PVC demand in India outpaces the available domestic supply by over 50%, which means extruders are left to commodity pricing issues to make ends meet. (HDFC Securities)
#6. Total resin capacity of Finolex Industries is more than 272,000 TPA, with up to 60% of it captively consumed. Estimates suggest that figure could reach 70% by the end of FY 2019. (HDFC Securities)
#7. The last greenfield investment for a PVC producer in India occurred in 2003, when the duty differential was about 15%. Since then, total demand within the pipe industry has grown by 1.6 million tons without any new capacity being added. (FICCI)
#8. Imports of PVC and pipes to the industry used to meet 5% of the country’s demand in 2002. Today, almost 50% of the demand is met by imports and that percentage continues to grow. (FICCI)
#9. There are more than 6,000 processors active in the Indian pipe industry, producing a value of more than Rs. 20,000 crores. To meet the infrastructural needs required for current demand levels, almost $660 billion in urban construction costs must be met within the next 20 years. (FICCI)
#10. The PVC pipe segment of the Indian industry contributes about 10% of the total GDP for the country each year. (FICCI)
#11. For the average person in India, the per capita consumption of PVC products from the pipe industry is 2kg per year. In comparison, Americans consume PVC at 12.7 kg per person, followed by China (10.3 kg), Thailand (8.8 kg), and Malaysia (7.6 kg). (FICCI)
#12. The oil and gas industry is the primary customer of the steel segment of the Indian pipe industry. Up to 12% of the overall capex for refineries and exploration is handled by stainless steel or carbon seamless tubes. (Edelweiss Investment Research)
#13. Up to 70% of the steel pipes that are manufactured by the Indian industry each year are used for oil and gas exploration. About 70% of the stainless-steel pipes are used at refineries or for exploratory purposes. Line pipes are primarily used for oil and gas, but 25% of them are used to transport water. 50% of the ERW pipe manufactured is used as municipal gas lines. (Edelweiss Investment Research)
#14. Energy consumption in India stands at 700 Mtoe. 58% of the energy comes from coal, while 35% of it is from oil or gas. The rates of consumption are expected to double through 2030, growing at 4.6% per year, creating more demand for the Indian pipe industry. (Edelweiss Investment Research)
#15. For the total pipeline length available in India, petroleum products account for 37% of what is utilized, while crude oil accounts for 25% of it. (EY)
#16. There are currently 31 petroleum product pipelines currently maintained by the pipe industry, accounting for 95% of the capacity that is transported each year. (EY)
#17. Even though gas transportation accounts for 38% of India’s pipeline network, the infrastructure remains inadequate because there is limited availability of natural gas in the country. The total network supported by the pipe industry is more than 15,340 kilometers of pipeline. (EY)
#18. 57% of the molecular weight of PVC manufactured by the Indian pipe industry comes from common salt. The remainder is derived from hydrocarbon feedstocks. (CPMA)
#19. There are currently 150 plastic processing machinery manufacturers active with the Indian pipe industry, supporting over 22,000 plastic processing units. (Indian Mirror)
#20. Total employment within the Indian pipe industry averages about 3.3 million people per year. Demand for plastics is growing at 2.5 times GDP growth as the Indian middle class continues to rise. (Indian Mirror)
#21. More than 2,000 companies are registered as PVC exporters in India, supporting a total contribution to the economy of about $450 million each year. (Indian Mirror)
Indian Pipe Industry Trends and Analysis
The growth of the Indian pipe industry has been spectacular, especially from a PVC standpoint. In the 1930s, only a few thousand tons of the material was produced. Now more than 50 million tons of PVC is being created each year. Despite the high figures, the Indian subcontinent is only producing 3% of the global PVC capacity, despite the high levels of domestic demand.
There are two primary challenges which face the industry right now: the dumping of cheap carbon steel in the tubing sector; and an inability to increase capacity within the PVC segment of the industry.
For the steel sector, ongoing needs for oil and gas exploration offset the cost issues caused by China. There is a preference for domestic products whenever possible, so this issue is a short-term reduction of revenues.
The PVC segment is a different story. An ongoing lack of capacity, fueled by a lack of investment, has made it so that the industry must import more than half of the PVC pipe that is required for new projects.
Continued investments should help the industry become more organized over time. There must be a local commitment to do this, however, and that may not be possible under the current circumstances.
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