Morgan Stanley in its research said India’s efforts to combat plastic waste in its major cities could impact demand growth for naphtha, an essential petroleum product used in all oil-based plastic products. Currently, India’s oil companies do not have high exposure to naphtha, but they continue to focus on integrating into the downstream sector. Reliance has about 13% of its refined product as naphtha due to its petrochemical integration.
Plastic waste accounted for around a tenth of India’s urban waste. The country recycles about 60% of its estimated 10 million tons of plastic waste annually. About two-thirds of those wastes is PE grade, and a tenth is PET. About 43% of plastic usage in India is for packaging, and about 25% is from recycled content. India’s is one of the top importers of plastic waste from the US last year, but the imports declined 43% year-on-year in the first six months of 2019.
Despite the declining plastic waste imports, India’s demand for plastics grew by 8% CAGR in the last five years. Less plastic waste imports mean more efficient waste collection for more than 40 recyclers in the country. Morgan Stanley said that a ban on single-use plastic along with higher content of recycled materials could lower demand growth.
Plastic producers such as Reliance, IOCL, and Indorama have all announced investment plans on recycling. Indorama’s planned $1.5 billion investment aims at increasing recycling capacity by 2023. Reliance recycled two billion bottles in the 2018-2019 fiscal year. It also used plastic to build roads and increased recycled content in polyester clothes.
