HPL to upgrade product mix

Kolkata: Haldia Petrochemicals limited (HPL) has commissioned a detailed feasibility report to enable production of new products offering better margins with naphtha consumption remaining constant, while working on parallel plans to build a PVC plant and invest in the chemicals zone proposed by the government.

This would help the company to realise higher profit margins during the next petrochemicals down-cycle estimated to hit between 2010 and 2013.

The initial report was ready.

It was keen on keeping naphtha consumption in check as global prices for this raw material had risen sharply in the last three years. Naphtha was at $820 per ton now as compared to $550 last year, said S K Bhowmik, managing director of HPL.

Despite polymer prices going up by nearly $150 per ton, the surge in naphtha prices had eaten into margins.

Profitability depended largely on raw material prices, and the margins were worse than last year, admitted Bhowmik. The HPL board recently decided to rope in external consultants to prepare a detailed report, he added.

The report was expected to be ready within the next six months. The petrochemicals industry was now in the middle of an up-cycle that was expected to continue till the middle of 2009, with demand exceeding supply of raw materials and services.

The company wanted to make the most of this period and reach a critical mass in production.

This would make commissioning of new plants more cost-competitive as the volume of intermediates would be high.

New products could intermediate goods like butane-1 and styrene as they had a low gestation period and global demand as well as prices for these were going up, he said. Currently, HPL imported butene 1 for internal consumption. It could commission a 55,000 tons per annum butane-1 unit both for internal consumption as well as for units at the upcoming petrochemical hub.

HPL currently made polypropylene, polyethylene, benzene and butadiene at its Haldia plant. The company had registered a profit before tax of Rs 325 crore in the April-November period this fiscal, down by more than 27 per cent compared to the same period last year. HPL board had also decided to work on a proposal to explore downstream business opportunities in the proposed chemical hub at Nayachar.

While smaller projects could be executed at the company's existing land area, larger facilities could be developed at the site of the Petroleum, Chemicals and Petrochemical Investment Region (PCPIR).

The West Bengal government was pushing for a PCPIR at Nayachar and it was also was one of the promoters of HPL.

HPL's focus would be on developing product line that used superior technology as well as environmentally clean processes.

According to Bhowmik, options like coal-based petrochemicals and polyvinyl chloride (PVC) could become important in the coming years.

China was making PVC from coal-based petrochemicals entailing a process which was allegedly not environmentally friendly. Clean coal technology was expected to be available soon and PVC could then be produced without pollution, Bhowmik said.

HPL was interested in setting up a PVC plant in future, he added.

HPL was also in the middle of its expansion project labeled Supermax which would take its existing naphtha cracking capacity of 523 kilo tons to 670 kilo tons by end of 2008.

HPL would create employment for 28000 people, both direct and indirect, in its mother plant as well as downstream units in West Bengal over the next one year, claimed Bhowmik.

Initiatives have resulted in the birth of 497 downstream plants in the state attracting an investment of Rs 483 crore, he added. Total employment generated in these units till November this year was 1,41,800.

Of these, more than 50,000 people were employed directly with HPL, while the rest worked in downstream units.

Another 42 plants were co