Introduction:

Have you caught the wind of the news, that China is solidifying its dominance in the acetic acid market and controlling about 60% of the global acetic acid production capacity? This has an impact on our nation and they are facing crucial crossroads. This rapid evolution of China from a net importer in 2019 to a leading exporter by now underscores their technological advancements and cost-efficient strategies. For now, Indian companies are battling their way up in the competition in terms of acetic acid production front. Can Indian companies survive the onslaught without embracing cutting-edge technologies like process automation, bio-based production and innovative catalysis? Probably not. The article comes up for the Indian acetic acid sector to turn this global shift into an opportunity and lead their way up through innovation and strategic moves. Let’s begin.

Importance and demand of Acetic acid:

Acetic acid is an industrial chemical that is utilized across several fields and used primarily in the production of the material used in several applications including the production of photographic films. This cellulose acetate is known for its qualities such as transparency, toughness, and flexibility. Therefore, the material remains relevant in various modern applications including textiles, and coatings.

Likewise, acetic acid is used in the production of Polyvinyl acetate, which is then used in the production of wood glue. The strong adhesion to the porous surfaces like wood, water-based and non-toxic characteristics gains traction for the chemical. The involvement of acetic acid helps in creating a polymer that is water-soluble in its emulsion form and further makes the glue easier to apply and non-toxic. Now, polyvinyl acetate plays a significant role in the production of synthetic fibres and fabric.

Acetic acid is also used in the production of acetic anhydride which is used in the production of pharmaceuticals, perfumes and agricultural chemicals.

On the other hand, acetic acid is utilized as a descaling agent itself at the household level. Therefore, the versatile applications and growing demand of the sectors that involve the chemical compound that is derived from acetic acid ensure a steady demand for acetic acid.

The tremendous growth of these sectors is going to impact the demand for acetic acid on a larger scale. For instance, the Indian pharmaceutical industry is expected to grow $65 billion by 2024 and $130 billion by the year 2030. The backing of Ayushman Bharat Digital Mission to support the nation’s integrated digital infrastructure is expected to further propel its growth.

Likewise, other sectors such as the food and beverage industry, biochemicals and green alternatives are also growing at their respective pace and effectiveness. These factors are expected to keep the demand for acetic acid at a high level and support the production requirements.

China accounts for about 60% of the global capacity of acetic acid- its impact on Indian industries:

China saw a huge shift in the production capacity of acetic acid which accounts for about 60% of the total production capacity. They were standing as a net importer in 2019 and now possess the largest acetic acid capacity.

How has this affected the Indian PTA producers?

The growing dominance of China in the production of PTA has created challenging situations for Indian companies such as Reliance Industries. The Indian companies are suffering to set up or compete on price, especially in the marketplace like Southeast Asia, and Africa.

Domestic price pressure is another factor that concerns Indian producers as cheaper imports affect margins and market share. At the same time, China is entering global markets with their cheaper market price.

The impact of raw material, Paraxylene on Indian companies is affecting the demand and pricing of Paraxylene globally. Although companies like reliance industries are major producers of paraxylene, the increased PTA capacity has affected the market to either stabilize or even rise. This influence of the cost structure for the Indian producers and traders is considered a big stumbling block to counter.

What about the other downstream industries like textiles and packaging?

PTA is a key component in the production of polyester that is widely used in the textile industry. Now, the cheaper imported PTA benefits the textile industries of India, however, the finished polyester products in the global markets are inducing stiffer competition in the global markets.

The packaging sector utilizes PTA for the manufacturing of PET plastic and they are commonly used in packaging. The Indian packaging companies benefit from the cheaper PTA prices and intense competition from the Chinese packaging materials, especially the profitability.

India was thriving to catch hold of the “KEY” export destination of PTA and acetic acid. Due to China’s self-sufficiency, India is losing their key export destination and they have switched their focus to other regions. However, the changes have caused some logistical challenges and cost adjustments.

China becomes a net exporter of PTA and the trade balance between India and China for the chemicals could shift. Overall, India is expected to see higher imports of cheaper Chinese PTA and lower export volumes to China, this change is expected to have a cascading effect on India, leading them to a deficit in the chemical sector.

What are the opportunities for the Indian acetic acid industry:

Indian companies should invest more in improving production efficiency and adopt advanced technologies. They should also increase their R&D efforts to develop their higher-value or specialty products where the competition in China is growing fierce.

Impact on the Indian acetic acid industry due to the growing dominance of Chinese companies has made Indian companies face downward pricing pressure and this has affected the profitability and pricing strategies of Indian companies.

China is leading the production capacity due to their vast coal-derived methanol production that acts as a primary raw material for acetic acid. The major compounds derived from acetic acid are Vinyl acetate monomer, purified terephthalic acid, ethyl acetate and acetic anhydride. The other products include monochloroacetic acid, butyl acetates and ethanol.

To combat the challenges, Indian companies should adopt a multi-prolonged approach focused on increasing efficiency, diversifying products, leveraging government support and investments in sustainability and technology.

Here we have discussed some of the strategies of Indian companies that come under the acetic acid sector:
 

Overall the strategies work when implemented the right ones at the right time and in the right geographical locations. For instance, Indian companies can explore new geographical markets and regions that are less dependent on Chinese imports. Implementing environmentally friendly procedures can appeal to environmentally conscious markets.

Take away:

The role of acetic acid is significant in sectors like pharmaceuticals, textiles and packaging. This has presented significant opportunities for Indian companies to innovate and diversify. Thus Indian companies must invest in advanced technologies, green production methods and expand their portfolios and regain their competitive edge. Also, strategic moves such as focusing on high-value derivatives and sustainable production processes will be crucial in navigating this global shift and securing long-term success.