Plan - 2023

Current Economic

&

Carbon Black Market Scenario

in South Asia November– 2017

2

Content

Sl No Table of Content

1. South Asia…..

2. Economic Environment

4. South Asia – Economic Indicators

5. India – Growth Drivers & Concerns

6. India Automobile Industry

7. India Tyre production

8. Trends in India Carbon Black Market

9. India – Carbon Black Demand & Supply

10. Sri Lanka – Carbon Black Demand & Supply

11. Bangladesh – Carbon Black Demand & Supply

12. Rest of South Asian Countries

13. Key Takeaways

• South Asia comprises of Eight Nations

Covering a population of more than 2 billion.

• South Asia Economic GDP growth rate is forecasted at 7.3% as against World economic growth to reach estimated 3.6 percent in 2018

3

South Asia ………….

Bangladesh

Pakistan

Maldives

Bhutan

Nepal

India

Afghanistan

Sri Lanka

Population : 34 Million GDP : $20.6 Billion

Population : 164 Million GDP : $249 Billion

Population : 0.8 Million GDP : $2.3 Billion

Population : 1.4 Billion GDP : $2.45 Trillion

Population : 29.1 Million GDP : $23.3 Billion

Population : 0.8 Million GDP : $2.3 Billion

Population : 20.9 Million GDP : $84 Billion

Population : 207 Million GDP : $304.4 Billion

6.56.9

7.3

2018 E 2017 2016

%

South Asia: GDP Growth Rate

4

Country Drivers Restraints

AFGHANISTAN

In Afghanistan, agriculture is expected to help spur 3% growth in 2017 and 3.5% in 2018. This will build on a gradual upward trend in growth over recent years.

Terrorism

BANGLADESH South Asia’s garment industry leader, exports are a key element driving growth that is forecast at 6.9%-7% in 2017 and 2018.

Sluggish growth in developed economies in Europe

BHUTAN

it’s all about clean energy in Bhutan is a world leader in terms of hydropower reserves. The country’s stunning 6.2% percent growth in 2016 to 11.2% forecast in 2018 rests primarily on the building of hydropower plants and selling the power

More than 50% of the country is inhospitable

INDIA

South Asia’s largest economy, GDP is expected to expand by 7.2% in 2017 and further to 7.7% the year after, based on increased consumer spending and government initiatives to boost private investment.

Global Slowdown and internal major economic reform like GST is slowing down growth

Economic Environment

5

Economic Environment

Country Drivers Restraints

MALDIVES

Maldives modest growth was maintained despite significant challenges. With tourism weak for a third straight year, Maldives is nevertheless forecast to register 4.1% growth in 2017 and 4.7% for 2018.

Volatile Political Conditions

NEPAL

Nepal, is on the path to economic recovery. It is forecast to post 5.5% growth in 2017 and 4.5% in 2018, powered by reconstruction spending and a revived agriculture sector.

Is still reeling from one of the worst disasters —a 7.8 magnitude earthquake that killed nearly 9,000 people and destroyed or damaged nearly 800,000 homes

PAKISTAN

In Pakistan, major economic reforms are working in tandem with an improved security situation to push growth to an estimated 5.0% in 2017 and 5.2% in 2018—the highest rates the country has seen in recent years.

Domestic Terrorism and War

SRI LANKA Economic reforms are also a big part of the story in Sri Lanka, which is expected to see 4.5%-5% growth in 2017 and 2018.

Natural calamities like flooding, tsunami etc. are regular occurrence

6

South Asia: Economic Indicators

6.8

4.7

6.9

4.3

6.2

2.0

3.9

7.2

5.0

6.9

4.55.9 5.5

3.04.1

7.7

5.2

7.0

4.8

11.2

4.53.5

4.7

0.60

1

2

3

4

5

6

7

8

9

10

11

12

Afghanistan Maldives Sri Lanka Bangladesh India Bhutan Nepal Pakistan

2016 2017 E 2018 E

South Asia: GDP Growth Rate

%

Sources: IMF, World Economic Outlook

In China, the region’s biggest and the world’s second largest economy, growth is projected to decelerate to 6.6 percent in 2017 and 6.2 in 2018.

7

India – Auto industry Growth Drivers & Concerns

Growing Demand Rising income and a large young population . Greater availability of credit and financing options. Demand for commercial vehicles increasing due to high level of activity in infrastructure sector.

Clear vision of Indian government to make India an auto manufacturing hub. Initiatives like ‘Make in India’, ‘Automotive Mission Plan 2026’, and NEMMP 2020 to give a

huge boost to the sector

Road infrastructure is a key priority of the govt. with 24 related road and highway projects fast tracked giving boost to its Bharatmala Plan.

Targeted pace of road construction has been increased to 23 km a day in 2017 and 41 kms in 2018.

Established auto ancillary industry giving the required support to boost growth. 5.1 per cent of total FDI inflows to India went into the automobiles sector.

Policy Initiative

Support infrastructure and high investments

Raw material price volatility

The prices of raw material consumed by the ancillary industry like natural rubber, carbon black, synthetic rubber, etc. are extremely volatile and could impact the margins

Dumping of tyres by China

Until recently, there were huge imports of TBR tyres from China. However anti-dumping duties have been levied.

Economic Measures Certain Economic measures such as Demonetization and implementation of GST has

impacted tyre sale and also OE for passenger vehicle / Commercial vehicle / 2wheeler in the short term

8

India Automobile Industry – a Snapshot

Vehicle Production (million units)

Source: SIAM

Passenger Vehicles

Commercial Vehicles

0.81

Three Wheelers

0.78 0.93 0.79

Two Wheelers

19.93 18.83

+3.0%

+5.8%

3.79

+9.4%

-16.2% 3.47

Fy 2017 Fy 2016

3rd largest automobile industry in the world and the

industry accounts for 7.1 per cent of the country's GDP.

Strong market in terms of both, the domestic demand and exports.

7th largest manufacturer of commercial vehicles The Two Wheelers segment with 81 per cent market

share is the leader of the Indian Automobile market owing to a growing middle class and a young population

The only country among top seven car markets globally to achieve double digit growth rate of 11 per cent during Jan-May 2017.

9

India – Vehicle Production

1.86

+10.8%

-1.1%

+9.2%

0.44

11.90

Three Wheelers Commercial Vehicles

0.37 0.39 0.44

Passenger Vehicles

13.44

Two wheelers

1.96

14.68

-5.4%

10.74

+5.2%

Grand Total

2017-18 2016-17

Total production volume grew at a CAGR of 5.56 per cent between FY12-17 and increased 9.18 per cent year-on-year in April-September 2017.

Vehicles Production (million units) : Apr – Sep 2016 Vs Apr – Sep 2017

Source: SIAM

10

India Tyre Industry – a Snapshot

152.0 146.1

2013-14 2014-15 2016-17 (Apr-Dec)

128.9

2015-16

+8.6%

127.3

Production of Tyre (million units)

There are 39 companies in the domestic tyre industry

as per ATMA and the industry is valued at around Rs. 535 billion as of 2015-16 with the top 10 companies accounting for 85-90% of the market share.

Tyre demand is directly proportional to the Economic

growth in country .

Momentum of radialisation in the Commercial vehicle sector increasing.

Dumping of cheap Chinese version had impacted the domestic market for radial tyres for the last 2 years. Anti dumping duties have since been imposed.

Source: ATMA

11

India – Tyre Production

-0.5% +7.0%

+14.2%

+16.4%

-2.7%

3 Wheelers

3.70 3.72

2 Wheelers

64.37

56.36

LCV/SCV

33.52

7.78

M&HCV P V

12.10 12.44

7.27

28.80

2016-17 2015-16

Tyre Production(million units) : Apr – Dec 2015 Vs Apr – Dec 2016

Market growing with steady demand increase from both OE and replacement segments Temporary blips in demand due to demonetization and GST

Source: ATMA

Carbon Black

Trends in India

Trends impacting Carbon Black demand in India

Development of Newer Grades

Trends CB Impact

Trend towards optimization of rolling resistance, light weight and fuel efficiency – all have to be represented in the tyre.

Development of newer grades of Black .

Fluctuating Demand

Trends CB Impact

Economic Measures like GST and Demonetisation has affected in short term in reduced demand for both vehicles and tyres.

Domestic demand fluctuated , however lower imports during same period did not dampen demand for CB

Production Capacity of HB

Trends CB Impact

Radialization in Truck/Bus segment steeply increased by 10% in last 2 years reaching 36% in March 17 & is expected to be at 42% in March 2018.

Sales of super hard grades steeply increased to 37% which four years ago was 25%. Effect - Production capacity of Hard Blacks going down.

Rising Sales of N550

Trends CB Impact

With boom in auto sectors demand for Moulded Rubber Goods (MRG) has been continuously increasing.

Sales % of N550/Clean N550 is rising. Effect- Production capacity of soft black is reducing.

13

India – Carbon Black Demand & Supply

763

157

606

798

165

633

Non Tyre

4.5%

Tyre Total

5.1%

4.6%

Fy 2018

Fy 2017

Carbon Black Demand In ‘000 tonnes pa

132100

795

1,028

852

1,028

Production Import Export

+7%

Capacity

Carbon Black Supply In ‘000 tonnes pa

Notch Consulting report

14

Carbon Black - India Uniqueness

Domestic players straddle the carbon black market in all segments baring one multi national. The other major global manufacturers do not have any presence in the country.

India’s diversity in terms of geography, markets and economic strata has lead to carbon black demand across the entire spectrum of grades right from the “1” series to “7” series.

Even with one of the largest global markets in tyres, Indian tyre industry is dominated by homegrown players.

As against other large economies, India has a large Bias tyre market

Carbon black demand in non-rubber segments, though small currently is growing at a fast pace specially in plastics and coatings

15

Sri Lanka– Carbon Black Demand & Supply

64

585452

2014 2015 2016 2017

+7.2%

Carbon Black Demand In ‘000 tonnes pa

Total supply of Carbon black is dependent on imports as there is no manufacturing unit.

Solid tyre industry growing quite strongly, new manufacturers are getting into the business and old manufacturers have increased their capacity.

Still a Bias tyre dominant market. No radial tyre manufacturer yet.

Industry Estimates

16

Bangladesh – Carbon Black Demand & Supply

86828078

2015 2016 2014

+3.3%

2017

Carbon Black Demand In ‘000 tonnes pa

Total supply is dependent on imports as there is no Carbon Black manufacturing unit.

Cycle tyre & footwear dominated market.

Ceat factory with a announced capacity of 65 tonne/ day could not start as planned in 2016 otherwise the volumes would have increased.

Gazi etc. are establishing Bias tyres units in near future

Industry Estimates

17

Rest of South Asian Countries

Main domestic source of carbon black production is National Petrocarbon operates a plant located in Karachi. Production capacity is estimated around 42 KTPY including added capacity of 22KTPY in 2010. Major consumer is General Tyre Pakistan. Still to recover from one of the worst disaster that unfortunately effected Nepal badly. A massive earthquake of 7.8 magnitude in the year 2015 Although previously demand was not big but after the disaster that also has dried up. Virtually no demand for carbon black exists in the rest of the countries due to absence of related manufacturing industries. They heavily rely on imports.

Pakistan

Nepal

Others

18

Key Takeaways

The region’s demand is dynamic influenced by trends like population, growth, rising aspirations and increase in purchasing power

South Asia region is one of the fastest growing carbon black market globally

India is a dominant figure in the South Asia Economy influencing its market demand and supply

Manufacturers need to be nimble footed to adjust to dynamic market scenario as well as economic reforms

For further information, please contact:

Company :

Address : Corporate Office Ruby House 8, India Exchange Place 2nd Floor, Kolkata- 700 001

Phone : (033) 2230-4363/ 9953

Email : mm@himadri.com

Website : www.himadri.com

Thank you